SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by rule
14c-5(d)(2))
[X] Definitive Information Statement
ESSENTIAL LASER CONCEPTS, LTD.
(Name of Registrant As Specified In Charter)
Payment of Filing Fee (Check the appropriate box):
No Fee Required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
1) Title of each class of securities to which transaction applies: Common
Stock
2) Aggregate number of securities to which transaction applies:
10,000,000 shares
3) Per unit price or other underlying value of Transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
Value: $0.05 per share times 10,000,000 shares
Times 0.00025 resulted in $125.00
4) Proposed maximum aggregate value of transaction: $500,000
5) Total fee paid: $125.00
Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing:
1) Amount previously paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
ESSENTIAL LASER CONCEPTS, LTD.
11601 East Lusitano Place
Tucson, Arizona 85748
May 15, 2002
The enclosed information statement is being furnished to shareholders
of record on May 15, 2002 (our "Record Date"), of Essential Laser Concepts,
Ltd., a Nevada corporation, (the "Company") in connection with the following
actions taken by written consent of holders of a majority of the outstanding
shares of our common stock entitled to vote on the following proposals:
1. Approval of a stock split of the Company's common stock at a 10.37037
for 1 ratio;
2. Approval and adoption of a merger agreement whereby the shareholders
of AgniCAD, Incorporated ("AgniCAD"), a Washington corporation, will
exchange all of their issued and outstanding shares of $.001 par value
for shares of post split $.001 par value common stock in the Company.
A copy of the merger agreement is attached as Appendix A. Shareholders
are entitled to assert dissenter's rights under Nevada Revised
Statutes 92A.300-92A.500, a copy of which is attached as Appendix B;
3. Amendment of our articles of incorporation to change our name to
AgniCAD, Inc. A copy of our Amended and Restated Articles of
Incorporation are attached to this information statement as Appendix
C; and
4. Amendment of our articles of incorporation to authorize the issuance
of preferred stock at the discretion of our board of directors. A copy
of our Amended and Restated Articles of Incorporation are attached to
this information statement as Appendix C.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY
Our board of directors has fully reviewed and unanimously approved the
actions in connection with the above-referenced merger agreement and has
determined that the consideration to our shareholders is fair for our
acquisition of AgniCAD. In addition, our board of directors unanimously approved
the amendments to our articles of incorporation.
The holder of 80% of our common stock has executed a written consent in
favor of the above proposals. However, under federal law these proposals may not
be effected until at least 20 days after this Information Statement has first
been sent to our shareholders.
By Order of the Board of Directors
/S/
Daniel L. Hodges
Chairman of the Board
Tucson, Arizona
May 15, 2002
This Information Statement has been prepared by our management. "We," "our,"
"Essential Laser" and the "Company" refer to Essential Laser Concepts, Ltd.
"AgniCAD" refers to AgniCAD, Incorporated. This Information Statement is first
being sent to our stockholders on or about May 15, 2002.
PROPOSAL NO. 1: STOCK SPLIT
Summary of Forward Stock Split
On April 2, 2002, our board of directors by unanimous consent approved
a 10.37037 stock split of our $.001 par value common stock. Currently, we have
100,000,000 shares of common stock authorized, of which 1,000,000 shares are
issued and outstanding. We have no other classes of stock authorized. Prior to
the stock split becoming effective and in conjunction with the terms of the
proposed merger, our sole Director, Officer and majority shareholder, Daniel L.
Hodges will submit 784,000 of his shares for cancellation. When the stock split
becomes effective, each holder of one share of our $.001 par value common stock
will own 10.37037 shares of $.001 par value common stock. The stock split will
not affect our authorized capital stock or par value. The stock split will not
affect any stockholder's proportionate equity interest in the Company in
relation to the other stockholders or the rights, preference, privileges or
priorities of any stockholder.
All outstanding options, warrants, rights and convertible securities
that include provisions for adjustments in the number of shares covered thereby,
and the exercise or conversion price thereof, automatically would be
appropriately adjusted for the stock split on the date the split becomes
effective.
Dissenting stockholders have no appraisal rights under Nevada law or
under our articles of incorporation or bylaws in connection with the reverse
stock split.
The board of directors adopted this 10.37037 stock split in preparation
of the proposed merger with AgniCAD, described in more detail in Proposal 2 to
this information statement. The board of directors believed the stock split
would allow us to enter into the merger with AgniCAD at the proper level of
shareholder capitalization such that the merger would dilute our current
shareholders to the level anticipated and negotiated with the AgniCAD board of
directors. The amended and restated articles of incorporation reflecting the
effect of the 10.37037:1 stock split appears in Appendix C.
Mechanics of the Stock Split
When the waiting period for this information statement has passed, our
amended and restated articles of incorporation will be filed with the Nevada
Secretary of State, and the 10.37037:1 stock split will thus be effected unless
abandoned by the board of directors. Immediately upon the filing of the amended
and restated articles of incorporation, each share of pre stock split common
stock will, automatically and without any action on the part of the
stockholders, be converted into 10.37037 shares of post stock split common
stock.
As soon as practicable after the date the stock split becomes
effective, we will notify all stockholders of record on the date of
effectiveness where and by what means to surrender their stock certificates in
exchange for certificates representing the post-stock split common stock.
Federal Income Tax Consequences of the Stock Split
The following is a summary of the material federal income tax
consequences of the stock split to stockholders of the Company. This summary is
based on the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), the Treasury Department Regulations (the "Regulations") issued pursuant
thereto, and published rulings and court decisions in effect as of the date
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hereof, all of which are subject to change. This summary does not take into
account possible changes in such laws or interpretations, including amendments
to the Code, applicable statutes, Regulations and proposed Regulations or
changes in judicial or administrative rulings, some of which may have
retroactive effect. No assurance can be given that any such changes will not
adversely affect the discussion of this summary.
The Company believes that the stock split will qualify as a
"recapitalization" under Section 368(a)(1)(E) of the Code or as a
stock-for-stock exchange under Section 1036(a) of the Code. As a result, no gain
or loss should be recognized by the Company or its stockholders in connection
with the stock split. A stockholder's aggregate tax basis in his or her shares
of post stock split common stock received from the Company will be the same as
his or her aggregate tax basis in the pre stock split common stock exchanged
therefore. The holding period of the post stock split common stock surrendered
in exchange therefore will include the period for which the shares of
pre-forward stock split common stock were held, provided all such common stock
was held as a capital asset on the date of the exchange.
This summary is provided for general information only and does not
purport to address all aspects of the possible federal income tax consequences
of the stock split and is not intended as tax advice to any person. In
particular, and without limiting the foregoing, this summary does not consider
the federal income tax consequences to stockholders of the Company in light of
their individual investment circumstances or to holders subject to special
treatment under the federal income tax laws (such as life insurance companies,
regulated investment companies and foreign taxpayers). In addition, this summary
does not address any consequence of the reverse stock split under any state,
local or foreign tax laws.
No ruling from the Internal Revenue Service or opinion of counsel has
been or will be obtained regarding the federal income tax consequences to the
stockholders of the Company as a result of the stock split. Accordingly, each
stockholder is encouraged to consult his or her tax advisor regarding the
specific tax consequences of the proposed transaction to such stockholder,
including the application and effect of state, local and foreign income and
other tax laws. It is the responsibility of each stockholder to obtain and rely
on advice from his or her personal tax advisor as to: the effect on his or her
personal tax situation of the stock split (including the application and effect
of state, local and foreign income and other tax laws); the effect of possible
future legislation and Regulations; and the reporting of information required in
connection with the stock split on his or her own tax returns. It also will be
the responsibility of each stockholder to prepare and file all appropriate tax
returns.
PROPOSAL NO. 2: PLAN OF MERGER
Summary Term Sheet
The following summary highlights selected information about the
proposed merger and may not contain all of the information that is important to
you. You should carefully read this entire information statement, including the
"Risk Factors," the financial statements and the related notes and all the
attachments for a complete understanding of the combination. In particular, you
should read the merger agreement, which is attached as Appendix A.
o It is proposed that AgniCAD, Incorporated will merge with and into us. We
are a company with a class of common stock registered under the Securities
Exchange Act of 1934. We have conducted no operations except organizational
matters since inception. Our principal offices are located at 11601 E.
Lusitano Pl., Tucson, Arizona 85748, and our phone number is (520)
731-9890. AgniCAD is involved in the outsourced detailing industry.
AgniCAD's principal offices are located at 4463 Russell Road, Suite 107,
Mukilteo, Washington 98275, and its phone number is (425) 493-0634. For
more information about the parties, please see "The Companies" beginning on
page 12.
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o On the effective date of the merger, which is expected to be in June of
2002, we will issue one share of our post-split common stock for each share
of AgniCAD common stock issued and outstanding. We will issue an aggregate
of 7,760,000 shares of our post-split common stock to the AgniCAD
shareholders as part of the merger.
o We plan to account for this merger on a purchase method.
o Concurrent with the merger, our largest shareholder, who now holds 80
percent of our outstanding common stock will contribute 784,000 pre-split
shares to us.
o After the merger, our shareholders will own 22.4 percent of our outstanding
common stock and the former AgniCad shareholders will own the remaining
77.6 percent.
o After the merger, we will change our name to AgniCAD, Inc.
Reasons for Engaging in the Merger
In evaluating the proposed merger, our management considered criteria
such as the value of the assets of AgniCAD and the anticipated business
operations of AgniCAD in comparison with our current lack of operations and
other opportunities presented to us. Based on these criteria, our management
determined that the combination was in the best interest of our shareholders.
Votes Required
Nevada law provides that the actions of a corporation may be approved
upon such terms and conditions as its board of directors may deem expedient and
for the best shares of the corporation when authorized by a vote of the holders
of the majority of the stock in a corporation. Nevada further permits the
holders of a majority of the stock in a corporation to approve such an action by
written consent without the necessity of holding a meeting. Daniel L. Hodges,
holder of 800,000 shares of our pre-split common stock, or 80% of our currently
outstanding shares, has executed a written consent to take all of the actions
set forth in this information statement including ratification of the merger
agreement. Therefore, no further vote of our shareholders is required.
Income Tax Consequences of the Merger - Tax Consequences of Stock
Contribution by Majority Shareholders
The following is a summary of the material federal income tax
consequences of the contribution of certain shares of Company stock (the
"Contribution") by the Company's largest shareholder (the "Majority
Shareholder") to the Company. This summary is based on the provisions of the
Internal Revenue Code of 1986, as amended (the "Code"), the Treasury Department
Regulations (the "Regulations") issued pursuant thereto, and published rulings
and court decisions in effect as of the date hereof, all of which are subject to
change. This summary does not take into account possible changes in such laws or
interpretations, including amendments to the Code, applicable statutes,
Regulations and proposed Regulations or changes in judicial or administrative
rulings, some of which may have retroactive effect. No assurance can be given
that any such changes will not adversely affect the discussion of this summary.
The tax consequences arising from the Contribution are not completely
clear, however, it appears that the following potential results could occur.
Under Revenue Ruling 72-233, 1973-1 C.B. 179, because the Contribution is being
made in connection with the Merger, the following may be deemed to occur: (i)
the Majority Shareholder will be treated as if he did not reduce his stock
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holdings in the Company prior to the Merger; and (ii) once the Merger has been
completed, the Majority Shareholder will be deemed to transfer the shares of
Company stock (the "Shares") he intended to contribute to the Company to the
Company's other pre-merger shareholders (the "Remaining Shareholders"). If such
were deemed to occur, then the tax consequences to the Majority Shareholder
could be as follows: (a) to the extent the Remaining Shareholders are family
members or close friends of the Majority Shareholder, such deemed transfer could
be characterized as a gift from the Majority Shareholder that is not subject to
income taxation but, to the extent of the fair market value of the Shares being
transferred, the Majority Shareholder may be subject to gift taxes on such
transfer (See Treas. Reg. ss. 25.2511-1(h)(1)), or (b) to the extent the
Remaining Shareholders are business associates and not family members or close
friends of the Majority Shareholder, such deemed Share transfer could be
characterized as a taxable disposition of such Shares resulting in the Majority
Shareholder recognizing taxable gain equal to the difference between the fair
market value of such Shares and the Majority Shareholder's income tax basis in
such Shares.
Meanwhile, the tax consequences to the Remaining Shareholders will
depend on their relationship with the Majority Shareholder. If a Remaining
Shareholder is a close friend or family member of the Majority Shareholder, then
arguably such Remaining Shareholder will be deemed to have received a
non-taxable gift of Shares from the Majority Shareholder. Alternatively, if a
Remaining Shareholder is a business associate and not a close friend or family
member of the Majority Shareholder, such deemed Share transfer would probably
not be characterized as a non-taxable gift but rather would result in such
Remaining Shareholder recognizing ordinary gross income equal to the fair market
value of the Shares deemed transferred to such Remaining Shareholder.
This summary is provided for general information only and does not
purport to address all aspects of the possible federal tax consequences of the
Contribution and is not intended as tax advice to any person. In particular, and
without limiting the foregoing, this summary does not consider the federal tax
consequences to stockholders of the Company in light of their individual
investment circumstances or to holders subject to special treatment under the
federal tax laws (such as life insurance companies, regulated investment
companies and foreign taxpayers). In addition, this summary does not address any
consequence of the Contribution under any state, local or foreign tax laws.
No ruling from the Internal Revenue Service or opinion of counsel has
been or will be obtained regarding the federal tax consequences to the
stockholders of the Company as a result of the Contribution. Accordingly, each
stockholder is encouraged to consult his or her tax advisor regarding the
specific tax consequences of the proposed transaction to such stockholder,
including the application and effect of state, local and foreign income and
other tax laws. It is the responsibility of each stockholder to obtain and rely
on advice from his or her personal tax advisor as to: the effect on his or her
personal tax situation of the Contribution (including the application and effect
of state, local and foreign income and other tax laws); the effect of possible
future legislation and Regulations; and the reporting of information required in
connection with the Contribution on his or her own tax returns. It also will be
the responsibility of each stockholder to prepare and file all appropriate tax
returns.
Dissenter's Rights
Any shareholder who dissents from the merger with AgniCAD is entitled
to the rights and remedies of dissenting shareholders as provided in 92A.380 of
the Nevada Revised Statutes, subject to compliance with the procedures set forth
in such chapter. A copy of ss.ss. 92A.300 - 92A.500 of the Nevada Revised
Statutes is attached as Appendix B to this Information Statement.
A dissenting shareholder may not challenge the corporate action
creating his entitlement to dissenter's rights unless the corporate action is
unlawful or fraudulent.
A notice of dissenter's rights must be sent no later than 10 days after
the effectuation of the corporate action creating the dissenter's rights. This
Information Statement constitutes such notice. A dissenting shareholder must
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demand payment by completing and executing a "Demand for Payment," a form which
is available from the Company, and returning all share certificates to us at the
following address:
Essential Laser Concepts, Ltd.
Attn: Daniel L. Hodges, President
11601 E. Lusitano Pl.
Tucson, Arizona 85748
All demands for payment must be received within 30 days from this date
of Information Statement. Any shareholder who fails to demand payment or deposit
his or her certificates where required by such date forfeits his or her payment.
We must pay the dissenter within 30 days after receipt of a demand for
payment the amount we estimate to be the fair value of the shares plus accrued
interest. We must include with the payment a copy of our balance sheet as of the
end of a fiscal year ending not more than 16 months before the payment date, an
income statement for that year, a statement of changes in shareholders equity
for that year, and the latest available interim financial statements. We must
also provide a statement of our estimate of the fair value of the shares, an
explanation of how the interest was calculated, a statement of dissenter's
rights to demand payment and a copy of the Nevada Revised Statute ss.ss. 92A.300
- - 92A.500, inclusive.
Government Regulation
Our combination with AgniCAD is not subject to federal or state
regulatory review, except as it relates to the review of this information
statement by the Securities and Exchange Commission.
Differences in Rights of Shareholders
Because our shareholders will retain their shares in this transaction,
there will be no change in the rights of our shareholders as a result of the
merger. However, once we approve proposal 3, our board of directors will be able
to designate and issue preferred stock without amending our articles and
requiring shareholder approval. If the preferred shares are convertible into
common shares or have voting rights similar to common stock, the issuance of the
preferred shares will dilute the voting power of the common shares.
Accounting Treatment of the Merger
We plan to account for this merger under the Purchase Method.
Audited AgniCad Financial Statements
See the AgniCad financial statements attached hereto as Appendix D.
RISK FACTORS
This information statement contains or incorporates by reference
certain forward looking statements with respect to our financial condition,
results of operations and business and, assuming the consummation of the
combination, the proposed combination with AgniCAD. These forward-looking
statements involve certain risks and uncertainties. Factors that may cause
actual results to differ materially from those contemplated by such
forward-looking statements include, among others, the following possibilities.
Risks Relating to AgniCAD's Business
The following risks related to AgniCAD's business and our business once
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the merger is consummated, and are important for you to consider.
AgniCAD's principal services are provided by an Indian corporation and
AgniCAD may therefore be subject to changing economic and political conditions
in India.
AgniCAD's principal services are provided by and through an Indian-based
company. Therefore, it is subject to certain risks of operating in India which
include:
|X| If political instability in India results in a government adverse to
foreign corporate activity, a number of adverse consequences could occur,
including higher tariffs, taxes or export controls, and increased
governmental ownership or regulation, any of which would increase our costs
for providing our services.
|X| Failure or inaccessibility of communications and internet infrastructure.
If the Indian company that AgniCAD uses to provide its detailing services
is disconnected from either communications or internet services for any
length of time AgniCAD would be unable to send and receive projects from
India. This would have an adverse effect on our operating results.
|X| AgniCAD's purchases services from India in U.S. dollars but based on
underlying rates tied to the Indian Rupee. Accordingly, their operating
results are also exposed to changes in exchange rates between the U.S.
dollar and Indian Rupee. While to date, AgniCAD's results have not
materially been affected by any changes in currency exchange rates,
devaluation of the U.S. dollar against the Indian Rupee would adversely
affect AgniCAD's expenses for their Indian service provider.
|X| Although wage costs in India are significantly lower than in the United
States and similar markets for comparably skilled technical personnel,
wages in India are increasing at a faster rate than in the United States.
If wage rates become comparable or even only slightly lower than those in
the U.S., AgniCAD's competitive advantage would be eroded and its results
of operations would suffer.
|X| In the past, India has experienced significant inflation and shortages of
foreign exchange, and has been subject to civil unrest and acts of
terrorism. Although the effect of inflation on our financial statements for
the periods discussed in this report has been insignificant, increases in
inflation in the future or changes in interest rates, taxation or other
social, political, economic or diplomatic developments could harm AgniCAD's
operating results.
AgniCAD faces intense competition for attracting and retaining
qualified personnel.
The ability of AgniCAD to maintain its competitive position will depend, in
large part, on the ability of its Indian service provider to attract and retain
highly qualified individuals to service AgniCAD's U.S. clients. Furthermore, the
services provided by AgniCAD's India service provider are in large part fungible
and therefore competition for such personnel is intense and there is a risk of
departure due to the competitive environment in India. The loss of a significant
group of key personnel would adversely affect AgniCAD's India service provider
and thereby impact the delivery of its services to AgniCAD. The failure to
successfully promote and hire suitable replacements in a timely manner could
have a material adverse effect on AgniCAD's ability to obtain services from its
India service provider.
AgniCAD will need to raise additional capital to continue operations,
failure to obtain additional capital would substantially hurt its business plan.
AgniCAD's future capital requirements will depend on many factors, including
cash flow from operations, competing market and technological developments, and
the its ability to market its services successfully. AgniCAD will need to raise
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additional capital to continue operations. At present levels of expenditure,
AgniCAD has funding to remain operational until July, 2002. AgniCAD does not
have any commitment for any additional capital, and its failure to raise
additional capital will jeopardize AgniCAD's ability to continue operations.
An overall economic downturn in the United States that has the effect
of limiting the construction of commercial and industrial facilities will have
an adverse effect on AgniCAD's operating results.
AgniCAD's primary business is the provision of detailing services to the
commercial and industrial construction sector in the United States. If the
current economic downturn is protracted, it could have the effect of limiting or
curtailing the construction of new commercial and industrial facilities. To date
the current economic slowdown has impacted several sectors of AgniCAD's market
due to a contraction in new construction projects in the United States.
Prolonged economic slowdown in the construction of new commercial and industrial
facilities will have an adverse affect on AgniCAD's operating results.
AgniCAD's competitors have greater resources than it does and may
develop superior services.
The detailing industry is subject to intense competition. AgniCAD currently
enjoys price advantages over its competition because of its operations in India.
However, AgniCAD competes in an industry segment in which numerous competitors
exist that may have substantially greater resources than it, including financial
resources, personnel and facilities. There are no assurances that AgniCAD will
be able to effectively compete in the future with these competitors or that
existing or potential competitors will not develop services equal to or better
than those marketed by it. In particular, should one of AgniCAD's larger
competitors establish facilities in India, its results could suffer.
AgniCAD has limited operating history and has inexperienced management
we therefore cannot assure you that its business plan will be successful.
AgniCAD was incorporated in December 1998 and has relatively limited operating
history. AgniCAD's ability to fulfill its business plan is dependent on further
successful development and marketing of its services. In addition AgniCAD's
management does not have any meaningful experience at managing an operational
company. AgniCAD may encounter unanticipated problems, expenses, and delays in
developing and marketing its products and services. The failure of AgniCAD to
develop its services or successfully market itself would have a material adverse
effect on it and would force AgniCAD to reduce operations. No assurance can be
given that AgniCAD can or will operate profitably.
Conflicts of interest
The company used by AgniCAD to provide detailing services in India is owned by
AgniCAD's chief executive officer and President. AgniCAD has entered into a
memorandum of understanding with D&D Services, the Indian company that provides
AgniCAD with detailing services. That memorandum of understanding contemplates a
future acquisition by AgniCAD. However, at this time the existing relationship
between AgniCAD and D&D Services provides the most cost effective and
managerially efficient form for the two companies to work together. The board of
directors of AgniCAD reviewed the relationship of AgniCAD with this company and
determined that the relationship was fair to AgniCAD. Continued review of this
relationship will be done in an ongoing basis after the merger to ensure that
the arrangement remains fair to us.
Risks Relating to the Merger
The consideration to be paid to AgniCAD was determined by us and the
management of AgniCAD after negotiation and may not reflect any recognized
criteria of value.
The consideration offered to AgniCAD in the merger may not reflect the actual
9
value of our stock and bears no relationship to the assets, book value,
earnings, net worth, or any other recognized criteria of value. Consequently,
the consideration offered to AgniCAD, which can be deemed an offering price for
AgniCAD's assets, was determined arbitrarily and solely by us and AgniCAD. In
establishing the offering price, our management considered such matters as
AgniCAD's financial resources and the general condition of the securities
markets. The exchange ratio of the merger should not, however, be considered an
indication of our or AgniCAD's actual value. Neither we nor AgniCAD obtained a
fairness opinion in connection with the merger.
Certain anti-takeover features of our articles of incorporation and
bylaws and Nevada law may have the effect of discouraging potential acquisition
proposals.
Upon consummation of the merger, certain provisions of our Articles of
Incorporation and Bylaws, along with certain provisions of Nevada statutory law,
could discourage potential acquisition proposals and could delay or prevent a
change in control. Such provisions could diminish the opportunities for a
shareholder to participate in tender offers, including tender offers at a price
above the then current market value of our common stock. Such provisions also
may inhibit fluctuations in the market price of our common stock that could
result from takeover attempts.
AgniCAD may not be profitable.
AgniCAD does not have an extended history of generating revenues from its
operations. We cannot assure you that the merged company will generate revenues
after the merger.
There is no market for your shares and you may not be able to sell
them.
There has been no trading market for our common stock. There is no assurance
that a trading market will ever exist. The Securities and Exchange Commission is
hostile to reverse shell mergers like this one. The Securities and Exchange
Commission may not allow this merger to occur or may only do so after great
difficulty.
Although we intend to ultimately file a registration statement under the
Securities Act of 1933, there is no assurance the registration statement will be
declared effective by the Securities and Exchange Commission.
If our registration statement is declared effective, we intend to apply for
listing of our common stock on the OTC Bulletin Board. We do not meet the
qualifications for NASDAQ or the other national exchanges. Although we will be
applying to list our common stock on the OTC Bulletin Board, there can be no
assurance that our application will be granted and there can be no assurance
that an active market will develop for our common stock. Although our director
Daniel Hodges has agreed to assist us in obtaining a market maker (a requirement
for listing), there can be no assurance any broker will be interested in trading
our stock. Therefore, it may be difficult to sell your shares if you should
desire or need to sell. You may have no more liquidity in your stock even if we
are successful in getting our stock transaction registered and getting listed on
the OTC Bulletin Board.
Once we have issued shares of our common stock in the merger, we do not know if
or how our common stock will trade. Even if we are successful in being listed on
the OTC Bulleting Board, the market price of our common stock may fluctuate
significantly due to a number of factors, some of which may be beyond our
control, including:
o the potential absence of securities analysts covering us and
distributing research and recommendations about us;
o the liquidity of our common stock, which will be low, because only 22%
of our shares will be in the hands of non-affiliates of the company and
such shares are not eligible for sale under exemptions from
registration under the Securities Act of 1933;
10
o changes in earnings estimates by securities analysts or our ability to
meet those estimates;
o the operating results and stock price performance of other comparable
companies;
o low trading volume because so much of our stock is closely held; and
o overall stock market fluctuations.
Any of these factors could have a significant and adverse impact on the market
price of our common stock. In addition, the stock market in general has
experienced extreme volatility and rapid decline that has often been unrelated
or disproportionate to the operating performance of particular companies. These
broad market fluctuations may adversely affect the trading price of our common
stock, regardless of our actual operating performance.
THE COMPANIES
Essential Laser Concepts, Ltd.
Since our inception in July 1997, we have not engaged in any operations
other than organizational matters. We were formed specifically to be a "blank
check" or "clean public shell" corporation, for the purpose of either merging
with or acquiring an operating company with operating history assets. We are
currently an inactive publicly registered shell corporation with no significant
assets or operations. We have not been involved in any litigation nor have we
had any prior regulatory problems or business failures. We are not traded on any
public market and we have never paid dividends. As of April 2, 2002 (our "Record
Date") we had 26 shareholders of record.
Our executive offices are located at 11601 E. Lusitano Pl., Tucson,
Arizona 85748. Our telephone number is (520) 731-9890. Our President, Secretary
and sole director is Daniel L. Hodges.
As the sole director, Mr. Hodges has commenced implementation of our
principal business purpose, which is to seek merger or acquisition candidates.
We have sought to acquire assets or shares of an entity actively engaged in
business and which generates revenues, in exchange for our securities. We have
not and will not, if the merger is not consummated, limit our search to any
particular field or industry.
Mr. Hodges has a controlling interest in numerous shell companies which
seek or have effected mergers or acquisitions similar to that which we seek. Mr.
Hodges owns 800,000 pre-split shares (80 percent) of our outstanding common
stock. In the past, Mr. Hodges has typically sold his controlling shares in the
shell companies for cash. The other shareholders of the shell companies received
shares in the applicable new company as a result of the merger or acquisition.
Competition. We are not a significant participant in the market for
mergers with, or financing of, development stage enterprises. There are many
established management and financial consulting companies and venture capital
firms which have significantly greater financial and personnel resources,
technical expertise and experience than we have in this field. In view of our
limited financial resources and management availability, we continue to be at a
significant competitive disadvantage.
Property. We have no operations and therefore neither rent nor own any
property. We operate at 11601 E. Lusitano Pl., Tucson, Arizona 85748, the
offices of Daniel L. Hodges. We pay no rent on this space.
Employees. We have no full-time or part-time employees. Mr. Hodges, our
sole officer and director, has agreed to allocate a nominal portion of his time
to our activities without compensation.
11
Legal Proceedings. We are not subject to any pending litigation, legal
proceedings or claims.
Market Information. There are no public markets for our common stock.
None of our securities are traded on any public market.
Dividends. We have not paid dividends on our common stock and do not
anticipate doing so in the foreseeable future.
Our Management's Discussion and Analysis of Financial Condition and
Results of Operation
We are an inactive publicly registered shell corporation with no
significant assets or operations. There are no trends that will result in or are
likely to result in our liquidity increasing or decreasing. We have no material
commitments for capital expenditures as of the end of the latest fiscal period.
We do not anticipate performing research and development for any products during
the next twelve months. We have no full or part time employees and do not
anticipate hiring any employees during the next twelve months. We are a public
shell corporation created as a vehicle to acquire or merge with another
corporation who seeks perceived advantages of a publicly held corporation. We
have, and likely will continue to have, insufficient capital to engage in any
operations other than acquiring or merging with another company.
Trading Market and Dividends. Our stock is not traded on any public
market or exchange.
Holders of common stock are entitled to receive dividends out of assets
legally available for this purpose at the times and in the amounts as the Board
of Directors may from time to time determine. Holders of common stock will share
equally on a per share basis in any dividend declared by the Board of Directors.
We have not paid any dividends on our common stock and do not
anticipate paying any cash dividends in the foreseeable future.
AgniCAD, Incorporated
AgniCAD, Inc. was formed in December, 1998 as Agni Technical
Consultants, L.L.C., a Washington Limited Liability Company. AgniCAD
Incorporated was formed as a successor in November 2000, and its services-based
company providing computer-aided design (CAD) consulting and services for the
North American construction industry.
AgniCAD has created a new business model in the field of detailing for
the creation of detailed shop drawings. AgniCAD utilizes an operational facility
in Seattle, Washington and outsourcing through a service provider based in
Mumbai, India. Detailing is a critical component of all commercial and
industrial construction projects. Every development project begins with a design
phase where architects and design engineers create the basic shape or structure
of a given project. Once the design phase is complete, a general contractor is
brought in to construct the design prepared by the architect/engineer. In order
to obtain the material necessary to build the design, a general contractor hires
fabricators to manufacture the necessary steel, rebar, post tensioning, joist
and girder, etc. These fabricators in turn hire detailers to translate contract
drawings into shop drawings. Once the detailed drawings have been approved by
the general contractor and/or architect/engineer, they are utilized for both
fabrication and erection purposes.
Today, the U.S. detailing industry is in crisis due to a severe
shortage of qualified detailers. A combination of outmoded production practices,
high labor costs and lack of new talent entering the field has crated a large
disparity between detailing capacity and the demand for available detailing
services. AgniCAD's unique production model offers its customers a variety of
12
benefits unavailable anywhere else in the industry, including (1) improvement in
quality and sophistication of detailing product through the use of university
trained civil engineers and state of the art detailing software and automation
tools; (2) substantial cost savings over traditional detailing service providers
with billing rates 40% below current market prices; (3) production turn-around
and delivery well in advance of industry standards, including 16-hours
production days and 24-hour operational handshake with client facilities; (4)
standardization of work flow and output; (5) integration of disparate detailing
fields into a unified product offering for consolidation of a client's total
detailing requirements; (6) expansion of our clients' core production capacity
through elimination of detailing bottleneck.
AgniCAD's revenue model is driven by production of detailing hours
which are billed at a flat rate based on specified production efficiencies
variable by field of detailing, complexity of the work, and client delivery
requirements. By effectively implementing the strategies in this business plan,
AgniCAD expects to realize rapid growth due to our ability to obtain and produce
detailing hours.
AgniCAD's Management Discussion and Analysis of Financial Condition and
Results of Operation
The following discussion should be read in conjunction with AgniCAD's financial
statements appearing elsewhere in this information statement. The following
discussion contains forward-looking statements, including, but not limited to,
statements concerning our plans, anticipated expenditures, the need for
additional capital and other events and circumstances described in terms of our
expectations and intentions. You are urged to review the information set forth
under the captions for factors that may cause actual events or results to differ
materially from those discussed below.
The Company operated as a Limited Liability Company until December 31, 2000 and
as such no shares were then outstanding.
RESULTS OF OPERATIONS
Comparison of 2001 and 2000
Revenues. Revenues increased to $196,059 in 2001 from $73,348 in 2000.
This revenue growth of 167% was primarily the result of new customer work and
expansion of relationships with existing customers.
Gross Margin. Gross margin for 2001 increased to $88,664 from $29,246
in 2000, an increase of 203%. The increase was primarily due to our ability to
bring our detailing staff up to full capacity from an underutilized condition.
The increase was also partially due to the implementation of employee training
programs which increased overall employee productivity.
General and Administrative. General and administrative expenses for the
fiscal year ended December 31, 2001 totaled $253,291 and the Company experienced
a net loss of $205,397 against revenues of $196,059 and cost of services
provided of $107,395. The major expenses during this period were $67,365 for
U.S. personnel costs; $48,432 in professional services; $36,513 for travel and
$34,756 for depreciation and amortization. The categories of insurance, bad debt
expense, business taxes, software maintenance, telephone and supplies made up
the remainder of the total expenses.
General and administrative expenses for the year ended December 31,
2000 totaled $78,900 and the Company experienced a net loss of $51,583 against
revenues of $73,348 and cost of services provided of $44,102. The major expenses
during this period were $17,308 in professional services; $17,140 in
depreciation and amortization; $6,756 in telephone expense; $8,588 in bad debt
expense and $21,554 in travel. The categories of rent and miscellaneous expenses
made up the remainder of total expenses.
13
Income Taxes
Prior to the December 31, 2000 reorganization, AgniCAD had elected to be taxed
as a limited liability company under the Code. In lieu of corporate income
taxes, the members of a limited liability company are taxed on their
proportionate share of the company's income. Therefore, no provision or
liability for income taxes has been accrued or included in the December 31, 2000
financial statements. After December 31, 2000, the Company records income taxes
using the liability method of Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes. At December 31, 2001, operating loss
carryforwards of approximately $169,000 expiring through 2020, are available to
offset future taxable income. Utilization of these carryforwards is dependent on
future taxable income. Subsequent changes in the Company's ownership could
result in limitations on the use of its net operating loss carryforwards. For
financial reporting purposes, a valuation allowance of $68,700 has been
recognized to offset the deferred tax asset related to those carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
AgniCAD's capital needs consist primarily of operating cash needs and
capital equipment purchases. AgniCAD has historically financed its operations
through a combination of equity and convertible notes payable and software
license financing. Our liquidity is impacted primarily by collection of accounts
receivable, monthly payroll and financing installment payments.
During 2001, net cash used in operating activities totaled $115,030.
The primary adjusting items were $24,792 for issuance of common stock for
services, $35,000 for issuance of commons tock in connection with pending
merger, $34,756 in depreciation and amortization, $29,289 for increase in
accounts payable, and $21,000 for decrease in license fee payable. AgniCAD used
$13,787 in investing activities in 2001 for the purchase of equipment and
software licenses. AgniCAD generated $130,000 in financing activities in 2001.
During 2000, net cash used in operating activities totaled $25,328. The
primary adjusting items were $24,857 for increase in accounts receivable,
$17,140 in depreciation and amortization and $32,075 for increase in accounts
payable. AgniCAD used $23,659 in investing activities in 2000 for the purchase
of equipment and software licenses. AgniCAD generated $47,500 in financing
activities in 2000.
AgniCAD will pursue further opportunities to augment its capital
structure to support anticipated growth following the merger. We can offer no
assurance that AgniCAD will be able to secure such additional capital or if it
is able to do so that it will be on terms acceptable to it. AgniCAD's management
has determined that because of the deficiency in working capital, significant
operating losses and lack of liquidity, there is doubt about its ability to
fulfill its business plan unless additional working capital is obtained.
Inflation
AgniCad's results of operations have not been affected by inflation and
its management does not expect inflation to have a material impact on its
operations in the future.
Description of AgniCAD's Capital Stock
AgniCAD has 40,000,000 shares of common stock authorized at a par value
of $.001. As of April 2, 2002, there were 7,760,000 shares issued and
outstanding. There are no agreements to issue any additional stock. There are no
voting trusts between AgniCAD and its shareholders relative to the outstanding
common stock.
PROPOSAL NO. 3: CHANGE IN OUR CORPORATE NAME
Following the combination, our board of directors and the majority
14
shareholder has decided that it is in our best shares to change our name to
reflect the merger with AgniCAD in order to capture the goodwill associated with
that name. Therefore, following the closing of the combination we will amend to
our articles of incorporation to change our name to AgniCAD, Inc. The form of
amendment is attached hereto as Appendix C.
PROPOSAL NO. 4: AUTHORIZE BLANK CHECK PREFERRED STOCK
Our majority shareholder has approved an amendment to our articles of
incorporation which would allow for the issuance of preferred stock. At the
present time, our articles of incorporation do not allow for the issuance of
preferred stock. The board of directors has reviewed this matter and has decided
that it is in our best interest to amend our articles of incorporation to
provide for 10,000,000 shares of "blank check" preferred stock.
Blank check preferred stock is preferred stock that is generally
authorized for issuance without any determination of rights and preferences
attached to it. The final decision as to the rights and preferences of preferred
stock that is issued rests in the hands of the board of directors without any
further shareholder approval requirement. In other words, the board of directors
can issue preferred stock in one or more classes with varying rights and
preferences from time to time without asking your permission.
As mentioned above, the board of directors reviewed this matter and
determined that not having the ability to issue preferred stock was a detriment
to our ability to achieve our business strategy. In addition, in the context of
the combination, the lack of authorized preferred stock would hinder our ability
to raise additional capital, assuming the combination is consummated, for the
ongoing business operations of AgniCAD.
The form of amendment that we are asking for your approval on is
attached hereto as Appendix C.
GENERAL INFORMATION
Security Ownership of Our Shares By Certain Beneficial Shareholders
As of April 2, 2002, Daniel L. Hodges was: (i) the only person known by
us to be the beneficial owner of more than 5% of the outstanding shares of
common stock, and (ii) is our sole director and executive officer. Mr. Hodges
has sole voting and investment power as to the shares shown.
Name and Address of Beneficial Owner Amount Percent
Daniel L. Hodges 800,000(1) 80%
President and Director
11601 E. Lusitano Place
Tucson, AZ 85748
(1) Pre-split shares.
After the merger our shareholders will own 2,240,000 shares or 22.4% of
the combined company.
Executive Compensation of our Directors and Officers
Mr. Hodges, the sole officer and director has not received any
compensation, at any time.
Shareholder Proposals
If the merger is not consummated, we may hold an annual meeting of
shareholders during 2002. In the event such a meeting is held, any shareholder
15
notice of a proposal intended to be presented at such meeting must be received
at our principal offices no later than the close of business of the sixtieth day
prior to the meeting, unless the public announcement is first made by us fewer
than seventy days prior to the date of such annual meeting, then the notice must
be received by the close of business on the tenth day following the day on which
the public announcement of the date of such annual meeting is made.
A shareholder's notice to the Secretary shall set forth as to each
matter the shareholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and address, as they appear on the corporation's books, of the shareholder
proposing such business, (iii) the class and number of shares of the corporation
which are beneficially owned by the shareholder, (iv) any material interest of
the shareholder in such business and (v) any other information that is required
to be provided by the shareholder pursuant to Regulation 14A under the
Securities Exchange Act of 1934, in his capacity as a proponent of a shareholder
proposal. Notwithstanding the foregoing, in order to include information with
respect to a shareholder proposal in the proxy statement and form of proxy for a
shareholder's meeting, shareholders must provide notice as required by the
regulations promulgated under the 1934 Act.
Management Following the Combination
The following table sets forth the names, positions and ages of the
directors and executive officers of our directors and officers following the
merger. All directors are elected at each annual meeting and serve for one year
and until their successors are elected and qualify. Officers are elected by the
Board of Directors and their terms of office are at the discretion of the Board.
Name of Director/Officer Age Position(s) With Company
Lloyd Andrews 81 Chairman of the Board, Director
Oliver Bangera 38 President, Chief Executive Officer, Director
Shaun Gill 33 Vice Chairman, Secretary, Treasurer, Director
Matt Wayrynen 41 Director
Vern Gillett 64 Director
Lloyd Andrews. Mr. Andrews has been a director since November 2000.
Lloyd is a retired Washington State Senator and past gubernatorial candidate. He
was the founder of Chem Nuclear Systems (a publicly held company sold to Waste
Management Systems) and is the past Chairman of the Board for Flow International
Corporation. Lloyd is currently a Director for Smith Barney's Fundamental Fund,
and he continues to serve as Chairman Emeritus for Flow International and as a
Senior Consultant for Chem Nuclear Systems. Finally, Lloyd is a founder and
Co-Chairman of the Board for Netcompliance, a start-up company based in Seattle,
Washington.
Oliver Bangera. Mr. Bangera has been a director and our Chief Executive
Officer and president since November 2000. Mr. Bangera was the General Secretary
for the National Student Union of India (NSUI), the student wing of the Congress
(I) - India's largest national political party. In his role as General
Secretary, he developed an extensive network of contacts within India's
political and business communities. In the U.S., Oliver was a four-term
President of the graduate and Professional Students' Association (GPSA) at
Washington State University. As president, Mr. Bangera played a role in policy
development for the University by representing the Association on the Board of
Regents. Oliver holds a bachelor degree in political science from Bombay
University and a Masters degree in Political Science and International Relations
from Washington State University.
16
Shaun Gill. Mr. Gill was formerly Director of the India and South Asia
Program at the Center for Strategic and International Studies (CSIS) in
Washington, D.C. At CSIS, his responsibilities included meetings with senior
U.S. and South Asian government, political, and business leaders; overview of
Program budget and development activities; management of ongoing research
projects; foundation and grant proposal writing; and editorial oversight of
Program publications, including the CSIS India Monitor & India Economic Watch
newsletter. Shaun was also deputy to William Clark, Jr., former U.S. Ambassador
to India and Assistant Secretary of State for Asia Pacific Affairs. Mr. Gill
holds a bachelor's degree in political science and history from Colgate
University and a law degree from the University of Washington School of Law.
Matt Wayrynen. Mr. Wayrynen has been a licensed broker in Canada for
the last 8 years. His experience has included venture capital, initial public
offerings, secondary financings and mergers and acquisitions. Mr. Wayrynen was
also an original member of the co-founding group of Netcompliance a
Seattle-based internet company. Mr. Wayrynen has also been a licensed Canadian
realtor for 10 years specializing in the conversion of residential apartments
into freehold condominiums.
Vern Gillett. Mr. Gillett has been employed with Design Data
Corporation based in Lincoln, Nebraska for the past 15 years. Design Data
develops, markets and sells drafting and engineering software to firms in the
steel industry and internationally. Mr. Gillett was formerly Vice President of
Sales for Design Data. Prior to joining Design Data, Mr. Gillett was a teacher
and superintendent in Nebraska. Mr. Gillett received a Bachelor of Science and
Master of Science in education from Chadron State College in Nebraska.
Our Principal Shareholder.
As of December 31, 2001, Daniel L. Hodges holds 800,000 shares of our
pre-split common stock which represents 80% of our issued and outstanding
capital stock. He is also our sole director and executive officer. Twenty-five
shareholders hold the remaining 200,000 shares of our pre-split common stock
none of whom own in excess of 1% of our shares.
17
APPENDIX A
AGREEMENT AND PLAN OF MERGER
by and between
ESSENTIAL LASER CONCEPTS, LTD.
and
AGNICAD, INCORPORATED
Dated April 2 , 2002
18
TABLE OF CONTENTS
Page
ARTICLE I: THE MERGER 3
ARTICLE II: REPRESENTATIONS AND WARRANTIES 4
ARTICLE III.A: COVENANTS OF AGNICAD 10
ARTICLE III.B: COVENANTS OF ESSENTIAL LASER 10
ARTICLE IV: CERTAIN COVENANTS 11
ARTICLE V: CONDITIONS 12
ARTICLE VI: STOCK RESTRICTION/INVESTMENT REPRESENTATION 15
ARTICLEVII: INDEMNIFICATION AND WAIVER OF CLAIMS - ESSENTIAL LASER 16
ARTICLE VIIA: INDEMNIFICATION AND WAIVER OF CLAIMS - AGNICAD 17
ARTICLE VIII: CLOSING DATE 18
ARTICLE IX: RESIGNATION AND ELECTION 18
ARTICLE X: MISCELLANEOUS 18
Exhibit A 23
Exhibit B 24
Exhibit C 25
Exhibit D 26
Exhibit E 27
Exhibit F 28
Exhibit G 29
Exhibit H 31
19
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, effective April 2, 2002, between ESSENTIAL
LASER CONCEPTS, LTD.., a Nevada Corporation ("ESSENTIAL LASER") and AGNICAD,
INCORPORATED, a Washington Corporation ("AgniCAD").
WHEREAS, the respective Boards of Directors of ESSENTIAL LASER
and AgniCAD deem it advisable to merge such Company into ESSENTIAL LASER
("Merged Company") pursuant to this Agreement and a Certificate of Merger to be
executed by each Company ("Certificate of Merger") and Articles of Merger to be
executed by each company and ESSENTIAL LASER ("Articles of Merger"), whereby the
holders of shares of common stock of each Company (such shares of common stock
being sometimes hereinafter called, collectively, the "Common Stock")
outstanding at the effective time (as hereinafter defined) of the merger will
have the right to receive shares of ESSENTIAL LASER common stock, $0.001 par
value per share (the "Essential Shares"), in the manner and in such amount as is
set forth in Article I hereof and upon the terms and conditions otherwise set
forth in this Agreement; and
WHEREAS, to effectuate the foregoing, the parties desire to
adopt a plan of reorganization in accordance with the provisions of Section
368(a)(1)(A) of the Internal Revenue Code of 1986, as amended (the "Code");
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreements herein contained, and for the purpose of stating
the terms and conditions of the merger, the mode of carrying the same into
effect, the manner of converting the shares of each company issued and
outstanding immediately prior to the effective time of the merger into ESSENTIAL
LASER shares, and such other details and provisions as are deemed desirable, the
parties hereto, severally and jointly, have agreed, and do hereby agree, subject
to the terms and conditions hereinafter set forth as follows:
ARTICLE I
THE MERGER
1. Execution of Certificate of Merger and Articles of Merger. Subject
to the provisions of this Agreement, the Articles of Merger with respect to the
merger shall be executed and acknowledged by ESSENTIAL LASER and AgniCAD and
thereafter delivered to the Secretary of State of the State of Nevada for
filing, as provided by the Nevada Business Corporation Act, as soon as
practicable on or after the Closing Date (as hereinafter defined) of such
merger. The merger shall become effective upon the filing of the Articles of
Merger with the Secretary of State of the State of Nevada. The date and time
when a merger becomes effective shall be called the "effective time" of such
merger. At the effective time of a merger, the separate existence of the merged
company (AgniCAD) shall cease and such company shall be merged with and into
ESSENTIAL LASER. ESSENTIAL LASER shall be the Surviving Corporation upon the
consummation of the merger (the "Surviving Corporation").
2. Consummation of the Merger. As soon as practicable after the
approval of the merger by the stockholders, ESSENTIAL LASER and AgniCAD will
cause such merger to be consummated in accordance with applicable law, subject
to the conditions hereinafter set forth.
3. Conversion of Shares of AgniCAD/ESSENTIAL LASER. At the effective
time of the merger of AgniCAD with and into ESSENTIAL LASER, each outstanding
share of AgniCAD common stock (currently 7,760,000) shall be canceled and shall
be converted into ESSENTIAL LASER shares (at the ratio of 1 share of ESSENTIAL
LASER Common Stock for each share of AgniCAD share of Common Stock) by virtue of
such merger and without any action on the part of the holder thereof, such that
prior Shareholders of AgniCAD Common Stock will hold 7,760,000 shares of Common
Stock of ESSENTIAL LASER, current shareholders of ESSENTIAL LASER will hold
2,240,000 shares of Common Stock of ESSENTIAL LASER.
4. Exchange of Certificates. After the effective time of the merger,
each holder of a certificate theretofore evidencing outstanding shares of common
stock of the merged company (other than shares held by dissenting stockholders
20
and shares that are automatically canceled as hereinabove provided), upon
surrender of the same to Securities Registrar and Transfer Corporation (the
"Transfer Agent") or such other agent or agents as shall be appointed by
ESSENTIAL LASER, shall be entitled to receive in exchange therefor a certificate
or certificates evidencing the number of full shares for which the shares of
common stock of the merged company theretofore represented by the certificate or
certificates so surrendered shall have been exchanged as provided in this
paragraph 4. As soon as practicable after the effective time of each merger, the
Transfer Agent will send a notice and transmittal form to each holder of an
outstanding certificate which immediately prior to the effective time of such
merger evidenced shares of common stock of the merged company and which is to be
exchanged for ESSENTIAL LASER as provided in paragraph 3 hereof, advising such
stockholder of the terms of the exchange effected by such merger and the
procedure for surrendering to the Transfer Agent (which may appoint forwarding
agents) such certificate for exchange into one or more certificates evidencing
ESSENTIAL LASER shares. Until so surrendered, each outstanding certificate
which, prior to the Effective time of such merger, represented common stock of
the merged company (other than shares previously held by dissenting
stockholders) will be deemed for all corporate purposes of ESSENTIAL LASER to
evidence ownership of the number of full ESSENTIAL LASER shares for which the
shares of common stock of the merged company represented thereby were exchanged;
provided, however, that until such outstanding certificates formerly evidencing
common stock of the merged company are so surrendered, no dividend payable to
holders of record of ESSENTIAL LASER shares as of any date subsequent to the
effective time of such merger or any cash in lieu of any fraction of a ESSENTIAL
LASER share payable pursuant to Section 5 hereof shall be paid to the holder of
such outstanding certificates in respect thereof. After the effective time of
such merger there shall be no further registry of transfers on the records of
the merged company of shares of common stock of the merged company and, if a
certificate evidencing such shares is presented to ESSENTIAL LASER, it shall be
canceled and exchanged for a certificate evidencing shares of ESSENTIAL LASER
common stock as herein provided.
5. No Fractional Shares. Neither certificates nor scrip for fractional
ESSENTIAL LASER shares will be issued and any such fractional shares shall be
rounded up or down as necessary to meet the requirements of this Agreement.
6. Certificate of Incorporation; By-laws; Directors. The Certificate of
Incorporation and By-laws of ESSENTIAL LASER, as in effect immediately prior to
the effective time of the merger, shall continue to be the Certificate of
Incorporation and By-laws of ESSENTIAL LASER, until they shall thereafter be
duly altered, amended or repealed. The directors of ESSENTIAL LASER shall
continue as the directors of ESSENTIAL LASER until their successors shall be
duly elected and qualified.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of Essential Laser. ESSENTIAL LASER
represents and warrants to AgniCAD, as follows:
(a) ESSENTIAL LASER has the corporate power and authority to enter into
this Agreement and to carry out its obligations hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
hereby have been duly authorized by the Board of Directors of ESSENTIAL LASER,
and, except for the approval of ESSENTIAL LASER's stockholders, no other
corporate proceedings on the part of ESSENTIAL LASER are necessary to authorize
this Agreement and the transactions contemplated hereby.
(b) ESSENTIAL LASER has heretofore delivered to AgniCAD its Annual
Report on Form 10-KSB for the fiscal year ended December 31, 2001, as filed with
the Securities and Exchange Commission (the "Commission"). As of the respective
dates, such documents did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading.
(c) Except as previously disclosed to AgniCAD in writing or in the
reports delivered pursuant to Section 1(b) or the Information Statement (as that
term is defined under Regulation 14C of the Securities Exchange Act of 1934),
there has not been any material adverse change in the business, operations,
properties, assets, condition, financial or otherwise, or prospects of ESSENTIAL
LASER and its subsidiaries taken as a whole.
(d) Due Organization; Power; Qualification; Subsidiaries and
Affiliates; Etc.
21
(i) ESSENTIAL LASER is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Nevada
and has the corporate power to own its property and to carry on its
business as now conducted. The nature of the business now conducted by
ESSENTIAL LASER, the character of the property owned by it, or any
other state of facts does not require ESSENTIAL LASER to be qualified
to do business as a foreign corporation in any jurisdiction.
(ii) ESSENTIAL LASER has no subsidiaries or affiliates (as
that term is used in the regulations promulgated under the Securities
Act of 1933).
(e) Capitalization.
(i) The total authorized capital stock of ESSENTIAL LASER
consists of 100,000,000 shares of common stock, ($0.001 par value). An
aggregate of 1,000,000 shares of common stock are currently issued and
outstanding. All of such stock has been duly and validly issued and is
fully paid and non-assessable.
(ii) There are, and on the Closing Date, there will be, no
outstanding subscriptions, options, warrants, contracts, calls, puts,
agreements, demands or other commitments or rights of any type to
purchase or acquire any securities of ESSENTIAL LASER, nor are there
outstanding securities of ESSENTIAL LASER which are convertible into or
exchangeable for any shares of ESSENTIAL LASER Common Stock, and
ESSENTIAL LASER has no obligation of any kind to issue any additional
securities.
(f) Financial Information: No Material Adverse Change.
(i) ESSENTIAL LASER has furnished to AgniCAD the financial
statements of ESSENTIAL LASER as at and for the period ended December
31, 2001 (the "Financials"). The Financials have been prepared in
accordance with generally accepted accounting principles, and fairly
present the financial condition of ESSENTIAL LASER as at the date
thereof, and the results of operation of ESSENTIAL LASER for the period
then ended.
(ii) Since December 31 , 2001, there has been no material
adverse change in the business or financial condition or the operations
of ESSENTIAL LASER or to the best knowledge of ESSENTIAL LASER any
occurrence, circumstance, or combination thereof which reasonably could
be expected to result in such a material adverse change in the future
except as stated and shown on Exhibit B.
(iii) At December 31 , 2001, there were no liabilities,
absolute or contingent of ESSENTIAL LASER that were not shown or
reserved against on the balance sheets included in the Financials,
except obligations under the contracts shown on or as otherwise
disclosed in Exhibit B.
(iv) Since December 31 , 2001, ESSENTIAL LASER has not sold or
otherwise disposed of or encumbered any of the properties or assets
reflected on the Financials, or otherwise owned or leased by it, except
in the ordinary course of business, or as otherwise disclosed on
Exhibit B.
(g) Tax Matters.
(i) ESSENTIAL LASER has filed or caused to be filed with the
appropriate federal, state, county, local and foreign governmental
agencies or instrumentalities all tax returns and tax reports required
to be filed, and all taxes, assessments, fees and other governmental
charges have been fully paid when due.
(ii) There is no pending or any threatened federal, state or
local tax audit of ESSENTIAL LASER; there is no agreement with any
federal, state or local taxing authority by ESSENTIAL LASER that may
affect the subsequent tax liabilities of AgniCAD.
(iii) Without limiting the foregoing: (a) the financial
statements include adequate provision for all taxes, assessments, fees,
22
penalties and governmental charges which have been or in the future may
be assessed against ESSENTIAL LASER with respect to the period then
ended and all periods prior. thereto; and (b) ESSENTIAL LASER is not,
on the date hereof, liable for taxes, assessments, fees or governmental
charges.
(h) No Conflict or Default. Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof, including
without limitation the consummation of the transactions contemplated hereby,
will violate any statute, regulation or ordinance of any governmental authority,
or conflict with or result in the breach of any term condition or provisions of
the Articles of Incorporation or Bylaws of ESSENTIAL LASER, or of any agreement,
deed, contract, mortgage, indenture, writ, order decree, legal obligation or
instrument to which ESSENTIAL LASER is a party or by which it or any of its
respective assets or properties are or may be bound, or constitute a default (or
an event which, with the lapse of time or the giving of notice, or both, would
constitute a default) thereunder, or result in the creation or imposition or any
lien, charge or encumbrance, or restriction of any nature whatsoever with
respect to any properties or assets of ESSENTIAL LASER, or give to others any
interest or rights, including rights of termination, acceleration or
cancellation in or with respect to any of the properties, assets, contracts or
business of ESSENTIAL LASER.
(i) Party to Agreements. ESSENTIAL LASER is not a party to any contract
or other arrangement except those made in the ordinary course of business or
which are terminable on the giving of sixty (60) day's (or less) notice of
ESSENTIAL LASER's intent to terminate such contract. ESSENTIAL LASER is not in
default in any material respect under any contract or agreement to which it is a
party or by which it or any of its assets is or may be bound.
(j) Litigation. There are no actions, suits, investigations, or
proceedings pending or threatened, against or affecting or which may affect
ESSENTIAL LASER, the performance of the terms and conditions hereof, or the
consummation of the transactions contemplated hereby, in any court or by or
before any governmental body or agency, including without limitation any claim,
proceeding or litigation for the purpose of challenging, enjoining or preventing
the execution, delivery or consummation of this agreement; and ESSENTIAL LASER
does not know of any state of facts which would give rise to any such action,
suit, investigation or proceeding. ESSENTIAL LASER is not subject to any order,
judgment, decree, stipulation or consent or any agreement with any governmental
body or agency that affects its business or operation.
(k) Securities Filings. As of the date of this Agreement and on the
Closing Date, ESSENTIAL LASER has and will have made all filings required to be
made by ESSENTIAL LASER with the Securities and Exchange Commission and any
state securities authorities.
(l) Governmental Approval. ESSENTIAL LASER has all permits, licenses,
orders and approvals of all federal, state, local or foreign governmental or
regulatory bodies required for ESSENTIAL LASER to conduct its business as
presently conducted. All such permits, licenses, orders and approvals are in
full force and effect and no suspension or cancellation of any of them is
threatened, and none of such permits, licenses, orders or approvals will be
affected by the consummation of the transactions contemplated by this Agreement
and all such permits, licenses, order or approvals to the extent transferable,
are transferable to ESSENTIAL LASER. No approval or authorization of or filing
with any governmental authority on the part of ESSENTIAL LASER is required as a
condition to the execution and delivery of this Agreement or the consummation of
the transactions contemplated hereby.
(m) Salaries. ESSENTIAL LASER has no employees, has paid no salaries,
and does not have any pension plan, profit-sharing plan or employees' savings
plan
(p) Conflicts of Interest. ESSENTIAL LASER has not entered into any
transactions between its Management and such Corporation; Management has no
interest in affiliated Corporations; and there are no actual or potential
conflicts of interest.
2. Representations and Warranties of AgniCAD: AgniCAD represents and
warrants, to ESSENTIAL LASER as follows:
(a) Such Company has the corporate power and authority to enter into
this Agreement and to carry out its obligation hereunder. The execution and
delivery of this Agreement and the consummation of the transactions contemplated
23
hereby have been duly authorized by its Board of Directors and, except for the
approval of its stockholders, no other corporate proceedings on the part of such
Company are necessary to authorize this Agreement and the transactions
contemplated hereby.
(b) Except as disclosed in writing in Exhibit B herein, since September
30, 2001, there has not been any material adverse change in the business,
operations, properties, assets, condition, financial or otherwise, or prospects
of such Company taken as a whole.
(c) AgniCAD has heretofore delivered to ESSENTIAL LASER (i) Business
Plan; (ii) Minutes of Directors and Shareholders meetings; and (iii) audited
financial statements for the year ended December 31, 2001. Such documents did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein in order to make the statements therein, in
light of the circumstances under which they were made, not misleading, and the
financial statements heretofore delivered to ESSENTIAL LASER are in accordance
with the books and records of AgniCAD and fairly present the financial position
and the results of the operations, changes in stockholders' equity and changes
in financial position of AgniCAD, as at and for the periods indicated, in each
case in conformity with generally accepted accounting principles consistently
applied.
(d) The authorized capital stock of AgniCAD consists of 50,000,000
shares, of which 10,000,000 shares of preferred stock, $0.001 is authorized,
none of which is outstanding, and 40,000,000 shares of which are common stock,
$0.001 par value per share, of which 7,760,000 shares are issued and outstanding
as of the date hereof. Except for that certain Series "A" Convertible Debenture
Certificate, between AgniCAD and Valorinvest Ltd., dated May 7, 2001, there are
no options, warrants, convertible securities or rights that may require any
Company to issue additional shares of its capital stock. All the outstanding
shares of Common stock of AgniCAD have been duly authorized, and are validly
issued, fully paid and non-assessable.
(e) Any amounts due and owing immediately prior to the effective date
of the merger to the officers, directors, and employees of AgniCAD shall not be
paid to such persons out of funds of ESSENTIAL LASER existing as of the Closing
Date.
(f) Due Organization: Power; Qualification; Subsidiaries and
Affiliates; Etc.
(i) AgniCAD is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Washington and has
the corporate power to own its property and to carry on its business as
now conducted. The nature of the business now conducted by AgniCAD, the
character of the property owned by it, or any other state of facts does
not require AgniCAD to be qualified to do business as a foreign
corporation in any jurisdiction.
(ii) There are no subsidiaries or affiliates (as that term is
used in the regulations promulgated under the Securities Act of 1933)
of AgniCAD, other than AgniCAD's relationship with D&D Services Ltd.,
an Indian Corporation providing subcontractor engineering and drafting
services to AgniCAD Incorporated.
(g) Title and Authority. To the best of the knowledge of AgniCAD,
shareholders as listed in Exhibit G are together the holders of record and sole
beneficial owners of all of the outstanding shares of AgniCAD common stock and
now have, at closing will have and at all times prior to the closing hereunder
will have:
(i) full legal title to all of such shares free and clear of
any liens, security interests, encumbrances, pledges, charges, claims
voting trusts, restrictions on transfer, and of any rights or interest
therein, direct or contingent, in favor of any other parties; and
(ii) full and unrestricted right, power and authority to sell,
assign, transfer and deliver the same or to cause the same to be
transferred to AgniCAD in accordance with this agreement.
(h) Financial Information; Contingent Liabilities.
(i) At September 30, 2001 there were no liabilities, absolute
or contingent of AgniCAD that were not shown or reserved against on the
24
balance sheets included in the Financials, except obligations under the
contracts shown on Exhibit B, and that certain Convertible Debenture
Certificate, between AgniCAD and Valorinvest Ltd., dated May 7, 2001,.
(ii) Since September 30, 2001, AgniCAD has not sold or
otherwise disposed of or encumbered any of the properties or assets
reflected on the Financials, or otherwise owned or leased by it, except
in the ordinary course of business, and as otherwise disclosed on
Exhibit B herein.
(i) Tax Matters.
(i) AgniCAD has filed or caused to be filed with the
appropriate federal, state, county, local and foreign governmental
agencies or instrumentalities all tax returns and tax reports required
to be filed, and all taxes, assessments, fees and other governmental
charges have been fully paid when due.
(ii) There is no pending or, to the best knowledge of AgniCAD,
threatened federal, state or local tax audit of AgniCAD; there is no
agreement with any federal, state or local taxing authority that may
affect the subsequent tax liabilities of AgniCAD.
(iii) Without limiting the foregoing: (a) the Financials
include adequate provision for all taxes, assessments, fees, penalties
and governmental charges which have been or in the future may be
assessed against AgniCAD with respect to the period then ended and all
periods prior thereto; and (b) AgniCAD is not, on the date hereof,
liable for taxes, assessments, fees or governmental charges.
(j) No Conflict or Default, Neither the execution and delivery of this
Agreement, nor compliance with the terms and provisions hereof, including
without limitation the consummation of the transactions contemplated hereby,
will violate any statute, regulation or ordinance of any governmental authority,
or conflict with or result in the breach of any term, condition or provisions of
the Articles of Incorporation or Bylaws of AgniCAD, or of any agreement, deed,
contract, mortgage, indenture, writ, order decree, legal obligation or
instrument to which AgniCAD is a party or by which it or any of its respective
assets or properties are or may be bound, or constitute a default (or an event
which, with the lapse of time or the giving of notice, or both, would constitute
a default) thereunder, or result in the creation or imposition of any lien,
charge or encumbrance, or restriction of any nature whatsoever with respect to
any properties or assets of AgniCAD, or give to others any interest or rights,
including rights of termination, acceleration or cancellation in or with respect
to any of the properties, assets, contracts or business of AgniCAD.
(k) Party to Agreements. AgniCAD is not a party to any contract or
other arrangement except those made in the ordinary course of business or which
are terminable on the giving of sixty (60) day's (or less) notice of AgniCAD's
intent to terminate such contract, except as set forth on Exhibit D annexed
hereto. AgniCAD is not in default in any material respect under any contract or
agreement to which it is a party or by which it or any of its assets is or may
be bound, except with respect to the terms of a certain loan agreement between
AgniCAD Inc. and Valorinvest.
(l) Litigation. Other than as disclosed in its Financial Statements for
the period ended December 31, 2001, there are no actions, suits, investigations,
or proceedings pending, or, to the knowledge of AgniCAD, threatened, against or
affecting or which may affect AgniCAD, the performance of the terms and
conditions hereof, or the consummation of the transactions contemplated hereby,
in any court or by or before any governmental body or agency, including without
limitation any claim, proceeding or litigation for the purpose of challenging,
enjoining or preventing the execution, delivery or consummation of this
agreement; and except as otherwise disclosed herein docs not know of any state
of facts which would give rise to any such action, suit investigation or
proceeding. AgniCAD is not subject to any order, judgment, decree, stipulation
or consent or any agreement with any governmental body or agency that affects
its business or operation.
(m) Governmental Approval. AgniCAD has all permits, licenses, orders
and approvals of all federal state, local or foreign governmental or regulatory
bodies required for AgniCAD to conduct its business as presently conducted. All
such permits, licenses, orders and approvals are in full force and effect and no
suspension or cancellation of any of them is threatened, and none of such
permits, licenses, orders of approvals will be affected by the consummation of
the transactions contemplated by this Agreement and all such permits, licenses,
25
order or approvals, to the extent transferable, are transferable to ESSENTIAL
LASER. No approval or authorization of or filing with any governmental authority
on the part of AgniCAD is requited as a condition to the execution and delivery
of this Agreement or the consummation of the transactions contemplated hereby.
(n) Salaries. Exhibit A annexed hereto and made a part hereof is a true
and complete list, as of the date of this agreement, of all of the persons who
arc employed by AgniCAD.
(o) Accrued Compensation. AgniCAD does not have any outstanding
liability for payment of wages, vacation pay (whether accrued or otherwise),
salaries, bonuses, pensions or contributions under any labor or employment
contract, whether oral or written or by reason of any past practices with
respect to such employees based upon or accruing with respect to services or
present or former employees of AgniCAD.
(p) Employee Benefit Plans. AgniCAD does not have any pension plan,
profit-sharing plan or employees' savings plan, and AgniCAD is not otherwise
subject to any applicable provisions of the Employee Retirement Income Security
Act of 1974 ("ERISA").
(q) Conflicts of Interest. Transactions between Management of AgniCAD
and such Corporation, Management's interest in affiliated Corporations,
agreements as to Management's remuneration, as well as any other actual or
potential conflicts of interest are disclosed in Exhibit H.
ARTICLE III.A
COVENANTS OF AGNICAD
AgniCAD agrees that prior to the Closing Date:
(a) No dividend shall be declared or paid by other distribution
(whether in cash, stock, property or any combination thereof) or payment
declared or made in respect to AgniCAD common stock, nor shall AgniCAD purchase,
acquire or redeem or split, combine or reclassify any shares of its capital
stock.
(b) No change shall be made in the number of shares of authorized or
issued AgniCAD common stock; nor shall any option, warrant, call, right,
commitment or agreement of any character be granted or made by AgniCAD relating
to its authorized or issued AgniCAD common stock; nor shall AgniCAD issue, grant
or sell any securities or obligations convertible into or exchangeable for
shares of AgniCAD common stock, except as disclosed in Exhibit C.
(c) AgniCAD will not take, agree to take or knowingly permit to be
taken any action or do or knowingly permit to be done anything, in the conduct
of the business of AgniCAD or otherwise, which would be contrary to or in breach
of any of the terms or provisions of this Agreement, or which would cause any of
AgniCAD's representations contained herein to be or become untrue in any
material respect at the Closing Date.
(d) AgniCAD will not (i) incur any indebtedness for borrowed money;
(ii) assume, guarantee, endorse, or otherwise become liable or responsible
(whether directly, contingently or otherwise) for the obligations of any other
individual, firm or corporation; or (iii) make any loans, advances or capital
contributions to or investments in, any other individual, firm or corporation,
(e) AgniCAD will not alter or change any employment or other contract
with any of its management personnel or make, adapt, alter, revise, or amend any
pension, bonus, profit-sharing or other employee benefit plan, or grant any
salary increase or bonus to any person without the prior written consent of
purchaser, except for normal year-end or anniversary salary adjustments for
employees, excluding officers.
ARTICLE III.B
COVENANTS OF ESSENTIAL LASER
ESSENTIAL LASER agrees that prior to the Closing Date:
(a) No dividend shall bc declared or paid or other distribution
26
(whether in cash, stock, property or any combination thereof) or payment
declared or made in respect of ESSENTIAL LASER Common Stock, nor shall ESSENTIAL
LASER purchase, acquire or redeem or split, combine or reclassify any shares of
ESSENTIAL LASER Common stock
(b) Except as herein provided, no change shall be made in the number of
shares of authorized or issued ESSENTIAL LASER common stock; nor shall any
option, warrant, call, right, commitment or agreement (other than this
Agreement) of any character be granted or made by ESSENTIAL LASER relating to
its authorized or issued ESSENTIAL LASER common stock; nor shall ESSENTIAL LASER
issue, grant or sell any securities or obligations convertible into or
exchangeable for shares of common stock.
(c) ESSENTIAL LASER will not (i) incur any indebtedness for borrowed
money; (ii) assume, guarantee, endorse, or otherwise become liable or
responsible (whether directly, contingently or otherwise) for the obligations of
any other individual, firm or corporation; or (iii) make any loans, advances or
capital contributions to or investments in, any other individual, firm or
corporation.
(d) ESSENTIAL LASER will not make any employment or other contract with
any of its management personnel or make, adopt, alter, revise, or amend any
pension, bonus, profit-sharing or other employee benefit plan, or grant any
salary increase or bonus to any person or owe any accrued salary or other
compensation under any agreement or plan (except as disclosed on Exhibit E)
without the prior written consent of AgniCAD.
27
(e) ESSENTIAL will not take, agree to take, or knowingly permit to be
taken any action, or do, or knowingly permit to be done anything in the conduct
of the business of ESSENTIAL LASER, or otherwise, which would be contrary to or
in breach of any of the terms or provisions of this Agreement, or which would
cause any of the representations of ESSENTIAL LASER contained herein to be or
become untrue in any material respect at the Closing Date.
ARTICLE IV
CERTAIN COVENANTS
1. Stockholders' Meeting. AgniCAD will take all actions necessary in
accordance with applicable law and its Articles of Incorporation and By-laws to
convene a meeting of its stockholders as promptly as practicable to consider and
vote upon the approval of the merger to which it is a party. ESSENTIAL LASER
will take all action necessary in accordance with applicable law and its
Certificate of Incorporation and By-laws to obtain the approval of its
stockholders as promptly as practicable for approval of the merger.
2. Conduct of Business by AgniCAD Pending the Merger. Prior to the
Effective date of the merger, unless ESSENTIAL LASER and AgniCAD shall otherwise
agree in writing, and disclosed to ESSENTIAL LASER and AgniCAD in writing prior
to the date hereof, each Company shall not (i) operate its business otherwise
than in the ordinary course, (ii) grant any compensation increase to any
director, officer or employee, (iii) issue, authorize or propose the issuance of
additional shares of capital stock of any class or securities convertible into
any such shares or rights, warrants or options to acquire any such shares or
convertible securities, (iv) amend its Articles of Incorporation or By-laws, (v)
split, combine or reclassify its outstanding shares of Common stock, or (vi)
authorize, recommend or propose any merger, consolidation, acquisition of
assets, disposition of assets, material change in its capitalization or any
comparable event, not in the ordinary) course of business (other than the
transactions contemplated hereby and transactions as to which written notice has
been given to ESSENTIAL LASER prior to the date hereof).
3. Takeover Proposals. AgniCAD and ESSENTIAL LASER will not, and will
not authorize or permit any officer, director or employee of, or any investment
banker, attorney, accountant or other representative retained by, or agent of
such Company or any affiliate of such company, to directly or indirectly solicit
or encourage any proposal for a merger or other business combination involving
such Company or for the acquisition of a substantial equity interest in such
Company or a substantial portion of such Company's assets, other than as
contemplated by this Agreement. Each Company will promptly advise the other
company of the terms of any such proposal that it may receive.
4. Conduct of Business by ESSENTIAL LASER Pending the Merger. Prior to
the effective time of the merger, ESSENTIAL LASER and AgniCAD shall not split,
combine or reclassify its common stock or declare, set aside or pay any dividend
payable in its common stock, unless prior to the record date for such dividend
or the effective date of such split, combination or reclassification, it tenders
to AgniCAD or ESSENTIAL LASER (as the case may be) its agreement to amend this
Agreement so as to effect an appropriate adjustment in the number of ESSENTIAL
LASER or AgniCAD shares (as the case may be) deliverable upon the effective time
of each merger, except as follows:
(a) Prior to the effective date of the Merger, there are 1,000,000
shares of Common Stock of ESSENTIAL LASER outstanding, of
which Daniel L. Hodges owns, possesses or controls 800,000
shares issued and outstanding Common Stock. As part of this
transaction, and pending the Merger, Daniel L. Hodges, will
contribute 784,000 of his 800,000 Common Shares to ESSENTIAL
LASER, which shares shall be retired, cancelled and deemed
null and void. Subsequent to such event, ESSENTIAL LASER shall
then forward split the remaining 216,000 Shares on the basis
of 10.37037 Shares for every one share held prior to the
Merger, such that as of the effective time of the merger,
there shall be then 2,240,000 shares of Common Stock
outstanding, prior to the effective time of the merger.
5. Information Provided by ESSENTIAL LASER. The information to be
provided by ESSENTIAL LASER for use in ESSENTIAL LASER's Information Statement
to be used in connection with the merger; shall, at the respective times the
Information Statement is mailed: and at the time of the stockholders' meetings
of AgniCAD and ESSENTIAL LASER and at the effective time of the merger, be true
28
and correct in all material respects and shall not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein to make the statements made, in the light of the circumstances under
which they were made, not misleading.
6. Information Provided by AgniCAD. The information to be provided by
AgniCAD for use in the Information Statement to be used in connection with the
merger to which AgniCAD is a party shall, at the times Information Statement is
mailed, and at the time of the stockholders' meetings of AgniCAD and ESSENTIAL
LASER and at the effective time of the merger, be true and correct in all
material respects and shall not contain any untrue statement of a material fact,
or omit to state a material fact required to be stated therein to make the
statements made, in the light of the circumstances under which they were made,
not misleading.
7. Information Statement. In connection with the preparation of the
Information Statement for ESSENTIAL LASER, and/or any other filings, AgniCAD and
ESSENTIAL LASER will cooperate with each other and will furnish the information
relating to AgniCAD and ESSENTIAL LASER, as the case may be, required by the
Securities Act of 1933 and/or the Securities Exchange Act of 1934 to be set
forth in such Information Statement and/or any other filings.
8. Press Releases. AgniCAD and ESSENTIAL LASER agree to cooperate with
each other in releasing information concerning this Agreement and the
transactions contemplated herein. Where possible, each of the parties shall
furnish to the other drafts of all releases prior to publication. Nothing
contained herein shall prevent either party at any time from furnishing any
information to any governmental agency.
9. Rule 145 Affiliates. As soon as practicable after the date hereof
AgniCAD shall furnish to ESSENTIAL LASER a schedule that sets forth the names
of, and number of shares of such company owned beneficially, or of record, by
any persons who may be deemed to be an affiliate of such company as that term is
used in Rule 145 under the Securities Act of 1933 (a "Rule 145 Affiliate").
10. Recommendation of Approval, The Board of Directors of ESSENTIAL
LASER and AgniCAD shall continue to recommend to their respective stockholders
approval of this Agreement and the merger to which such company is a party,
except as the fiduciary obligations of each such Board of Directors may
otherwise require.
11. Access. Prior to the closing, AgniCAD shall afford to the officers,
attorneys, accountants, and other authorized representatives of ESSENTIAL LASER
free and full access to the premises, books and records of AgniCAD in order that
ESSENTIAL LASER may make such investigation as it may desire of the affairs of
AgniCAD. Prior to the closing, ESSENTIAL LASER shall afford to the officers,
attorneys, accountants, and other authorized representatives of AgniCAD free and
full access to the premises, books and records of the Company so that purchasers
may make such investigations as it may desire of the affairs of the Company.
12. "Market Stand-off" Agreement. For a period of one year following
the effective time of the merger, ESSENTIAL LASER, AgniCAD, their officers,
directors, and principal shareholders agree not to engage in any activity in the
common stock of ESSENTIAL LASER which will destabilize the value of the common
stock, including but not limited to, the sale, transfer or disposition of Common
Stock, or the "Shorting" of common stock of the Company which has the effect of
destabilization of the value of the common stock.
ARTICLE V
CONDITIONS
1. Conditions to the Obligations of ESSENTIAL LASER. The obligations of
ESSENTIAL LASER to consummate the merger contemplated by this Agreement are
subject to the satisfaction, at or before the consummation of such merger, of
each of the following conditions:
(a) The stockholders of such AgniCAD shall have duly approved the
merger in accordance with applicable law;
(b) The stockholders of ESSENTIAL LASER shall have duly approved such
merger in accordance with applicable law;
29
(c) No action shall have been taken, and no statute, rule, regulation
or order shall have been promulgated, enacted, entered, enforced or deemed
applicable to the merger by any federal, state or foreign government or
governmental authority or by any court, domestic or foreign, including the
merger of a preliminary or permanent injunction, which would (i) make the merger
illegal, (ii) require the divestiture by ESSENTIAL LASER or any other subsidiary
of ESSENTIAL LASER of the shares of such company or of a material portion of the
business of ESSENTIAL LASER and its subsidiaries taken as a whole, (iii) impose
material limits on the ability of ESSENTIAL LASER to effectively control the
business of ESSENTIAL LASER and its subsidiaries, (iv) otherwise materially
adversely affect ESSENTIAL LASER and its subsidiaries taken as a whole or (v) if
the merger is consummated, subject any officer, director, or employee of
ESSENTIAL LASER to criminal penalties or to civil liabilities not adequately
covered by insurance or enforceable indemnification maintained by ESSENTIAL
LASER;
(d) No action or proceeding before any court or governmental authority,
domestic or foreign, by any government or governmental authority or by any other
person, domestic or foreign, shall bc threatened, instituted or pending which
would reasonably be expected to result in any of the consequences referred to in
clauses (i) through (v) of paragraph (c) above;
(e) AgniCAD shall have complied in all material respects with its
agreements and covenants herein, and all representations and warranties of
AgniCAD herein shall be true and correct in all material respects at the time of
consummation of the merger as if made at that time, except to the extent they
expressly relate to an earlier date, and ESSENTIAL LASER shall have received a
certificate to that effect to the best of the knowledge of AgniCAD, signed by
the President of AgniCAD;
(f) (Reserved)
(g) The holders of no more than ten percent (10%) of the issued and
outstanding shares of common stock of AgniCAD with respect to which such merger
is proposed shall have exercised their right to dissent as dissenting
stockholders.
(h) With respect to the merger of ESSENTIAL LASER, the merger of
ESSENTIAL LASER and AgniCAD shall have become effective.
2. Conditions to the Obligations of AgniCAD. The obligations of AgniCAD
to consummate the merger contemplated by this Agreement are subject to the
satisfaction, at or before the consummation of such merger, of each of the
following conditions:
(a) The stockholders of ESSENTIAL LASER shall have duly approved the
merger in accordance with applicable law, and each outstanding share of AgniCAD
common stock (currently 7,760,000) shall be canceled and shall be converted into
ESSENTIAL LASER shares (at the ratio of 1 share of ESSENTIAL LASER for each
share of AgniCAD shares) by virtue of such merger and without any action on the
part of the holder thereof, such that prior Shareholders of AgniCAD Common Stock
will hold 7,760,000 shares of Common Stock of ESSENTIAL LASER, current
shareholders of ESSENTIAL LASER will hold 2,240,000 shares of Common Stock of
ESSENTIAL LASER.
(i) Daniel L. Hodges will contribute 784,000 of his 800,000 Common
Shares to ESSENTIAL LASER, which shares shall be retired,
cancelled and deemed null and void. Subsequent to such event,
ESSENTIAL LASER shall then forward split the remaining 216,000
Shares on the basis of 10.37037 Shares for every one share
held prior to the Merger, such that as of the effective time
of the merger, there shall be then 2,240,000 shares of Common
Stock outstanding, prior to the effective time of the merger.
(b) The stockholders of AgniCAD shall have duly approved such merger in
accordance with applicable law;
(c) No action shall have been taken, and no statute, rule, regulation
or order shall have been promulgated, enacted, entered, enforced or deemed
30
applicable to the merger by any federal, state or foreign government or
governmental authority or by any court, domestic or foreign, including the entry
of a preliminary or permanent injunction, which would (i) make the merger
illegal, (ii) require the divestiture by AgniCAD or any other subsidiary of
AgniCAD of the shares of such company or of a material portion of the business
of AgniCAD and its subsidiaries taken as a whole, (iii) impose material limits
on the ability of AgniCAD to effectively control the business of AgniCAD and its
subsidiaries, (iv) otherwise materially adversely affect AgniCAD and its
subsidiaries taken as a whole or (v) if the merger is consummated, subject any
officer, director, or employee of AgniCAD to criminal penalties or to civil
liabilities not adequately covered by insurance or enforceable indemnification
maintained by AgniCAD;
(d) No action or proceeding before any court or governmental authority,
domestic or foreign, by any government or governmental authority or by any other
person, domestic or foreign, shall bc threatened, instituted or pending which
would reasonably be expected to result in any of the consequences referred to in
clauses (i) through (v) of paragraph (c) above;
(e) ESSENTIAL LASER shall have complied in all material respects with
its agreements and covenants herein, and all representations and warranties of
ESSENTIAL LASER herein shall be true and correct in all material respects at the
time of consummation of the merger as if made at that time, except to the extent
they expressly relate to an earlier date, and AgniCAD shall have received a
certificate to that effect to the best of the knowledge of ESSENTIAL LASER,
signed by the President of ESSENTIAL LASER:
(f) As of the Closing Date, ESSENTIAL LASER will have made all filings
required to be made by ESSENTIAL LASER with the Securities and Exchange
Commission and any state securities authorities
(g) The holders of no more than ten percent (10%) of the issued and
outstanding shares of common stock of ESSENTIAL LASER with respect to which such
merger is proposed shall have exercised their right to dissent as dissenting
stockholders.
(h) With respect to the merger of ESSENTIAL LASER, the merger of
ESSENTIAL LASER and AgniCAD shall have become effective.
3. Conditions to each Company's Obligations. The obligation of each
company to consummate the merger contemplated by this Agreement is subject to
the satisfaction, at or before the consummation of such merger, of each of the
following conditions;
(a) the stockholders of such Company shall have duly approved the
merger in accordance with applicable law;
(b) the stockholders of ESSENTIAL LASER shall have duly approved the
merger in accordance with applicable law;
(c) no action shall have been taken, and no statute, rule, regulation
or order shall have been promulgated, enacted, entered, enforced or deemed
applicable to the merger by any federal, state or foreign government or
governmental authority or by any court, domestic or foreign, including the entry
of a preliminary or permanent injunction, which would (i) make the merger
illegal, or (ii) if the merger is consummated, subject any officer, director or
employee of AgniCAD to criminal penalties or to civil liability not adequately
covered by insurance or enforceable indemnification arrangements maintained by
AgniCAD or ESSENTIAL LASER;
(d) No action or proceeding before any court or governmental authority
domestic or foreign, by any government or governmental authority or by any other
person, domestic or foreign, shall be threatened, instituted or pending which
would reasonably be expected to result in any of the consequences referred to in
clauses (i) and (ii) of paragraph (c) above;
(e) The Information Statement shall be filed under the Securities
Exchange Act of 1934 and shall not be subject to a stop order or any threatened
stop order; and
31
(f) With respect to the merger of ESSENTIAL LASER, the merger of
ESSENTIAL LASER and AgniCAD shall have become effective.
ARTICLE VI
STOCK RESTRICTION/INVESTMENT REPRESENTATIONS
1. No Solicitation. Each shareholder of AgniCAD and ESSENTIAL LASER
will not (nor will it permit any agent or affiliate to) solicit, initiate or
encourage any Acquisition Proposal or furnish any information to, or cooperate
with, any person, corporation, firm or other entity with respect to an
Acquisition Proposal. As used herein "Acquisition Proposal" means a proposal for
a merger or other business combination involving the Company or for the
acquisition of a substantial equity interest in, or a substantial portion of the
assets of AgniCAD other than the merger.
2. The Officers, Directors, Shareholders Holding 10% or more of the
outstanding stock of AgniCAD each acknowledges, represent, warrant, and agree
that:
(a) He/she is acquiring ESSENTIAL LASER common stock to be acquired
pursuant to this Agreement for his/her own account for investment, and he/she
has no present intention to sell, distribute or otherwise dispose thereof;
(b) He/she has evaluated his/her present and anticipated needs and
person requirements and is satisfied that he has adequate means for providing
for these expenses without respect to any income or other benefit which may be
derived from his investment in ESSENTIAL LASER common stock and does not
anticipate any need to sell, assign, or transfer his common stock;
(c) He/she acknowledges being informed that the ESSENTIAL LASER common
stock being received by him is not registered under the Securities Act of 1933
or any state securities law, and it must be held indefinitely unless it is
subsequently registered under the Securities Act of 1933 or Securities Exchange
Act of 1934 and applicable state securities laws or he furnishes to ESSENTIAL
LASER an opinion of counsel satisfactory to ESSENTIAL LASER that registration is
not required under the under such Act or laws;
(d) He realizes that neither the Securities and Exchange Commission,
nor the securities regulatory body of any state has received, considered or
passed upon the accuracy or adequacy of the information and representations made
in this Agreement.
ARTICLE VIIA
INDEMNIFICATION AND WAIVER OF CLAIMS - ESSENTIAL LASER
ESSENTIAL LASER, its officers and directors hereby agree, to indemnify
and hold AgniCAD, its officers, directors, employees and agents harmless from
and against the following:
(a) any and all liabilities, losses, damages, claims, costs and
expenses of ESSENTIAL LASER of any nature, whether absolute, contingent or
otherwise, which are not expressly assumed by AgniCAD as herein provided,
including but not limited to any and all claims or rights to dissent from the
shareholders of ESSENTIAL LASER, purported shareholders of ESSENTIAL LASER,
claims of ESSENTIAL LASER creditors, Federal or State or Local taxing
authorities, and other claimants of ESSENTIAL LASER;
(b) Any and all damages or deficiencies resulting from any
misrepresentation, breach of any warranty, or non-fulfillment of any covenant or
agreement on the part of ESSENTIAL LASER contained in this Agreement or in any
statement or certificate furnished or to be furnished to AgniCAD pursuant hereto
or in connection with the transactions contemplated hereby; and
32
(c) ESSENTIAL LASER, as of the date immediately preceding this
Agreement, will indemnify and hold harmless AgniCAD, from and against any and
all losses, claims, damages, expenses or liabilities, joint or several, to which
it may become subject within the meaning of the Securities Exchange Act of 1934
and the Securities act of 1933 (the "Act") or under any other statutes or at
common law or otherwise, and will reimburse and indemnify AgniCAD and its
officers and directors for any legal or other expenses [including the cost of
any investigation and preparation] reasonably incurred by them or any of them in
connection with investigating or defending any litigation or claim, whether or
not resulting in any liability insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of are based upon any untrue
statement or alleged untrue statement or a material fact contained in any
Prospectus, Private Placement Memorandums, Offering Circulars, Proxy Statements,
and Verbal, Written and other representations in connection with or related to
Limited Partnership Offerings, Joint Ventures, any stock or bond offering, stock
conversion rights granted, investment contracts, or other security as that term
is defined under the Act or any State Security Act [as amended or as
supplemented thereof] or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading; or any
negligent misrepresentation of any officer, director, agent, or employee of
ESSENTIAL LASER; or any failure to perform any of the terms or conditions of
this agreement AgniCAD agrees upon its receipt of written notice of the
commencement of any action against them as aforesaid, in respect of which
indemnity may be sought from ESSENTIAL LASER, on account of the indemnity
agreement contained in the subsection, to notify ESSENTIAL LASER promptly in
writing of the commencement thereof. AgniCAD agrees to notify ESSENTIAL LASER
promptly of the commencement of any litigation or proceeding against it or
against any of the officers or directors of AgniCAD of which it may be advised,
in connection with the issue and sale of any of its securities.
ARTICLE VIIB
INDEMNIFICATION AND WAIVER OF CLAIMS - AGNICAD
AgniCAD, hereby agrees to indemnify and hold ESSENTIAL LASER, its
officers, directors, employees and agents harmless from and against the
following:
(a) any and all liabilities, losses, damages, claims, costs
and expenses of AgniCAD of any nature, whether absolute, contingent or
otherwise, which are not expressly assumed by ESSENTIAL LASER as herein
provided, including but not limited to any and all claims or rights to dissent
from the shareholders of AgniCAD, purported shareholders of AgniCAD, claims of
AgniCAD creditors, Federal or State or Local taxing authorities, other claimants
of AgniCAD, claims arising out of and/or connected to the cancellation,
redemption, retirement of AgniCAD stock;
(b) Any and all damages or deficiencies resulting from any
misrepresentation, breach of any warranty, or non-fulfillment of any covenant or
agreement on the part of AgniCAD contained in this Agreement or in any statement
or certificate furnished or to be furnished to AgniCAD pursuant hereto or in
connection with the transactions contemplated hereby; and
(c) Any and all actions, suits, proceedings, demands,
assessments or judgments, costs and expenses (including reasonable attorneys'
fees) incident to any of the foregoing.
(d) AgniCAD, as of the date immediately preceding this
Agreement, will indemnify and hold harmless ESSENTIAL LASER, from and against
any and all losses, claims, damages, expenses or liabilities, joint or several,
to which they or any of them may become subject within the meaning of the
Securities and the Securities Exchange Act of 1934 and the Securities act of
1933 (collectively the "Act") or under any other statutes or at common law or
otherwise, and will reimburse and indemnify ESSENTIAL LASER and its officers and
directors for any legal or other expenses including the cost of any
investigation and preparation] reasonably incurred by them or any of them in
connection with investigating or defending any litigation or claim, whether or
not resulting in any liability insofar as such losses, claims, damages,
expenses, liabilities or actions arise out of are based upon any untrue
statement or alleged untrue statement or a material fact contained in any
Prospectus, Private Placement Memorandums, Offering Circulars, Proxy Statements,
and Verbal, Written and other representations in connection with or related to
Limited Partnership Offerings, Joint Ventures, any stock or bond offering, stock
33
conversion rights granted, investment contracts, or other security as that term
is defined under the Act or any State Security Act [as amended or as
supplemented thereof] or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary in order to make the statements therein not misleading; or any
negligent misrepresentation of any officer, director, agent, or employee of
AgniCAD; or any failure to perform any of the terms or conditions of this
agreement. ESSENTIAL LASER agrees upon its receipt of written notice of the
commencement of any action against them as aforesaid, in respect of which
indemnity may be sought from AgniCAD, its Directors and officers on account of
the indemnity agreement contained in the subsection, to notify AgniCAD promptly
in writing of the commencement thereof. ESSENTIAL LASER agrees to notify AgniCAD
promptly of the commencement of any litigation or proceeding against it or
against any of the officers or directors of AgniCAD of which it may be advised,
in connection with the issue and sale of any of its securities.
ARTICLE VIII
CLOSING DATE
The closing for the consummation of the merger contemplated by this Agreement
shall unless another date or place is agreed to in writing by the parties
hereto, take place at the offices of Quarles & Brady Streich Lang LLP, on the
date which is no later than the fifth business day after the last to occur of
the following dates:
(a) Five (5) days after the date the stockholders of ESSENTIAL
LASER and AgniCAD with respect to which such merger is proposed shall have given
the approval referred to in Article IV, Section 1, hereof; or
(b) The date on which all the conditions set forth in Article
V hereof shall have been satisfied, except to the extent any such conditions
shall have been waived by ESSENTIAL LASER or by the respective Companies.
ARTICLE IX
RESIGNATION AND ELECTION
At the closing, ESSENTIAL LASER will cause all of its officers and
directors to resign from office and to cause to be elected to the Board of
Directors of ESSENTIAL LASER those persons designated by AgniCAD to wit:
Oliver Bangera Chief Executive Officer, President/Director
Shaun Gill Secretary
Lloyd Andrews Chairman
Vern Gillett Director
Matt Wayrynen Director
ARTICLE X
MISCELLANEOUS
1. Termination. With respect to each company, this Agreement may be
terminated and the merger to which such company is proposed to be a party as
contemplated herein may be abandoned (i) by the mutual consent of ESSENTIAL
LASER and AgniCAD at any time; (ii) by either AgniCAD or ESSENTIAL LASER if the
merger to which such company is proposed to be a party has not been consummated
on or prior to May 15, 2002; (iii) in the event of any material adverse change
in the business, property, or financial condition of ESSENTIAL LASER or AgniCAD;
(iv) in the event of any action, suit, or proceeding at law or equity against
either AgniCAD or ESSENTIAL LASER or by any Federal, State, Local government
agency or commission, board or agency, where any unfavorable decision would
materially adversely affect the business, property or financial condition or
34
income of AgniCAD or ESSENTIAL LASER; or (v) in the event the merger violates
any federal or state statute, rule or regulation. In the event of such
termination and abandonment, neither ESSENTIAL LASER nor AgniCAD (or any of its
directors or officers) shall have any liability or further obligation to any
other party to this Agreement, except that nothing herein will relieve any party
from liability for any willful breach of this Agreement.
2. Expenses. Whether or not any merger is consummated, all
out-of-pocket costs and expenses incurred in connection with the merger and this
agreement will be paid by the party incurring such expenses, except that AgniCAD
shall bear all legal costs and fees for preparing registration statements to be
filed with Federal and/or State securities agencies, proxy statements, proxy
solicitation costs, proxy mailing costs, due diligence fees and costs, costs and
fees of any registration statements, legal fees and costs in preparation of
merger documents, and auditing costs.
3. Brokers. No broker or finder is entitled to any brokerage or
finder's fee or other commission or fee from any Company or based upon
arrangements made by or on behalf of any Company with respect to the
transactions contemplated by this Agreement, except as disclosed on Exhibit F
attached hereto and incorporated herein by reference in which Matt Wayrnen is
entitled to a fee of 100,000 shares of AgniCAD common stock.
4. Arbitration. Any controversy arising out of, connected to, or
relating to any matters herein of the transactions with AgniCAD, ESSENTIAL LASER
on behalf of the undersigned, or this Agreement, or the breach thereof,
including, but not limited to any claims of violations of Federal and/or State
Securities Acts, Banking Statutes, Consumes Protection Statutes, Federal and/or
State anti-Racketeering (e.g. RICO) claims as well as any common law claims and
any State Law claims of fraud, negligence, negligent misrepresentations, and/or
conversion shall be settled by arbitration; and in accordance with this
paragraph and judgment on the arbitrator's award may be entered in any court
having jurisdiction thereof in accordance with the provisions of Revised Code of
Washington. In the event of such a dispute, each party to the conflict shall
select an arbitrator, both of whom shall select a third arbitrator that shall
constitute the three-person arbitration board. The decision of a majority of the
board of arbitrators, who shall render their decision within thirty (30) days of
appointment of the final arbitrator, shall be binding upon the parties. Venue
for any action shall lie in Seattle, Washington.
5. Other Actions. Each of the parties hereto agrees to execute and
deliver such other documents, certificates, agreements and other writings and to
take such other actions as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
6. Waiver and Amendment. Any provision of this Agreement may be waived
at any time by the party which is or whose stockholders are, entitled to the
benefits thereof and this Agreement may be amended or supplemented at any time.
No such waiver, amendment or supplement shall be effective unless in writing and
signed by the party or parties necessary thereto.
7. Entire Agreement. This Agreement contains the entire agreement
between ESSENTIAL LASER and AgniCAD with respect to the merger and the other
transactions contemplated hereby.
8. Applicable Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
9. Descriptive Headings. The descriptive headings are for convenience
of reference only and shall not affect in any way the meaning or interpretation
of this Agreement.
10. Notices. All notes or other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by registered or certified mail postage prepaid, addressed as follows:
If to ESSENTIAL LASER, to: Daniel Hodges
11601 E. Lusitano Place
Tucson, Arizona 85748
and to: Dave M. Gomez
Quarles & Bandy Streich Lang LLP
35
One Renaissance Square
Two North Central Avenue
Phoenix, Arizona 85004-2391
If to AgniCAD, to: Oliver Bangera
AgniCAD, Incorporated
4463 Russell Road, Suite 107
Mukilteo, Washington 98275
and to: Charles A. Cleveland
Charles A. Cleveland, P.S.
Suite 304, 1212 North Washington
Rock Pointe Centre
Spokane, Washington 99201-2401
11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute but one agreement.
12. Registration Statement. After the effective time, and at the sole
discretion of the Board of Directors, ESSENTIAL LASER will file a registration
statement on Form SB-2 or other applicable form, with the United States
Securities and Exchange Commission, as well as any applicable state securities
commissions, to register all of the outstanding shares of Common Stock of
ESSENTIAL LASER. The Company will also make such filings with Nasdaq to cause
its shares to be eligible for public trading through the Nasdaq OTC Bulletin
Board after the registration statement has become effective.
(a) For a period of 12 months subsequent to the closing of
this transaction, ESSENTIAL LASER, its current and former officers and
directors and principal shareholders, agree not to engage in any
activities that may effect destabilization in the common stock of the
Company.
13. Signatures. Each of the undersigned, being all the directors in
office of ESSENTIAL LASER CONCEPTS, INC., a Nevada Corporation, and AgniCAD,
Incorporated, a Washington Corporation, hereby agree to vote all shares held of
record by him and to recommend to the shareholders a vote in favor of the
transactions contemplated by the within Agreement at the meeting of shareholders
of said corporation contemplated by this Agreement.
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officers of the parties hereto as of the date first hereinabove
written.
ESSENTIAL LASER CONCEPTS, LTD.
By:
--------------------------------
Title: President, Daniel Hodges
ATTEST:
36
DIRECTOR/OFFICER OF ESSENTIAL LASER:
DANIEL HODGES
AGNICAD, INCORPORATED
By:
--------------------------------
Title: President, Oliver Bangera
ATTEST:
DIRECTORS OF AGNICAD:
LLOYD ANDREWS
SHAUN GILL
OLIVERA BANGERA
---------------------
VERN GILLETT
------------------------
------------------------------------
MATT WAYRYNEN
------------------------------------
STATE OF WASHINGTON )
)ss
COUNTY OF )
-------------------
On this ___ day of April, 2002, before me, the undersigned, a Notary Public in
and for the State of Washington, duly commissioned and sworn, personally
appeared Oliver Bangera and Shaun Gill, to me known to be the President and
Secretary, respectively, of AgniCAD Incorporated, the corporation that executed
the foregoing instrument, and acknowledged the said instrument to be the free
and voluntary act and deed of said corporation, for the uses and purposes
therein mentioned, and on oath stated that they were authorized to execute the
said instrument and that the seal affixed is the corporate seal of said
corporation.
37
WITNESS my hand and official seal hereto affixed the day and year first above
written.
NOTARY PUBLIC in and for the State of
Washington, residing in My Commission
expires:
STATE OF )
----------------------
)ss
COUNTY OF )
-------------------
On this ___ day of April, 2002, before me, the undersigned, a Notary Public in
and for the State of Arizona, duly commissioned and sworn, personally appeared
DANIEL HODGES, to me known to be the President and Secretary, of ESSENTIAL LASER
CONCEPTS, LTD., the corporation that executed the foregoing instrument, and
acknowledged the said instrument to be the free and voluntary act and deed of
said corporation, for the uses and purposes therein mentioned, and on oath
stated that they were authorized to execute the said instrument.
WITNESS my hand and official seal hereto affixed the day and year first above
written.
--------------------------------------------
NOTARY PUBLIC in and for the State of Arizona, residing in Tucson, Arizona
My Commission expires:
38
EXHIBIT A
AgniCAD Employees:
Oliver Bangera
Abraham Kannankeril
Buckie Taft
Robert Kissinger
EXHIBIT B
ESSENTIAL LASER:
(1) Material Changes
(2) Contingent Liabilities
(3) Disposed or encumbered property or assets
AGNICAD:
(1) Material Changes: No Material Changes.
(2) Contingent Liabilities: No contingent Liabilities
(3) Disposed or encumbered property or assets: None
EXHIBIT C
(1) Options to Purchase shares of AgniCAD stock:
Issued to Number of Shares Option Price Expiration Date
- --------------------------------------------------------------------------------
As of time of merger, there shall be no outstanding options or warrants on
AgniCAD Incorporated common or preferred stock.
(2) Options to Purchase shares of ESSENTIAL LASER stock:
Issued to Number of Shares Option Price Expiration Date
- --------------------------------------------------------------------------------
EXHIBIT D
Contracts not subject to cancellation within sixty days:
(1) Contract with Graham Steel cancelable without cause on 90 days notice,
cancelable for cause on 10 days notice. Contract is part of due diligence
materials submitted to Essential Laser counsel.
39
EXHIBIT E
(1) AgniCAD Employees as of 12/31/01:
4 employees - 2 on salary; none on deferred salary. No liabilities,
contingent or otherwise, related to employees.
Accrued Compensation - AgniCAD: None
EXHIBIT F
Fees or Commissions with respect to merger:
Share grant of 100,000 shares of AgniCAD common stock to Matt Wayrynen as
commission for introduction to Essential Laser as merger partner.
EXHIBIT G
Shareholders of AgniCAD:
Name Shares Issued
Oliver Bangera 2,519,919
3116 164th Street S.W., #714
Lynwood, Washington 98037
Shaun Gill 2,519,919
718 36th Avenue
Seattle, Washington 98122
Lloyd Andrews 939,340
4995 West Village Road
Rathdrum, Idaho 83858
Buckie Taft 300,000
1120 S.W. 16th Street, Renton
Washington 98155
Steve Dickinson 200,000
2030 Western Ave
Seattle Washington
Charles Cleveland 123,334
North 1212 Washington
Spokane, Washington 99201
40
Lloyd and Winnie Mae Andrews Trust 67,487
C/o Robert E. Moe
Robert Moe & Associates
West 201 North River Drive, Suite 305
Spokane, WA 99201
Matt Wayrynen 100,000
1177 West Hastings Street
Vancouver, British Columbia
V6E 2K3,Canada
Robert Kissinger 10,000
North 2601 Barker Road #119
Otis Orchards, Washington 99027
Vern Gillett 25,000
1501 Old Cheney Road
Lincoln, Nebraska 68512
Mike Rabaudo 100,000
Suite #250 - 450 N. Newballas
St. Louis, Missouri 63141
David Samuels 40,000
A.G. Edwards & Sons, Inc.
A.G. Edwards Building, 10401 Clayton Road
St. Louis, Missouri, 63131
Larry Samuels 60,000
A.G. Edwards & Sons, Inc.
A.G. Edwards Building, 10401 Clayton Road
St. Louis, Missouri, 63131
41
Abraham Kannankeril 50,000
11332 183rd Pine
#J4020
Redmond, Washington 98052
Allocated and Held in Reserve by AgniCAD 705,001
(includes shares for additional board seat & shares for India staff grants)
- ------------------------------------------------------------------
Total 7,760,000
EXHIBIT H
AGNICAD:
(1) Conflicts of Interest and Disclosures as to Affiliated Corporations:
--------------------------------------------------------------------
(A) Oliver Bangera, co-founder and CEO/President of AgniCAD
Incorporated is also a 100% owner of D&D Services in Mumbai, India. D&D Services
is an Indian corporation serving as the primary subcontractor for AgniCAD
Incorporated for engineering and drafting services.
(2) Compensation of Management: None.
---------------------------------
42
APPENDIX B
RIGHTS OF DISSENTING OWNERS
NRS 92A.380 Right of stockholder to dissent from certain corporate actions and
to obtain payment for shares.
1. Except as otherwise provided in NRS 92A.370 and 92A.390, a stockholder is
entitled to dissent from, and obtain payment of the fair value of his shares in
the event of any of the following corporate actions:
(a) Consummation of a plan of merger to which the domestic corporation is a
party:
(1) If approval by the stockholders is required for the merger NRS 92A.120 to
92A.160 inclusive, or the articles of incorporation and he is entitled to vote
on the merger; or
(2) If the domestic corporation is a subsidiary and is merged with its parent
under NRS 92A.180.
(b) Consummation of a plan of exchange to which the domestic corporation is a
party as the corporation whose subject owner's interests will be acquired, if he
is entitled to vote on the plan.
(c) Any corporate action taken pursuant to a vote of the stockholders to the
event that the articles of incorporation, bylaws or a resolution of the board of
directors provides that voting or nonvoting stockholders are entitled to dissent
and obtain payment for their shares.
2. A stockholder who is entitled to dissent and obtain payment under NRS 92A.300
to 92A.500, inclusive, may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to him or
the domestic corporation.
NRS 92A.400 Limitations on right of dissent: Assertion as to portions only to
shares registered to stockholder; assertion by beneficial stockholder.
1. A stockholder of record may assert dissenter's rights as to fewer than all of
the shares registered in his name only if he dissents with respect to all shares
beneficially owned by any one person and notifies the subject corporation in
writing of the name and address of each person on whose behalf he asserts
dissenter's rights. The rights of a partial dissenter under this subsection are
determined as if the shares as to which he dissents and his other shares were
registered in the names of different stockholders.
2. A beneficial stockholder may assert dissenter's rights as to shares held on
his behalf only if:
(a) He submits to the subject corporation the written consent of the stockholder
of record to the dissent not later than the time the beneficial stockholder
asserts dissenter's rights; and
(b) He does so with respect to all shares of which he is the beneficial
stockholder or over which he has power to direct the vote.
NRS 92A.410 Notification of stockholders regarding right of dissent.
1. If a proposed corporate action creating dissenters' rights is submitted to a
vote at a stockholders' meeting, the notice of the meeting must state that
stockholders are or may be entitled to assert dissenters' rights under NRS
92A.300 to 92A.500, inclusive, and be accompanied by a copy of those sections.
2. If the corporate action creating dissenters' rights is taken by written
consent of the stockholders or without a vote of the stockholders, the domestic
corporation shall notify in writing all stockholders entitled to assert
dissenters' rights that the action was taken and send them the dissenter's
notice described in NRS 92A.430.
NRS 92A.420 Prerequisites to demand for payment for shares.
43
1. If a proposed corporate action creating dissenters' rights is submitted to a
vote at a stockholders' meeting, a stockholder who wishes to assert dissenter's
rights:
(a) Must deliver to the subject corporation, before the vote is taken, written
notice of his intent to demand payment for his shares if the proposed action is
effectuated; and
(b) Must not vote his shares in favor of the proposed action.
2. A stockholder who does not satisfy the requirements of subsection 1 and NRS
92A.400 is not entitled to payment for his shares under this chapter.
NRS 92A.430 Dissenter's notice: Delivery to stockholders entitled to assert
rights; contents.
1. If a proposed corporate action creating dissenters' rights is authorized at a
stockholders' meeting, the subject corporation shall deliver a written
dissenter's notice to all stockholders who satisfied the requirements to assert
those rights.
2. The dissenter's notice must be sent no later than 10 days after the
effectuation of the corporate action, and must:
(a) State where the demand for payment must be sent and where and when
certificates, if any, for shares must be deposited;
(b) Inform the holders of shares not represented by certificates to what extent
the transfer of the shares will be restricted after the demand for payment is
received;
(c) Supply a form for demanding payment that includes the date of the first
announcement to the news media or to the stockholders of the terms of the
proposed action and requires that the person asserting dissenter's rights
certify whether or not he acquired beneficial ownership of the shares before
that date;
(d) Set a date by which the subject corporation must receive the demand for
payment, which may not be less than 30 nor more than 60 days after the date the
notice is delivered; and
(e) Be accompanied by a copy of NRS 92A.300 to 92A.500, inclusive.
NRS 92A.440 Demand for payment and deposit of certificates; retention of rights
of stockholder.
1. A stockholder to whom a dissenter's notice is sent must:
(a) Demand payment;
(b) Certify whether he acquired beneficial ownership of the shares before the
date required to be set forth in the dissenter's notice for this certification;
and
(c) Deposit his certificates, if any, in accordance with the terms of the
notice.
2. The stockholder who demands payment and deposits his certificates, if any,
before the proposed corporate action is taken retains all other rights of a
stockholder until those rights are canceled or modified by the taking of the
proposed corporate action.
3. The stockholder who does not demand payment or deposit his certificates where
required, each by the date set forth in the dissenter's notice, is not entitled
to payment for his shares under this chapter.
NRS 92A.460 Payment for shares: General requirements.
1. Except as otherwise provided in NRS 92A.470, within 30 days after receipt of
a demand for payment, the subject corporation shall pay each dissenter who
44
complied with NRS 92A.440 the amount the subject corporation estimates to be the
fair value of his shares, plus accrued interest. The obligation of the subject
corporation under this subsection may be enforced by the district court:
(a) Of the county where the corporation's registered office is located; or
(b) At the election of any dissenter residing or having its registered office in
this state, of the county where the dissenter resides or has its registered
office. The court shall dispose of the complaint promptly.
2. The payment must be accompanied by:
(a) The subject corporation's balance sheet as of the end of a fiscal year
ending not more than 16 months before the date of payment, a statement of income
for that year, a statement of changes in the stockholders' equity for that year
and the latest available interim financial statements, if any;
(b) A statement of the subject corporation's estimate of the fair value of the
shares;
(c) An explanation of how the interest was calculated;
(d) A statement of the dissenter's rights to demand payment under NRS 92A.480;
and
(e) A copy of NRS 92A.300 to 92A.500, inclusive. NRS 92A.470 Payment for shares:
Shares acquired on or after date of dissenter's notice.
1. A subject corporation may elect to withhold payment from a dissenter unless
he was the beneficial owner of the shares before the date set forth in the
dissenter's notice as the date of the first announcement to the news media or to
the stockholders of the terms of the proposed action.
2. To the extent the subject corporation elects to withhold payment, after
taking the proposed action, it shall estimate the fair value of the shares, plus
accrued interest, and shall offer to pay this amount to each dissenter who
agrees to accept it in full satisfaction of his demand. The subject corporation
shall send with its offer a statement of its estimate of the fair value of the
shares, an explanation of how the interest was calculated, and a statement of
the dissenters' right to demand payment pursuant to NRS 92A.480.
NRS 92A.480 Dissenter's estimate of fair value: Notification of subject
corporation; demand for payment of estimate.
1. A dissenter may notify the subject corporation in writing of his own estimate
of the fair value of his shares and the amount of interest due, and demand
payment of his estimate, less any payment pursuant to NRS 92A.460, or reject the
offer pursuant to NRS 92A.470 and demand payment of the fair value of his shares
and interest due, if he believes that the amount paid pursuant to NRS 92A.460 or
offered pursuant to NRS 92A.470 is less than the fair value of his shares or
that the interest due is incorrectly calculated.
2. A dissenter waives his right to demand payment pursuant to this section
unless he notifies the subject corporation of his demand in writing within 30
days after the subject corporation made or offered payment for his shares.
NRS 92A.490 Legal proceeding to determine fair value: Duties of subject
corporation; powers of court; rights of dissenter.
1. If a demand for payment remains unsettled, the subject corporation shall
commence a proceeding within 60 days after receiving the demand and petition the
court to determine the fair value of the shares and accrued interest. If the
subject corporation does not commence the proceeding within the 60-day period,
it shall pay each dissenter whose demand remains unsettled the amount demanded.
2. A subject corporation shall commence the proceeding in the district court of
the county where its registered office is located. If the subject corporation is
45
a foreign entity without a resident agent in the state, it shall commence the
proceeding in the county where the registered office of the domestic corporation
merged with or whose shares were acquired by the foreign entity was located.
3. The subject corporation shall make all dissenters, whether or not residents
of Nevada, whose demands remain unsettled, parties to the proceeding as in an
action against their shares. All parties must be served with a copy of the
petition. Nonresidents may be served by registered or certified mail or by
publication as provided by law.
4. The jurisdiction of the court in which the proceeding is commenced under
subsection 2 is plenary and exclusive. The court may appoint one or more persons
as appraisers to receive evidence and recommend a decision on the question of
fair value. The appraisers have the powers described in the order appointing
them, or any amendment thereto. The dissenters are entitled to the same
discovery rights as parties in other civil proceedings.
5. Each dissenter who is made a party to the proceeding is entitled to a
judgment:
(a) For the amount, if any, by which the court finds the fair value of his
shares, plus interest, exceeds the amount paid by the subject corporation; or
(b) For the fair value, plus accrued interest, of his after-acquired shares for
which the subject corporation elected to withhold payment pursuant to NRS
92A.470. NRS 92A.500 Legal proceeding to determine fair value: Assessment of
costs and fees.
1. The court in a proceeding to determine fair value shall determine all of the
costs of the proceeding, including the reasonable compensation and expenses of
any appraisers appointed by the court. The court shall assess the costs against
the subject corporation, except that the court may assess costs against all or
some of the dissenters, in amounts the court finds equitable, to the extent the
court finds the dissenters acted arbitrarily, vexatiously or not in good faith
in demanding payment.
2. The court may also assess the fees and expenses of the counsel and experts
for the respective parties, in amounts the court finds equitable:
(a) Against the subject corporation and in favor of all dissenters if the court
finds the subject corporation did not substantially comply with the requirements
of NRS 92A.300 to 92A.500, inclusive; or
(b) Against either the subject corporation or a dissenter in favor of any other
party, if the court finds that the party against whom the fees and expenses are
assessed acted arbitrarily, vexatiously or not in good faith with respect to the
rights provided by NRS 92A.300 to 92A.500,inclusive.
3. If the court finds that the services of counsel for any dissenter were of
substantial benefit to other dissenters similarly situated, and that the fees
for those services should not be assessed against the subject corporation, the
court may award to those counsel reasonable fees to be paid out of the amounts
awarded to the dissenters who were benefited.
4. In a proceeding commenced pursuant to NRS 92A.460, the court may assess the
costs against the subject corporation, except that the court may assess costs
against all or some of the dissenters who are parties to the proceeding, in
amounts the court finds equitable, to the extent the court finds that such
parties did not act in good faith in instituting the proceeding.
5. This section does not preclude any party in a proceeding commenced pursuant
to NRS 92A.460 or 92A.490 from applying the provisions of N.R.C.P. 68 or NRS
17.115.
46
APPENDIX C
CERTIFICATE AMENDING ARTICLES OF INCORPORATION OF
ESSENTIAL LASER CONCEPTS, LTD.
The undersigned, being the President and Secretary of Essential Laser
Concepts, Ltd., a Nevada Corporation, hereby certify that a majority vote of the
Board Directors and majority vote of the stockholders at a meeting held on April
2, 2002, it was agreed by unanimous vote that this CERTIFICATE AMENDING ARTICLES
OF INCORPORATION be filed. The undersigned further certifies that the original
Articles of Incorporation of Essential Laser Concepts, Ltd. were filed with the
Secretary of State of Nevada on the 25th Day of July 1997. The undersigned
further certifies that ARTICLE FIRST and ARTICLE FOURTH of the original Articles
of Incorporation filed on the 25th Day of July, 1997, herein are amended to read
as follows:
ARTICLE FIRST
The name of the Corporation shall be: AgniCAD, Inc.
ARTICLE FOURTH
Section 1: Aggregate Number of Shares
The total number of shares which the Corporation shall have authority to issue
is 110,000,000 of which (a) 10,000,000 shares shall be Preferred Stock of par
value $0.001 per share, (b) 100,000,000 shares shall be Common Stock of the par
value of $0.001 per share.
Section 2: Rights of Preferred Stock
The Preferred Stock may be issued from time to time in one or more series and
with such designation for each such series as shall be stated and expressed in
the resolution or resolutions providing for the issue of each such series
adopted by the Board of Directors. The Board of Directors in any such resolution
or resolutions is expressly authorized to state and express for each such
series:
(i) The voting powers, if any, of the holders of stock of such series;
(ii) The rate per annum and the times at and conditions upon which the
holders of stock of such series shall be entitled to receive dividends, and
whether such dividends shall be cumulative or noncumulative and if cumulative
the terms upon which such dividends shall be cumulative;
(iii) The price or prices and the time or times at and the manner in
which the stock of such series shall be redeemable and the terms and amount of
any sinking fund provided for the purchase or redemption of shares;
(iv) The rights to which the holders of the shares of stock of such
series shall be entitled upon any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(v) The terms, if any, upon which shares of stock of such series shall
47
be convertible into, or exchangeable for, shares of stock of any other class or
classes or of any other series of the same or any other class or classes,
including the price or prices or the rate or rates of conversion or exchange and
the terms of adjustment, if any; and
(vi) Any other designations, preferences, and relative participating,
optimal or other special rights, and qualifications, limitations or restrictions
thereof so far as they are not inconsistent with the provisions of the Articles
of Incorporation, as amended, and to the full extent now or hereafter permitted
by the laws of Nevada.
Section 3: Rights of Common Stock
The Common Stock may be issued from time to time in one or more Classes and with
such designation for each such Classes as shall be stated and expressed in the
resolution or resolutions providing for the issue of each such Classes adopted
by the Board of Directors. The Board of Directors in any such resolution or
resolutions is expressly authorized to state and express for each such Class:
(i) The voting powers, if any, of the holders of stock of such Class;
The rate per annum and the times at and conditions upon which the holders of
stock of such Class shall be entitled to receive dividends, and whether such
dividends shall be cumulative or noncumulative and if cumulative the terms upon
which such dividends shall be cumulative;
(iii) The price or prices and the time or times at and the manner in
which the stock of such series shall be redeemable and the terms and amount of
any sinking fund provided for the purchase or redemption of shares;
(iv) The terms, if any, upon which shares of stock of such series shall
be convertible into, or exchangeable for, shares of stock of any other class or
classes or of any other series of the same or any other class or classes,
including the price or prices or the rate or rates of conversion or exchange and
the terms of adjustment, if any; and
(v) Any other designations, preferences, and relative participating,
optimal or other special rights, and qualifications, limitations or restrictions
thereof so far as they are not inconsistent with the provisions of the Articles
of Incorporation, as amended, and to the full extent now or hereafter permitted
by the laws of Nevada.
Section 4: Statutes Not Applicable
The provisions of Nevada Revised Statutes, 78.378 through 78.3793, inclusive,
regarding the voting of a controlling interest in stock of a Nevada corporation
and sections 78.411 through 78.444, inclusive, regarding combinations with
interested stockholders, shall not be applicable to this Corporation .
The undersigned hereby certify that they have on this __ Day of April,
2002, executed this Certificate
Amending the original Articles of Incorporation heretofore filed with the
Secretary of State of Nevada.
- ---------------------------- --------------------------------
President Secretary
48
APPENDIX D
AgniCAD Incorporated
Balance sheetS
December 31,
ASSETS
2001 2000
-------------- ---------------
Current assets
Cash $ 5,455 $ 4,272
Accounts receivable, net of allowance of $0 and $9,868 35,051 40,082
Prepaid expenses 17,604 1,103
-------------- ---------------
Total current assets 58,110 45,457
equipment, net of
accumulated depreciation of $3,507 and $6,576 2,845
3,604
SOFTWARE LICENSES, net of
accumulated amortization of $15,140 and $46,827 67,570
45,842
-------------- ---------------
$ 107,556 $ 115,872
============== ===============
Liabilities and stockholders' equity (DEFICIT)
Current liabilities
Note payable $ 60,000 $ -
Borrowings from related party 20,000 20,000
49
Accounts payable 29,727 4,450
Accrued expenses 8,278 7,558
License fees payable 39,000 60,000
Payables to related parties 17,499 14,207
Deferred revenue 6,000 7,000
--------------- --------------
Total current liabilities 180,504 113,215
Stockholders' equity (deficit)
Preferred stock, $0.001 par value,
10,000,000 shares authorized -
-
Common stock, $0.0001 par value,
40,000,000 shares authorized 661
681
Common stock subscribed 35,000 -
Additional paid-in capital 96,768 1,996
Deficit in retained earnings (205,397) -
--------------- --------------
(72,948) 2,657
--------------- --------------
$ 107,556 $ 115,872
=============== ==============
50
AgniCAD Incorporated
Statements of Operations
Years ended December 31,
2001 2000
--------------- ----------------
Revenue, net $ 196,059 $ 73,348
Cost of services 107,395 44,102
--------------- ----------------
Gross profit 88,664 29,246
Selling, general and administrative expenses 253,291 78,900
--------------- ----------------
Loss from operations (164,627) (49,654)
OTHER EXPENSES
Interest 5,770 1,929
Finder's fee 35,000 -
--------------- ----------------
40,770 1,929
--------------- ----------------
Net loss $ (205,397) $ (51,583)
=============== ================
51
AgniCAD Incorporated
Statement of members' and Stockholders' Equity (deficit)
Preferred Stock Common Stock Common Stock subscribed
-------------------- ---------------- ------------------
Additional
Members' Paid In Retained
Equity Shares Amount Capital Earnings
Shares Amount Shares Amount Total
-------- ---------- ------- --------- ---- -------- ------- ------- --------- ---------
Balances at
January 1, 2000 $ 6,240 -- $ -- -- $-- -- $ -- $ -- $ -- $ 6,240
Sales of
members' units 45,000 -- -- -- -- -- -- -- -- 45,000
for cash
Issuance of
members' units
in exchange for 3,000 -- -- -- -- -- -- -- -- 3,000
services
Net loss for
the year ended
December 31, 2000 (51,583) -- -- -- -- -- -- -- -- (51,583)
Exchange of
members' units
for common shares
in AgniCAD Inc.
on --
December 31, 2000
(2,657) -- 6,606,666 661 -- -- 1,996 -- --
-------- ---------- ------- --------- ---- -------- ------- ------- --------- ---------
Balances at
December 31, -- -- -- 6,606,666 661 -- -- 1,996 -- 2,657
2000
Common stock
earned, but not
vested by
employees, shares
held by Company
of common -- -- -- 200,000 20 -- -- 69,980 -- 70,000
stock for cash
-- -- -- 70,833 -- -- -- 24,792 -- 24,792
Issuance of
common stock
for services
related -- -- -- -- -- 100,000 35,000 -- -- 35,000
to acquisition
Net loss for
the year ended
December 31, 2001 -- -- -- -- -- -- -- -- (205,397) (205,397)
-------- ---------- ------- --------- ---- -------- ------- ------- --------- ---------
52
Balances at
December 31, 2001 $ -- -- $ -- 6,877,499 $681 100,000 $35,000 $96,768 $(205,397) $ (72,948)
======== ========== ======= ========= ==== ======== ======= ======= ========= =========
53
AgniCAD Incorporated
Statements of Cash Flows
Years ended December 31
2001 2000
---------------- ----------------
INCREASE (DECREASE) IN CASH
Cash flows from operating activities
Net loss $ (205,397) $ (51,583)
Adjustments to reconcile net loss to net cash used in operating activities
Depreciation and amortization 34,756 17,140
Issuance of members' units and common stock for services 24,792 3,000
Issuance of stock for finder's fee 35,000 -
Changes in assets and liabilities:
Accounts receivable, net 5,031 (24,857)
Prepaid expenses (16,501) (1,103)
Accounts payable, accrued and other liabilities 29,289 32,075
Deferred revenue (1,000) -
---------------- ----------------
Net cash used in operating activities (94,030) (25,328)
Cash flows from investing activities
Purchase of equipment (3,828) (949)
Purchase of software licenses (30,959) (22,710)
License fee payable (21,000)
---------------- ----------------
Net cash used in investing activities (34,787) (23,659)
54
Cash flows from financing activities
Proceeds from note payable borrowings 60,000 2,500
Proceeds from sales of members' units and common stock 70,000 45,000
---------------- ----------------
Net cash provided by financing activities 130,000 47,500
---------------- ----------------
Net (decrease) increase in cash 1,183 (1,487)
Cash at beginning of period 4,272 5,759
---------------- ----------------
Cash at end of period $ 5,455 $ 4,272
================ ================
Supplementary information:
Cash paid for interest $ - $ -
================ ================
55