Exhibit 2.1
AGREEMENT AND PLAN OF MERGER AND REORGANIZATION
This Agreement and Plan of Merger and Reorganization (this
"Agreement")
is entered into as of April 5, 2004, by and
among ProUroCare Inc., a Minnesota
corporation having a place of business
located at One Carlson Parkway, Suite
124, Plymouth, Minnesota 55447 (the
"Company"), Global Internet Communications,
Inc., a Nevada corporation having a place
of business located at 2035-1050
Burrard Street, Vancouver, British Columbia
("GICI"), and GIC Acquisition Corp.,
a Minnesota corporation that is wholly
owned by GICI and has a place of business
located at 2035-1050 Burrard Street,
Vancouver, British Columbia (hereinafter
referred to "Merger Sub").
WITNESSETH
WHEREAS, the Boards of Directors of the Company, GICI and Merger
Sub
have determined that it is in the best
interests of such corporations and their
respective stockholders to consummate a
merger (the "Merger") of Merger Sub with
and into the Company with the Company
remaining as the surviving corporation
(such surviving corporation is referred to
herein as the "Surviving Company");
WHEREAS, GICI, as the sole stockholder of Merger Sub, has approved
this
Agreement, the Merger and the other
transactions contemplated by this Agreement
pursuant to action taken by written consent
in accordance with the requirements
of the Minnesota Business Corporation Act
(the "MBCA") and the certificate of
incorporation and the bylaws of Merger
Sub;
WHEREAS, pursuant to the Merger, among other things, the
outstanding
shares of common stock of the Company shall
be converted into the right to
receive upon Closing (as hereinafter
defined) and thereafter, the Merger
Consideration (as hereinafter defined);
WHEREAS, the parties to this Agreement intend to adopt this
Agreement
as a plan of reorganization within the
meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the
"Code") and the regulations promulgated
thereunder, and intend that the Merger and
the transactions contemplated by this
Agreement be undertaken pursuant to that
plan; and
WHEREAS, the parties to this Agreement intend that the Merger
qualify
as a "reorganization," within the meaning
of Section 368(a) of the Code, and
that GICI, Merger Sub and the Company will
each be a "party to a
reorganization," within the meaning of
Section 368(b) of the Code, with respect
to the Merger.
WHEREAS, simultaneously herewith, GICI (as it will exist as of
the
closing of the Merger) is selling shares of
common stock, $.00001 par value per
share (the "GICI Common Stock"), in a
private placement of such securities to
accredited investors for the purposes of
expanding the business of the Surviving
Company following the Merger.
AGREEMENT
NOW, THEREFORE, in consideration of the representations, warranties
and
covenants contained herein, the parties
hereto agree as follows:
ARTICLE I
DEFINITIONS
As used herein, the following terms shall have the following
meanings
(such meaning to be equally applicable to
both the singular and plural forms of
the terms defined):
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"Affiliate" has the meaning as defined in Rule 12b-2 promulgated
under
the Exchange Act, as such regulation is in
effect on the date hereof.
"Articles of Merger" shall mean the articles of merger in
substantially
the form attached hereto as Exhibit A.
"Code" has the meaning ascribed thereto in the preambles to
this
Agreement.
"Copyrights" has the meaning ascribed thereto in Section
3.20(a).
"Effective Date" shall have the meaning as set forth in Section
2.1(d)
hereof.
"Effective Time" shall have the meaning ascribed thereto in
Section
2.1(d) hereof.
"ERISA" means the Employee Retirement Income Security Act of 1974
or
any successor law and the regulations
thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as
amended.
"Exchange Ratio" means three (3).
"GAAP" shall mean United States generally accepted accounting
principles as in effect from time to
time.
"Indemnified Parties" has the meaning ascribed thereto in
Section
6.4(d).
"Intellectual Property" has the meaning ascribed thereto in
Section
3.20(a).
"Know-How" has the meaning ascribed thereto in Section 3.20(a).
"Knowledge" means, with respect to an individual, that such
individual
is actually aware of a particular fact or
other matter, with no obligation to
conduct any inquiry or other investigation
to determine the accuracy of such
fact or other matter. A person other than
an individual shall be deemed to have
Knowledge of a particular fact or other
matter if the officers, directors or
other management personnel of such person
had Knowledge of such fact or other
matter.
"Minnesota Business Corporations Act" or "MBCA" shall mean Chapter
302A
of the Minnesota Statutes, as amended.
"Material Adverse Effect" shall, with respect to an entity, mean
a
material adverse effect on the business,
operations, results of operations or
financial condition of such entity on a
consolidated basis.
"Merger" shall have the meaning ascribed thereto in the preambles
of
this Agreement.
"Merger Consideration" means the shares of GICI Common Stock
issuable
in connection with the Merger to the
holders of Company Common Stock, as set
forth in Section 2.2(a).
"General Corporation Law of Nevada" or "NGCL" shall mean the
provisions
set forth in Chapters 78 and 92A of the
Nevada Revised Statutes, as amended.
"Offering
Memorandum" has the meaning ascribed thereto in Section
6.4(a).
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"Patents" has the meaning ascribed thereto in Section 3.20(a).
"Person" means any individual, corporation (including any
non-profit
corporation), general or limited
partnership, limited liability company, joint
venture, estate, trust, association,
organization, labor union, governmental
authority or other entity.
"Private Placement" shall have the meaning ascribed thereto in
Section
6.4(a).
"Proxy Statement" shall have the meaning ascribed thereto in
Section
6.5.
"GICI Common Stock" shall mean the common stock, par value $0.0001
per
share, of GICI.
"GICI Convertible Securities" shall have the meaning ascribed
thereto
in Section 2.2(c).
"GICI 10-K Reports" shall have the meaning ascribed thereto in
Section
4.4.
"GICI 10-Q Reports" shall have the meaning ascribed thereto in
Section
4.4.
"GICI Insider" shall have the meaning ascribed thereto in Section
4.11.
"Requisite Company Shareholder Vote" shall have the meaning
ascribed
thereto in Section 3.2.
"SEC" shall mean the United States Securities and Exchange
Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Subsidiary" shall, with respect to any entity, mean each
corporation
in which such entity owns directly or
indirectly fifty percent (50%) or more of
the voting securities of such corporation
and shall, unless otherwise indicated,
be deemed to refer to both direct and
indirect subsidiaries of such entity.
"Surviving Company" shall have the meaning ascribed thereto in
Article
II.
"Tax" or "Taxes" shall mean any federal, state, local or
foreign
income, gross receipts, license, payroll,
employment, excise, severance, stamp,
occupation, premium, property or windfall
profits taxes, environmental taxes,
customs duties, capital stock, franchise,
employees' income withholding, foreign
or domestic withholding, social security,
unemployment, disability, workers'
compensation, employment-related insurance,
real property, personal property,
sales, use, transfer, value added,
alternative or add-on minimum or other
governmental tax, fee, assessment or charge
of any kind whatsoever including any
interest, penalties or additions to any Tax
or additional amounts in respect of
the foregoing.
"Trademarks" has the meaning ascribed thereto in Section
3.20(a).
"Units" has the meaning ascribed thereto in Section 6.4(a).
"Company Common Stock" means the common stock, par value $.01
per
share, of the Company.
"Company Convertible Securities" shall have the meaning
ascribed
thereto in Section 2.2(c).
"Warrants" has the meaning ascribed thereto in Section 6.4(a).
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ARTICLE II
MERGER
Subject to the satisfaction or waiver of the conditions set forth
in
Article VII, at the Effective Time, (i)
Merger Sub will merge with and into the
Company, and (ii) the Company will be the
surviving corporation to the Merger
and will become a wholly owned subsidiary
of GICI. The term "Surviving Company"
as used herein shall mean the Company, as a
wholly owned subsidiary of GICI
after giving effect to the Merger. The
Merger will be effected pursuant to the
Articles of Merger in accordance with the
provisions of, and with the effect
provided in, the MBCA.
2.1 Effects of
Merger.
(a) Articles of Incorporation; Bylaws. From and after the
Effective
Time and until further altered, amended or
repealed in accordance with law, (i)
the Articles of Incorporation of the
Company as in effect immediately prior to
the Effective Time shall be the Articles of
Incorporation of the Surviving
Company, and (ii) the Bylaws of the Company
as in effect immediately prior to
the Effective Time shall be the Bylaws of
the Surviving Company.
(b) From and after the Effective Time and until further altered
or
amended in accordance with law, (i) all of
the rights, privileges, immunities,
powers, franchises and authority (both
public and private) of the Company and
Merger Sub shall vest in the Surviving
Company; (ii) all of the assets and
property of the Company and Merger Sub of
every kind, nature and description
(real, personal and mixed and both tangible
and intangible) and every interest
therein, wheresoever located, including,
without limitation, all debts or other
obligations belonging or due to the Company
or Merger Sub, all claims and all
causes of action, shall be, and be deemed
to be, vested, absolutely and
unconditionally, in the Surviving Company;
and (iii) all debts and obligations
of the Company and Merger Sub, all rights
of creditors of the Company or Merger
Sub and all liens or security interests
encumbering any of the property of the
Company or Merger Sub shall be vested in
the Surviving Company and shall remain
in full force and effect without
modification or impairment and shall be, and be
deemed to be, enforceable against the
Surviving Company and its assets and
properties with the same full force and
effect as if such debts, obligations,
liens or security interests had been
originally incurred or created by the
Surviving Company in its own name and for
its own behalf. Without limiting the
generality of the foregoing, Surviving
Company specifically assumes all
continuing obligations which the Company or
Merger Sub would otherwise have to
indemnify its officers and directors, to
the fullest extent currently provided
in the Surviving Company's Articles of
Incorporation, By-Laws and pursuant to
the MBCA, with respect to any and all
claims arising out of actions taken or
omitted by such officers and directors
prior to the Effective Date.
(c) Best Efforts; Further Assurances. GICI, the Company and Merger
Sub,
respectively, shall each use its best
efforts to take all such action as may be
necessary or appropriate to effectuate the
Merger in accordance with the MBCA at
the Effective Time. If at any time after
the Effective Time, any further action
is necessary or desirable to carry out the
purposes of this Agreement and to
vest the Surviving Company with full right,
title and possession to all
properties, rights, privileges, immunities,
powers and franchises of either the
Company or Merger Sub, the officers of
GICI, and the officers of Surviving
Company on behalf of the Company and Merger
Sub, shall take all such lawful and
necessary action.
(d) Closing; Closing Date. Subject to the provisions of Article VII
and
Article VIII hereof, the closing (the
"Closing") of the transactions
contemplated hereby shall take place at
such location, on such date (the
"Closing Date") and at such time as the
Company and GICI mutually agree at the
earliest practicable time after the
satisfaction or waiver of the conditions in
Article VII, but in no event later than
five (5) business days after all such
conditions have been satisfied or waived,
or on such other date as may be
mutually agreed by the parties hereto. On
the Closing Date, to effect the
Merger, the parties hereto will cause the
Articles of Merger to be filed with
the Minnesota Secretary of State in
accordance with the MBCA. The Merger shall
become effective upon the filing of the
Articles of Merger with the Minnesota
Secretary of State, or at such later date
or time as is specified in the
Articles of Merger (the "Effective Time").
As used herein, the term "Effective
Date" shall mean the date on which Merger
shall become effective pursuant to
this Section 2.1(d).
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2.2 Effect on the Company's Capital Stock and Merger Sub Capital
Stock.
To effectuate the Merger, and subject to
the terms and conditions of this
Agreement, at the Effective Time:
(a) Outstanding Shares of Company Common Stock. Each issued and
outstanding share of Company Common Stock
immediately prior to the Effective
Time (other than shares to be extinguished
pursuant to Section 2.2(c) and
Dissenting Shares (as defined in Section
2.5 below) shall be converted into and
exchangeable for such number of fully paid
and non-assessable shares of GICI
Common Stock equal to one multiplied by the
Exchange Ratio; and GICI shall issue
to each holder of Company Common Stock
(other than holders of shares
extinguished pursuant to Section 2.2(c) and
Dissenting Shares) the number of
shares of GICI Common Stock equal to the
number of shares of Company Common
Stock held by such shareholder multiplied
by the Exchange Ratio, rounded to the
nearest whole share (the "Merger
Consideration").
(b) Company Convertible Securities. All outstanding securities
convertible into or exchangeable for shares
of Company Common Stock (including
without limitation options and warrants to
purchase shares of Company Common
Stock) that are outstanding immediately
prior to the Effective Time (the
"Company Convertible Securities") shall
convert automatically into securities
convertible into or exchangeable for that
number of shares of GICI Common Stock
(the "GICI Convertible Securities") as the
holders thereof would have been
entitled to receive if such Company
Convertible Securities had been converted
into or exercised for shares of Company
Common Stock immediately prior to the
Effective Time, based on the Exchange
Ratio; provided, however, that the
exercise price per share of GICI Common
Stock under each such GICI Convertible
Security will be equal to the quotient
obtained by dividing the exercise price
per share of Company Common Stock under
each outstanding Company Convertible
Security by the Exchange Ratio; provided
further, that any fractional shares of
GICI Common Stock otherwise issuable upon
conversion or exercise of any such
GICI Convertible Security must be rounded
to the nearest share.
(c) Company Common Stock Held by Merger Sub. Each share of
Company
Common Stock issued and outstanding
immediately prior to the Effective Time and
owned by Merger Sub or GICI, if any, shall
be cancelled and extinguished without
any conversion thereof and no payment shall
be made with respect thereto; and
(d) Merger Sub Common Stock. All issued and outstanding shares
of
common stock, $0.01 par value per share, of
Merger Sub held by GICI immediately
prior to the Effective Time will be
converted into and become one validly
issued, fully paid and nonassessable share
of common stock, $.01 par value per
share, of the Surviving Company.
2.3 Rights of
Holders of Company Capital Stock.
(a) On and after the Effective Date and until surrendered for
exchange,
each outstanding stock certificate that
immediately prior to the Effective Date
represented shares of Company Common Stock
(except Dissenting Shares and shares
cancelled or extinguished pursuant to
Section 2.2(c)) shall be deemed for all
purposes, to evidence ownership of and to
represent the number of whole shares
of GICI Common Stock into which such shares
of Company Common Stock shall have
been converted pursuant to Section 2.2(a)
above. The record holder of each such
outstanding certificate representing shares
of Company Common Stock, shall,
after the Effective Date, be entitled to
vote the shares of GICI Common Stock
into which such shares of Company Common
Stock shall have been converted on any
matters on which the holders of record of
GICI Common Stock, as of any date
subsequent to the Effective Date, shall be
entitled to vote. In any matters
relating to such certificates of Company
Common Stock, GICI may rely
conclusively upon the record of
stockholders maintained by the Company
containing the names and addresses of the
holders of record of Company Common
Stock on the Effective Date.
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(b) On and after the Effective Date, GICI shall reserve a
sufficient
number of authorized but unissued shares of
GICI Common Stock for issuance in
connection with (i) the conversion of
Company Common Stock into GICI Common
Stock and (ii) the conversion or exercise
of all GICI Convertible Securities
into which Company Convertible Securities
are converted pursuant to Section
2.2(b).
2.4 Procedure
for Exchange of Company Common Stock.
(a) GICI shall act as exchange agent in the Merger (the
"Exchange
Agent"). As soon as practicable following
the Effective Time, the Exchange Agent
will mail to each former holder of Company
Common Stock (except Dissenting
Shares and shares cancelled or extinguished
pursuant to Section 2.2(c)), as
recorded on the books and records of the
Company immediately prior to the
Merger, (i) a letter of transmittal in
customary form and containing such
provisions to effect transfer of title to
the Company Common Stock as GICI may
reasonably specify, and (ii) instructions
for use in effecting the surrender of
certificates representing Company Common
Stock in exchange for the Merger
Consideration described in Section
2.2(a).
(b) Upon surrender of a certificate representing Company Common
Stock
to the Exchange Agent for exchange,
together with a duly executed letter of
transmittal and such other documents as may
be reasonably required by the
Exchange Agent to effect transfer of title
to the Company Common Stock, each
such former holder of Company Common Stock
shall be entitled to receive
certificates representing the number of
whole shares of GICI Common Stock into
which shares of Company Common Stock
theretofore represented by the certificates
so surrendered shall have been converted as
provided in Section 2.2(a) hereof.
GICI shall not be obligated to deliver the
Merger Consideration to which any
former holder of shares of Company Common
Stock is entitled until such holder
surrenders the certificate or certificates
representing such shares. Upon
surrender, each certificate evidencing
Company Common Stock shall be canceled.
(c) If there is a transfer of Company Common Stock ownership which
is
not registered in the transfer records of
Company, a certificate representing
the proper number of shares of GICI Common
Stock may be issued to a person other
than the person in whose name the
certificate so surrendered is registered if:
(x) upon presentation to the Secretary of
GICI, such certificate shall be
properly endorsed or otherwise be in proper
form for transfer, (y) the person
requesting such payment shall pay any
transfer or other taxes required by reason
of the issuance of shares of GICI Common
Stock to a person other than the
registered holder of such certificate or
establish to the reasonable
satisfaction of GICI that such tax has been
paid or is not applicable, and (z)
the issuance of such GICI Common Stock
shall not, in the sole discretion of
GICI, violate the requirements of
applicable securities laws and regulations
with respect to the private placement of
GICI Common Stock that will result from
the Merger.
(d) All shares of GICI Common Stock issued upon the surrender
for
exchange of Company Common Stock in
accordance with the above terms and
conditions shall be deemed to have been
issued and paid in full satisfaction of
all rights pertaining to such shares of
Company Common Stock.
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<PAGE>
(e) No holder surrendering a certificate representing shares of
Company
Common Stock will be issued in exchange a
certificate representing other than a
whole number of shares of GICI Common
Stock.
(f) Any shares of GICI Common Stock issued in the Merger will not
be
transferable except (1) pursuant to an
effective registration statement under
the Securities Act or (2) upon receipt by
GICI of a written opinion of counsel
reasonably satisfactory to GICI to the
effect that the proposed transfer is
exempt from the registration requirements
of the Securities Act and relevant
state securities laws. Restrictive legends
shall be placed on all certificates
representing shares of GICI Common Stock
issued in the Merger, substantially as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER AND CERTAIN OTHER CONDITIONS.
NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY
BE
MADE EXCEPT (A) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND
REGULATIONS
IN EFFECT THEREUNDER AND ALL APPLICABLE STATE SECURITIES OR "BLUE
SKY"
LAWS (SUCH FEDERAL AND STATE LAWS, THE "SECURITIES LAWS") OR (B)
THE
COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL FOR THE
HOLDER,
WHICH OPINION AND COUNSEL SHALL BE REASONABLY SATISFACTORY TO
THE
COMPANY, TO THE EFFECT THAT SUCH TRANSFER, SALE, ASSIGNMENT,
PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE
REGISTRATION
REQUIREMENTS OF THE SECURITIES LAWS."
The failure, however, of such certificates to contain such a
legend
shall not affect the enforceability of
restrictions set forth in this Section
2.4.
(g) In the event any certificate for Company Common Stock shall
have
been lost, stolen or destroyed, GICI shall
issue and pay in exchange for such
lost, stolen or destroyed certificate, upon
the making of an affidavit of that
fact by the holder thereof, such shares of
the GICI Common Stock and cash for
fractional shares, if any, as may be
required pursuant to this Agreement.
2.5 Dissenting Shares. Shares of capital stock of the Company held
by
shareholders of the Company who are
entitled to exercise dissenters' rights
under Section 302A.471 of the MBCA and have
properly demand for the fair value
of their shares of Company Common Stock in
accordance with Section 302A.473 of
the MBCA ("Dissenting Shares") shall not be
converted into or represent a right
to receive shares of GICI Common Stock
pursuant to Section 2.2(a) above, but the
holders thereof shall be entitled only to
such rights as are granted by Sections
302A.471 and 302A.473 of the MBCA. Each
holder of Dissenting Shares who becomes
entitled to fair payment for such shares
pursuant to Sections 302A.471 and
302A.473 of the MBCA shall receive such
payment from the Surviving Company in
accordance with the MBCA; provided,
however, that if any such holder of
Dissenting Shares shall have effectively
withdrawn or failed to preserve such
holder's dissenters' rights, such holder
shall forfeit the right to receive fair
value for such Dissenting Shares and each
such Dissenting Share shall thereupon
be deemed to have been canceled,
extinguished and converted, as of the Effective
Time, into and represent the right to
receive payment from GICI of shares of
GICI Common Stock as provided in Section
2.2(a) above.
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2.6 Directors and Officers of the Surviving Company. From and after
the
Effective Time, the directors and officers
of the Surviving Company shall be the
persons who were directors of the Company
immediately prior to the Effective
Time and the officers of the Company
immediately prior to the Effective Time.
Such directors and officers of the
Surviving Company shall hold office for the
term specified in, and subject to the
provisions contained in, the Articles of
Incorporation and Bylaws of the Surviving
Company and applicable law. If, at or
after the Effective Time, a vacancy shall
exist on the board of directors or in
any of the offices of the Surviving
Company, such vacancy shall be filled in the
manner provided in the Articles of
Incorporation and Bylaws of the Surviving
Company.
2.7 Directors and Officers of GICI. Immediately after the
Effective
Time, the board of directors of GICI will
consist of the following persons:
Maurice Taylor II, David Koenig, Michael P.
Grossman and Alex Nazarenko, who
shall serve for the term specified in, and
subject to the provisions contained
in, the Certificate of Incorporation and
Bylaws of GICI and applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants as follows:
3.1 Organization and Qualification. The Company is a corporation
duly
organized, validly existing and in good
standing under the laws of the State of
Minnesota, and has the requisite corporate
power to carry on its business as now
conducted. The Company is licensed or
qualified to do business in every
jurisdiction in which the nature of its
business or its ownership of property
requires it to be licensed or qualified,
except where the failure to be so
licensed or qualified would not have a
Material Adverse Effect on the Company or
the Surviving Company given the Company's
current business operations.
3.2 Authority Relative to this Agreement; Non-Contravention.
The
Company has the requisite corporate power
and authority to enter into this
Agreement and to carry out its obligations
hereunder. The execution and delivery
of this Agreement by the Company and the
consummation by the Company of the
transactions contemplated hereby have been
duly authorized by the Board of
Directors of the Company and, except for
approval of this Agreement and the
Merger by the requisite vote of the
Company's shareholders (the "Requisite
Company Shareholder Vote"), no other
corporate proceedings on the part of the
Company are necessary to authorize the
execution and delivery of this Agreement
and the consummation of the transactions
contemplated hereby. This Agreement has
been duly executed and delivered by the
Company and constitutes a valid and
binding obligation of the Company
enforceable in accordance with its terms,
except as enforcement may be limited by
general principles of equity whether
applied in a court of law or a court of
equity and by bankruptcy, insolvency and
similar laws affecting creditors' rights
and remedies generally. Except as set
forth in Schedule 3.2, the Company is not
subject to, or obligated under, any
provision of (a) its Articles of
Incorporation or Bylaws, (b) any agreement,
arrangement or understanding, (c) any
license, franchise or permit or (d)
subject to obtaining the approvals referred
to in the next sentence, any law,
regulation, order, judgment or decree,
which would conflict with, be breached or
violated, or in respect of which a right of
termination or acceleration or any
security interest, charge or encumbrance on
any of its assets would be created,
by the execution, delivery or performance
of this Agreement, or the consummation
of the transactions contemplated hereby,
other than any such conflicts,
breaches, violations, rights of termination
or acceleration or security
interests, charges or encumbrances which,
in the aggregate, could not reasonably
be expected to result in a Material Adverse
Effect on the Company or the
Surviving Company. Except for (a) approvals
under applicable Blue Sky laws, (b)
the filing of the Articles of Merger with
the Secretary of State of Minnesota,
and (c) such filings, authorizations or
approvals as may be set forth in
Schedule 3.2, no authorization, consent or
approval of, or filing with, any
public body, court or authority is
necessary on the part of the Company for the
consummation by the Company of the
transactions contemplated by this Agreement,
except for such authorizations, consents,
approvals and filings as to which the
failure to obtain or make the same would
not, in the aggregate, reasonably be
expected to have a Material Adverse Effect
on the Company or the Surviving
Company or adversely affect the
consummation of the transactions contemplated
hereby.
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3.3
Capitalization.
(a) The authorized, issued and outstanding shares of capital stock
of
the Company as of the date hereof are
correctly set forth on Schedule 3.3(a).
The issued and outstanding shares of
capital stock of the Company are duly
authorized, validly issued, fully paid and
nonassessable and have not been
issued in violation of any preemptive
rights, and to the Company's Knowledge,
are free from any restrictions on transfer
(other than restrictions under the
Securities Act or state securities laws) or
any option, lien, pledge, security
interest, encumbrance or charge of any
kind. Other than as described on Schedule
3.3(a), the Company has no other equity
securities or securities containing any
equity features (including Company
Convertible Securities) authorized, issued or
outstanding. Except as set forth in
Schedule 3.3(a) hereto, there are no
agreements or other rights or arrangements
existing which provide for the sale
or issuance of capital stock by the Company
and there are no rights,
subscriptions, warrants, options,
conversion rights or agreements of any kind
outstanding to purchase or otherwise
acquire from the Company any shares of
capital stock or other securities of the
Company of any kind. Except as set
forth on Schedule 3.3(a), there are no
agreements or other obligations
(contingent or otherwise) which may require
the Company to repurchase or
otherwise acquire any shares of its capital
stock.
(b) The Company does not own, and is not party to any contract
to
acquire, any equity securities or other
securities of any entity or any direct
or indirect equity or ownership interest in
any other entity. To the Company's
Knowledge, there exist no voting trusts,
proxies, or other contracts with
respect to the voting of shares of capital
stock of the Company.
3.4 Litigation. Except as set forth on Schedule 3.4, there are
no
actions, suits, proceedings, orders or
investigations pending or, to the
Knowledge of the Company, threatened
against the Company, at law or in equity,
or before or by any federal, state or other
governmental department, commission,
board, bureau, agency or instrumentality,
domestic or foreign.
3.5 No Brokers or Finders. Except as disclosed on Schedule 3.5,
there
are no claims for brokerage commissions,
finders' fees, investment advisory fees
or similar compensation in connection with
the transactions contemplated by this
Agreement based on any arrangement,
understanding, commitment or agreement made
by or on behalf of the Company.
3.6 Tax
Matters.
(a) (i) Except for the 2002 Minnesota Tax Return which will show no
tax
due, the Company has timely filed (or has
had timely filed on its behalf) all
returns, declarations, reports, estimates,
information returns, and statements,
including any schedules and amendments to
such documents ("Company Returns"),
required to be filed or sent by it in
respect of any Taxes or required to be
filed or sent by it by any taxing authority
having jurisdiction; (ii) all such
Company Returns are complete and accurate
in all material respects; (iii) the
Company has timely and properly paid (or
has had paid on its behalf) all Taxes
required to be paid by it; (iv) the Company
has established on the Company
Latest Balance Sheet, in accordance with
GAAP, reserves that are adequate for
the payment of any Taxes not yet due and
payable; (v) the Company has complied
with all applicable laws, rules, and
regulations relating to the collection or
withholding of Taxes from third parties
(including without limitation employees)
and the payment thereof (including, without
limitation, withholding of Taxes
under Sections 1441 and 1442 of the Code,
or similar provisions under any
foreign laws).
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(b) There are no liens for Taxes upon any assets of the Company,
except
liens for Taxes not yet due.
(c) No deficiency for any Taxes has been proposed, asserted or
assessed
against the Company that has not been
resolved and paid in full or is not being
contested in good faith. Except as
disclosed in Schedule 3.6, no waiver,
extension or comparable consent given by
the Company regarding the application
of the statute of limitations with respect
to any Taxes or Returns is
outstanding, nor is any request for any
such waiver or consent pending. Except
as disclosed in Schedule 3.6, there has
been no Tax audit or other
administrative proceeding or court
proceeding with regard to any Taxes or
Company Returns, nor is any such Tax audit
or other proceeding pending, nor has
there been any notice to the Company by any
Taxing authority regarding any such
Tax audit or other proceeding, or, to the
Knowledge of the Company, is any such
Tax audit or other proceeding threatened
with regard to any Taxes or Company
Returns. The Company does not expect the
assessment of any additional Taxes of
the Company for any period prior to the
date hereof and has no Knowledge of any
unresolved questions, claims or disputes
concerning the liability for Taxes of
the Company which would exceed the
estimated reserves established on its books
and records.
(d) The Company is not liable with respect to any indebtedness
the
interest of which is not deductible for
applicable federal, foreign, state or
local income tax purposes. The Company has
not filed or been included in a
combined, consolidated or unitary Tax
return (or the substantial equivalent
thereof) of any person.
(e) Except as set forth on Schedule 3.6, the Company has not
requested
any extension of time within which to file
any Company Return, which return has
not since been filed.
3.7 Contracts
and Commitments.
(a) Schedule 3.7 hereto lists all material agreements, whether oral
or
written, to which the Company is a party,
which are currently in effect, and
which relate to the operation of the
Company's business.
(b) The Company has performed all obligations required to be
performed
by it in connection with the contracts or
commitments required to be disclosed
in Schedule 3.7 hereto and is not in
receipt of any claim of default under any
contract or commitment required to be
disclosed under such caption; the Company
has no present expectation or intention of
not fully performing any material
obligation pursuant to any contract or
commitment required to be disclosed under
such caption; and the Company has no
Knowledge of any breach or anticipated
breach by any other party to any contract
or commitment required to be disclosed
under such caption.
3.8 Affiliate Transactions. Except as set forth in Schedule 3.8
hereto,
and other than pursuant to this Agreement,
no officer, director or employee of
the Company, or any member of the immediate
family of any such officer, director
or employee, or any entity in which any of
such persons owns any beneficial
interest (other than any publicly-held
corporation whose stock is traded on a
national securities exchange or in the
over-the-counter market and less than
five percent of the stock of which is
beneficially owned by any of such persons)
(collectively "Company Insiders"), has any
agreement with the Company (other
than normal employment arrangements) or any
interest in any property, real,
personal or mixed, tangible or intangible,
used in or pertaining to the business
of the Company (other than ownership of
capital stock of the Company). Except as
set forth on Schedule 3.8, the Company is
not indebted to any Company Insider
(except for amounts due as normal salaries
and bonuses and in reimbursement of
ordinary business expenses) and no Company
Insider is indebted to the Company
(except for cash advances for ordinary
business expenses). None of the Company
Insiders has any direct or indirect
interest in any competitor, supplier or
customer of the Company or in any person,
firm or entity from whom or to whom
the Company leases any property, or in any
other person, firm or entity with
whom the Company transacts business of any
nature. For purposes of this Section
3.8, the members of the immediate family of
an officer, director or employee
shall consist of the spouse, parents,
children and siblings of such officer,
director or employee.
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<PAGE>
3.9 Compliance
with Laws; Permits.
(a) Except for any noncompliance that would not reasonably be
expected
to have a Material Adverse Effect on the
Company or the Surviving Company, the
Company and its officers, directors, agents
and employees have complied with all
applicable laws, regulations and other
requirements, including, but not limited
to, federal, state, local and foreign laws,
ordinances, rules, regulations and
other requirements pertaining to equal
employment opportunity, employee
retirement, affirmative action and other
hiring practices, occupational safety
and health, workers' compensation,
unemployment and building and zoning codes,
and no claims have been filed against the
Company, and the Company has not
received any notice, alleging a violation
of any such laws, regulations or other
requirements. The Company is not relying on
any exemption from or deferral of
any such applicable law, regulation or
other requirement that would not be
available to GICI after it acquires the
Company's properties, assets and
business.
(b) The Company has, in full force and effect, all licenses,
permits
and certificates, from federal, state,
local and foreign authorities (including,
without limitation, federal and state
agencies regulating occupational health
and safety) necessary to conduct its
business and operate its properties
(collectively, the "Company Permits"). A
true, correct and complete list of all
the Company Permits is set forth in
Schedule 3.9 hereto. The Company has
conducted its business in compliance with
all material terms and conditions of
the Company Permits, except for any
noncompliance that would not reasonably be
expected to have a Material Adverse Effect
on the Company or the Surviving
Company.
3.10 Financial Statements. GICI acknowledges receipt of the
unaudited
balance sheets of the Company as of
December 31, 2002 and December 31, 2003,
along with the related unaudited statements
of income, changes in stockholders'
equity, and cash flows of the Company for
the periods then ended (the "Company
Financial Statements"). The Company
Financial Statements have been prepared in
accordance with GAAP consistently applied
with past practice (except that the
unaudited financial statements may not
contain all notes and may not contain
prior period comparative data) and on that
basis present fairly, in all material
respects, the financial position and the
results of operations, changes in
stockholders' equity, and cash flows of the
Company as of the date of and for
the period referred to in the Company
Financial Statements.
3.11 Books and Records. The books of account, minute books,
stock
record books, and other records of the
Company, have been made available to
GICI, have been properly kept and contain
no inaccuracies except for
inaccuracies that would not, individually
or in the aggregate, reasonably be
expected to have a Material Adverse Effect
on the Company or the Surviving
Company. At the Closing, all of the
Company's records will be in the possession
of the Company.
3.12 Real Property. The Company does not own any real property.
Schedule 3.12 contains an accurate list of
all leaseholds and other interests of
the Company in any real property. The
Company has good and valid title to those
leaseholds and other interests free and
clear of all liens and encumbrances, and
the real property to which those leasehold
and other interests pertain
constitutes the only real property used in
the Company's business.
11
<PAGE>
3.13 Insurance. The insurance policies owned and maintained by
the
Company that are material to the Company
are in full force and effect, all
premiums due and payable thereon have been
paid (other than retroactive or
retrospective premium adjustments that the
Company is not currently required,
but may in the future be required, to pay
with respect to any period ending
prior to the date of this Agreement), and
the Company has received no notice of
cancellation or termination with respect to
any such policy that has not been
replaced on substantially similar terms
prior to the date of such cancellation.
3.14 No Undisclosed Liabilities. Except as reflected in the
unaudited
balance sheet of the Company at December
31, 2003 (the "Company Latest Balance
Sheet"), the Company has no liabilities
(whether accrued, absolute, contingent,
unliquidated or otherwise except (i)
liabilities which have arisen after the
date of the Company Latest Balance Sheet in
the ordinary course of business
(none of which is a material uninsured
liability for breach of contract, breach
of warranty, tort, infringement, claim or
lawsuit), or (ii) as otherwise set
forth in Schedule 3.14.
3.15 Environmental Matters. None of the operations of the
Company
involves the generation, transportation,
treatment, storage or disposal of
hazardous waste, as defined under 40 C.F.R.
Parts 260-270 or any state, local or
foreign equivalent.
3.16 Absence of Certain Developments. Except as set forth in
Schedule
3.16 or as disclosed in the Company
Financial Statements or as otherwise
contemplated by this Agreement, since the
Company Latest Balance Sheet, the
Company has conducted its business only in
the ordinary course consistent with
past practice and there has not occurred
(i) any event having a Material Adverse
Effect on the Company or the Surviving
Company, (ii) any event that would
reasonably be expected to prevent or
materially delay the performance of the
Company's obligations pursuant to this
Agreement, (iii) any material change by
the Company in its accounting methods,
principles or practices, (iv) any
declaration, setting aside or payment of
any dividend or distribution in respect
of the shares of capital stock of the
Company or any redemption, purchase or
other acquisition of any of the Company's
securities, (v) any increase in the
compensation or benefits or establishment
of any bonus, insurance, severance,
deferred compensation, pension, retirement,
profit sharing, stock option
(including, without limitation, the
granting of stock options, stock
appreciation rights, performance awards or
restricted stock awards), stock
purchase or other employee benefit plan of
the Company, or any other increase in
the compensation payable or to become
payable to any employees, officers,
consultants or directors of the Company,
(vi) other than issuances of options
pursuant to duly adopted option plans, any
issuance, grants or sale of any
stock, options, warrants, notes, bonds or
other securities, or entry into any
agreement with respect thereto by the
Company, (vii) any amendment to the
Articles of Incorporation or Bylaws of the
Company, (viii) other than in the
ordinary course of business consistent with
past practice, any (w) capital
expenditures by the Company, (x) purchase,
sale, assignment or transfer of any
material assets by the Company, (y)
mortgage, pledge or existence of any lien,
encumbrance or charge on any material
assets or properties, tangible or
intangible, of the Company, except for
liens for taxes not yet due and such
other liens, encumbrances or charges which
do not, individually or in the
aggregate, have a Material Adverse Effect
on the Company or the Surviving
Company, or (z) cancellation, compromise,
release or waiver by the Company of
any rights of material value or any
material debts or claims, (ix) any
incurrence by the Company of any material
liability (absolute or contingent),
except for current liabilities and
obligations incurred in the ordinary course
of business consistent with past practice,
(x) damage, destruction or similar
loss, whether or not covered by insurance,
materially affecting the business or
properties of the Company, (xi) entry into
any agreement, contract, lease or
license other than in the ordinary course
of business consistent with past
practice, (xii) any acceleration,
termination, modification or cancellation of
any agreement, contract, lease or license
to which the Company is a party or by
which it is bound, (xiii) entry by the
Company into any loan or other
transaction with any officers, directors or
employees of the Company, (xiv) any
charitable or other capital contribution by
the Company or pledge therefore,
(xv) entry by the Company into any
transaction of a material nature other than
in the ordinary course of business
consistent with past practice, or (xvi) any
negotiation or agreement by the Company to
do any of the things described in the
preceding clauses (i) through (xv).
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<PAGE>
3.17
Employee Benefit Plans.
(a) Schedule 3.17(a) lists all material (i) "employee benefit
plans,"
within the meaning of Section 3(3) of
ERISA, of the Company, (ii) bonus, stock
option, stock purchase, stock appreciation
right, incentive, deferred
compensation, supplemental retirement,
severance, and fringe benefit plans,
programs, policies or arrangements, and
(iii) employment or consulting
agreements, for the benefit of, or relating
to, any current or former employee
(or any beneficiary thereof) of the
Company, in the case of a plan described in
(i) or (ii) above, that is currently
maintained by the Company or with respect
to which the Company has an obligation to
contribute, and in the case of an
agreement described in (iii) above, that is
currently in effect (the "Company
Plans"). The Company has heretofore been
delivered to GICI true and complete
copies of the Company Plans and any
amendments thereto, any related trust,
insurance contract, summary plan
description, and, to the extent required under
ERISA or the Code, the most recent annual
report on Form 5500 and summaries of
material modifications.\
(b) No Company Plan is (1) a "multiemployer plan" within the
meaning of
Sections 3(37) or 4001(a)(3) of ERISA, (2)
a "multiple employer plan" within the
meaning of Section 3(40) of ERISA or
Section 413(c) of the Code, or (3) is
subject to Title IV of ERISA or Section 412
of the Code.
(c) Except as set forth in Schedule 3.17(c), there is no
proceeding
pending or, to the Company's Knowledge,
threatened against the assets of any
Company Plan or, with respect to any
Company Plan, against the Company other
than proceedings that would not reasonably
be expected to result in a material
liability, and to the Company's Knowledge
there is no proceeding pending or
threatened in writing against any fiduciary
of any Company Plan other than
proceedings that would not reasonably be
expected to result in a material
liability.
(d) Each of the Company Plans has been operated and administered in
all
material respects in accordance with its
terms and applicable law, including,
but not limited to, ERISA and the Code.
(e) Each of the Company Plans that is intended to be "qualified"
within
the meaning of Section 401(a) of the Code
has received a favorable
determination, notification, or opinion
letter from the IRS.
(f) Except as set forth in Schedule 3.17(f), no director, officer,
or
employee of the Company will become
entitled to retirement, severance or similar
benefits or to enhanced or accelerated
benefits (including any acceleration of
vesting or lapsing of restrictions with
respect to equity-based awards) under
any Company Plan solely as a result of
consummation of the transactions
contemplated by this Agreement.
3.18 Tax-Free Reorganization. Neither the Company nor, to the
Company's
Knowledge, any of its Affiliates has
through the date of this Agreement taken or
agreed to take any action that would
prevent the Merger from qualifying as a
reorganization under Section 368(a) of the
Code.
3.19 Full Disclosure. The representations and warranties of the
Company
contained in this Agreement (and in any
schedule, exhibit, certificate or other
instrument to be delivered under this
Agreement) are true and correct in all
material respects, and such representations
and warranties do not omit any
material fact necessary to make the
statements contained therein, in light of
the circumstances under which they were
made, not misleading. There is no fact
of which the Company has Knowledge that has
not been disclosed to GICI pursuant
to this Agreement, including the schedules
hereto, all taken together as a
whole, which has had or could reasonably be
expected to have a Material Adverse
Effect on the Company or the Surviving
Company or materially adversely affect
the ability of the Company to consummate in
a timely manner the transactions
contemplated hereby.
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3.20
Intellectual Property.
(a) Except as set forth in Schedule 3.20(a), the Company owns or
has
valid and enforceable licenses to use all
of the following used in or necessary
to conduct its business as currently
conducted (collectively, the "Company
Intellectual Property"):
(i) patents (including any registrations, continuations,
continuations
in part, renewals, and any applications for
any of the foregoing) (collectively,
"Patents");
(ii) registered and unregistered copyrights and copyright
applications
(collectively, "Copyrights");
(iii) registered and unregistered trademarks, service marks,
trade
names, slogans, logos, designs and general
intangibles of the like nature,
together with all registrations and
applications therefor (collectively,
"Trademarks");
(iv) trade secrets, confidential or proprietary technical
information,
know-how, designs, processes, research in
progress, inventions and invention
disclosures (whether patentable or
unpatentable) (collectively, "Know-How");
(v) software (together with Patents, Copyrights, Trademarks,
and
Know-How, as the "Intellectual
Property").
(b) Set forth on Schedule 3.20(b) is a complete and accurate list
of
all Patents, Trademarks, registered or
material Copyrights and software owned or
licensed by the Company. Schedule 3.20(b)
sets forth a complete and accurate
list of all Persons from which or to which
the Company licenses any material
Intellectual Property.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF GICI AND MERGER SUB
GICI and Merger Sub hereby jointly and severally represent and
warrant
to the Company as follows:
4.1 Organization and Qualification. GICI and Merger Sub are
each
corporations duly organized, validly
existing and in good standing under the
laws of the States of Nevada and Min
