EXHIBIT 10.4
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LETTER OF UNDERSTANDING
ProUroCare Inc.
Xxx Xxxxxxx Xxxxxxx Xxxxx
Xxxxx 000
Xxxxxxxx, XX 00000
March 23, 2004
Profile, LLC
c/o Xx. Xxxx Xxxxxx
0000 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000
with a copy to:
Xxxxx X. Xxxxxxxxxx, Esq.
Xxxxxxxxxx, Xxxxxx & Xxxxxxx, LLP
000 Xxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Gentlemen:
This letter sets forth the agreement between ProUroCare, Inc.
("ProUroCare"), and Profile, LLC ("Profile").
Profile and ProUroCare have entered into the following agreements and
relationships:
(a) Stock Purchase Agreement, dated January 14, 2002, between Profile and
ProUroCare, as amended on March 22, 2002 with a First Amendment to
Stock Purchase Agreement (as amended the "Purchase Agreement").
(b) License Agreement between Profile and ProUroCare, dated January 14,
2002, as amended on March 22, 2002 with a First Amendment to License
Agreement (as amended, the "License").
(c) Amended and Restated Shareholder Control and Share Transfer Agreement
between ProUroCare, Profile, Clinical Network, Inc., Clinical Network,
LLC, and CS Medical Technologies, LLC dated January 14, 2002 (the
"Shareholder Agreement").
(d) Profile owns 1,333,333 shares of common stock of ProUroCare.
(e) Profile has given notice to ProUroCare that it is in default under the
License and ProUroCare has denied that it is in default.
(f) ProUroCare held a special Shareholders' Meeting on March 5, 2004, at
which the shareholders of ProUroCare approved the merger of ProUroCare
with GIC Acquisition Corp. ("GIC"), a subsidiary of Global Internet
Communications, Inc. ("Global") whereby the shareholders of ProUroCare
will exchange their shares of ProUroCare common stock for shares of
Global common stock (the "Merger") all as described in the Private
Placement Memorandum (hereinafter defined).
(g) On March 3, 2004, Profile exercised the dissenters' rights on behalf
of beneficial owners owning 308,465 shares of common stock of
ProUroCare.
(h) Global is engaged in a private placement of a minimum of 1,500,000
shares of Global common stock and a maximum of 2,500,000 shares of
Global common stock at $2.00 per share pursuant to a private placement
memorandum dated February 11, 2004, as supplemented by Supplement No.
1, dated March 23, 2004 (the "Private Placement") (as so supplemented,
the "Private Placement Memorandum").
(i) Xxxxxxx X. Xxxxxx, XX, ("Xxxxxx") owns beneficially approximately
1,041,315 shares of common stock of ProUroCare. Of these shares,
847,982 shares of ProUroCare common stock are owned by Clinical
Network, LLC, and 85,000 shares of ProUroCare common stock are owned
by Clinical Network, Inc. Xxxxxx'x ownership also includes 108,333
shares that are subject to options. Based on Xxxxxx'x ownership in
Clinical Network, LLC and Clinical Network, Inc., approximately
589,815 shares of common stock of ProUroCare are owned beneficially by
Xxxxxx and his family. The remaining 342,302 shares of ProUroCare
common stock owned by Clinical Network, LLC and Clinical Network, Inc.
are owned beneficially by persons or entities that are not otherwise
affiliated with Xxxxxx.
Based upon the preceding, the parties hereto agree as follows:
1. All continuing obligations of ProUroCare to Profile under the Purchase
Agreement including, without limitation, Sections 4.2, 4.3 and 4.4, shall
terminate upon the Effective Date and shall be of no further force or effect
after the Effective Date (as hereinafter defined).
2. The Shareholder Agreement shall terminate as of the Effective Date and
be of no further force or effect after the Effective Date, contingent only upon
Clinical Network, LLC, Clinical Network, Inc. and CS Medical Technologies, LLC
agreeing in writing to terminate the Shareholder Agreement.
3. As of the Effective Date, Profile withdraws its default letters under
the License and waives any existing defaults under the License. This waiver
shall in no way limit the ability of Profile to enforce its rights and remedies
for defaults by ProUroCare occurring after to the Effective Date. For purposes
of Section 7.4(e) of the License, in the event of a termination of the License
after the Effective Date, Profile shall be obligated to return the number of
Global shares issued to ProUroCare in the proposed merger in respect of one-half
of the original 1,076,923 shares of ProUroCare stock acquired by Profile
pursuant to the Stock Purchase Agreement (subject to adjustment for any stock
splits or dividends or exchange ratios under the Merger).
4. ProUroCare agrees that of the funds raised by Global in the Private
Placement not less than $1,200,000 will be used by ProUroCare in connection with
the research, development and commercialization of the "Devices" as that term is
defined in the License; provided, however, said amount may be reduced by any
amounts paid to Profile pursuant to Section 6 hereof and will be increased (to
the amount of such reduction from $1,200,000) to the extent ProUroCare raises
more than $3,000,000 in the Private Placement as provided in the Private
Placement Memorandum or in any subsequent financing.
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5. As of the Effective Date, Profile agrees to transfer to ProUroCare
300,000 shares of ProUroCare common stock.
6. As consideration for the agreements of Profile contained in this
Agreement, ProUroCare shall pay Profile $750,000; $100,000 of which shall be
payable as of the Effective Date, $325,000 of which shall be payable ninety (90)
days months after the Effective Date, and the final $325,000 of which shall be
payable within six (6) months after the Effective Date. Profile will receive a
Promissory Note ("Note") for the remaining $650,000 outstanding as of the
Effective Date, which will accrue interest at the rate of six and one-half
percent (6 1/2 %) per year and, in the event of default in payment, will accrue
eight and one-half percent (8 1/2 %) after the payment default. ProUroCare may
prepay the Note at any time. The Note will be secured by the assets of
ProUroCare, including its intellectual property, in accordance with a security
agreement mutually acceptable to both parties, which shall be executed,
delivered and perfected immediately upon (and as a condition to) the Effective
Date. ProUroCare's counsel will prepare the Note, a security agreement, a
collateral patent assignment, an assignment of license and a UCC Financing
Statement to perfect Profile's security interest in ProUroCare's assets
(including its intellectual property), subject to approval by Profile's counsel,
not to be unreasonably withheld or delayed. ProUroCare shall cause said UCC
Financing Statements and Collateral Patent Assignments to be properly filed
immediately upon (and as a condition to) the Effective Date. Profile and
ProUroCare shall each pay its own attorneys' fees.
7. The transfer of 300,000 shares of ProUroCare common stock, as of the
Effective Date, pursuant to this Agreement shall have the effect of settling any
dissenters' rights claims Profile or its beneficial owners have with respect to
the Merger or on account of Profile's exercise of dissenters' rights as
described in paragraph (g) above. The remaining 8,465 shares of ProUroCare
common stock for which dissenters' rights were exercised shall be returned to
Profile and shall participate in the Merger.
8. As of the Effective Date, Xxxxxx agrees that he will dispose of no
shares of ProUroCare common stock that he or his family beneficially owns so
long as any amounts are owing under the Note to Profile, including without
limitation any shares of ProUroCare common stock acquired in connection with the
exercise by Xxxxxx or his family of any options or warrants to purchase shares
of ProUroCare common stock; provided, however, that in the event Clinical
Network, LLC or Clinical Network, Inc. distributes its shares to its beneficial
owners, then any person or entity not affiliated with Xxxxxx may sell shares
that were previously owned by Clinical Network, LLC and Clinical Network, Inc.
and not be subject to these limitations; and, provided further, that Xxxxxx may
sell up to 300,000 shares multiplied by a fraction, the denominator of which is
$750,000 and the numerator of which is the sum of the amount of principal under
the Note that has been paid by ProUroCare to Profile plus the original $100,000
paid on the Effective Date. For example, Xxxxxx may sell 40,000 shares after
ProUroCare pays $100,000 to Profile, and Xxxxxx may sell an additional 130,000
shares after ProUroCare makes its $325,000 payment to Profile. The foregoing
share totals are also subject to adjustment for any stock splits or dividends or
exchange ratios under the Merger. References in this Section 8 to ProUroCare
shares shall include any Global common stock received in exchange for such
ProUroCare shares.
9. (a) Global shall prepare and file with the SEC, within 120 days after
the final closing of the Private Placement, a registration statement on Form
SB-2 with respect to resale of shares of Global common stock, including all
shares of Global common stock held by Profile or its transferees, from time to
time through the over-the-counter market or in privately negotiated
transactions, and use its commercially reasonable best efforts (subject to
receipt of necessary information from Profile or its transferees) to cause such
registration to be effective as soon as possible thereafter.
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(b) Global shall prepare and file such amendments and supplements to the
registration statement as may be necessary to keep such registration statement
effective for one year from its effective date or such shorter period when all
of Global common stock owned by Profile and its transferees have been sold or
may be sold pursuant to Rule 144(k).
(c) Except to the extent an exemption from registration is available,
Global agrees to register or qualify the resale of such shares under all
applicable state securities or blue sky laws of such jurisdictions in the United
States as Profile or any transferee shall reasonably request, and to keep each
such registration or qualification effective during the period when such SEC
registration is required to be kept effective.
(d) Upon request, Global will notify the shareholders whose shares are
being registered when the registration statement is filed with the SEC and each
state, and Global will notify all shareholders participating in the offering (A)
when the registration statement is effective (B) when any stop order is issued,
and (C) after such effectiveness, of the happening of any event as the result of
which the registration statement or the prospectus contains a material
misstatement or omission, and in the case of (B) or (C), Global will use its
best efforts, as soon as practicable, to cause the stop order to be lifted or
the registration statement and prospectus to be amended to correct the problem.
(e) Global will pay all the costs and expenses of such registrations, other
than the legal fees of any shareholders' separate legal counsel, and any
commissions or fees relating to the sale of such shares, and will defend,
indemnify and hold the selling shareholder harmless for any liabilities and
actions in respect thereof which arise out of (i) any untrue or alleged untrue
statement of a material fact contained in such registration statement or
prospectus (other than information furnished by the shareholders for inclusion
therein), (ii) any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading, or (iii)
any violation of any law, rule or regulation in connection with such
registration, registration statement or prospectus.
(f) During the period commencing on the date hereof and ending one year
following the effective date of the registration statement in which the Global
shares of Profile are registered as described in Section 9(a) above, if Global
effects any underwritten offering of common stock, and if such offering includes
any shares of Global common stock owned by any Global shareholder, then Global
will allow Profile and its transferees to participate in the offering by giving
Profile at least ten (10) days' prior notice. In the event that the managing
underwriter notifies Global in writing that the inclusion of the shares
requested to be so included by Profile and any other Global shareholders
permitted to participate would materially interfere with the underwriters'
ability to effectuate the registration and complete the offering, then the
number of shares of Global common stock of Profile and its transferees to be
included in the offering may be cut-back pro rata (based on the number of shares
of Global common stock requested by Profile and its transferees to be included
in the offering in relation to the total number of shares of Global common stock
requested by all Global shareholders to be included in the offering); provided
that, in no event, shall the cut-back for Profile and its transferees be any
less favorable than the cut-back for any other Global shareholder.
(g) Global will take such other actions at its expense as are customary or
reasonably requested by the participating shareholder to facilitate the
registration and sale of shares contemplated by this Section 9.
10. As of the Effective Date, ProUroCare and Profile will each, for
themselves and for their agents, administrators, employees, officers, directors,
shareholders, subsidiaries, affiliates, successors and
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assigns, release and forever discharge the other and its past, present, and
future officers, directors, attorneys, insurers, principals, agents, servants,
representatives, employees, shareholders, subsidiaries, affiliates, partners,
predecessors, successors and assigns of and from all past, present and future
claims, demands, obligations, actions and causes of action, at law or in equity,
whether under statute, common law, or otherwise, of whatsoever kind or nature,
from the beginning of time to the Effective Date, except for obligations of the
parties contained in this Agreement. The release of ProUroCare shall expressly
apply to Xxxxxxx Xxxxxx and Xx. Xxx F. Dagi and the release of Profile shall
expressly apply to Xxxxxxx X. Xxxxxx, XX, Xxxxx X. Xxxxxx and Xxxx Xxxxxxxxx.
Notwithstanding any of the foregoing to the contrary, the release of ProUroCare
shall not apply to Xxxx Xxxxxxx. This mutual release does not go into effect
with respect to existing claims of the parties against each other, if any, until
the Effective Date. Notwithstanding any of the foregoing to the contrary, except
as expressly set forth in Section 3 hereof, the foregoing release shall not
apply to the rights and obligations of the parties under the License.
11. Profile is entering into this Agreement in reliance upon the
information disclosed in the Private Placement Memorandum. Profile has received
a copy of the Private Placement Memorandum. In the event that the Private
Placement Memorandum is again supplemented in any material respect prior to the
Effective Date, ProUroCare will cause Profile to receive such supplement in a
timely fashion and, if the changes disclosed in such supplement have a material
and adverse effect on Profile's position, Profile shall have the right, at its
option, to declare this letter of understanding to be of no force or effect and
void ab initio.
12. This Agreement has been duly authorized, executed and delivered by
ProUroCare and as of the Effective Date will be binding upon and enforceable
against ProUroCare and, to the extent applicable, Global in accordance with its
terms. The Effective Date will not occur unless Global agrees (a) to meet its
obligations under the Agreement, (b) to cause ProUroCare to meets its
obligations under this Agreement, (c) to provide any necessary support,
including financial support, for ProUroCare to meet its obligations to Profile
under the Agreement and (d) to provide sufficient resources to ProUroCare in
such a manner that ProUroCare complies with Section 302A.551 of the Minnesota
Business Corporation Act with respect to the redemption of 300,000 shares of
common stock pursuant to Section 5 hereof and payment of the amounts set forth
in Section 6 hereof.
13. The consummation of the transactions contemplated by this Agreement is
contingent upon (i) Global raising not less than $3,000,000 in the Private
Placement, (ii) the Merger being consummated, and (iii) the execution, delivery
and, as applicable, perfection of the instruments referenced in Section 6 and
payment of the first installment of $100,000 as contemplated therein. These
events shall occur no later than April 30, 2004 (the "Effective Date") and the
transactions contemplated herein shall be effective as of the Effective Date.
The parties agree in the event the conditions (i) and (ii) contained in this
Section are not met by April 30, 2004, then all the representations and
agreements contained herein shall be of no further force or effect and nothing
herein contained will be further binding on the parties, and this entire
Agreement shall be void ab initio.
14. The agreements contained herein are meant to be binding agreements of
and enforceable against the parties hereto, their successor and assigns.
15. Reference to shares of ProUroCare contained herein shall be to shares
of Global exchanged for ProUroCare shares as of the Effective Date, subject to
adjustment pursuant to Section 8. All rights of Profile under this Agreement
shall inure to the benefit of Profile's direct and indirect transferees.
References to Global shall, as the context may require, include any successor or
assign of Global or ProUroCare or their respective business, and any parent
corporation or affiliate whose shares may be exchanged for ProUroCare or Global
shares.
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16. This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered will be deemed an original, and all of
which together shall constitute one and the same agreement.
If the foregoing sets forth your understanding, please so acknowledge by
signing a copy of this letter and returning it to the undersigned.
PROUROCARE INC.
By: /s/ Xxxxxxx Xxxxxxxx
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Its: President and Chief Executive Officer
Agreed and accepted this 23rd day of March, 2004
PROFILE, L.L.C.
By: /s/ Xxxx Xxxxxx
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Its: Manager
Agreed and accepted this 23rd day of March, 2004
Agreed and accepted this 23rd day of March, 2004 Solely for the purpose of
agreeing to Sections 8 hereof:
/s/ Xxxxxxx X. Xxxxxx, XX
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Xxxxxxx X. Xxxxxx, XX
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