SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934-
Filed by the Registrant- [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2)
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
FRANKLIN CONSOLIDATED MINING COMPANY, INC.
(Name of Registrant as Specified in Its Charter)
FRANKLIN CONSOLIDATED MINING COMPANY, INC.
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------
2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
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4) Proposed maximum aggregate value of transaction:
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5) Total Fee Paid:
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[ ] 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: __________________________________________
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FRANKLIN CONSOLIDATED MINING COMPANY, INC.
76 Beaver Street
Suite 500
New York, NY 10005-3402
Telephone (212) 344-2828
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
To Be Held September 14th, 1998
A Special Meeting of Stockholders of Franklin Consolidated Mining Company, Inc.,
a Delaware corporation (the "Company"), will be held at the Ocean Palace Hilton
Hotel, 1 Ocean Blvd., Long Branch, New Jersey, on Monday, September 14th, 1998
at 7 p.m., for the following purposes:
(1) The election of five directors for a term expiring at the 1999 Annual
Meeting of Shareholders or until their respective successors have been duly
elected and qualified (the "Election of Directors");
(2) The approval of the Stock Purchase Agreement, dated August 3, 1998,
pursuant to which the Company shall issue 11,000,000 shares of Common Stock, par
value $.01 per share of the Company (the "Common Stock") to US Mining, Inc.
("USM"), in exchange for (a) the assignment of that portion of the Mining Lease,
dated November 12, 1996, by and among the Company, Audrey Hayden ("Hayden") and
Dorothy Kennec, sold by Hayden to USM (the "Hayden Leasehold") and (b) the
satisfaction of a note, dated March 5, 1998, in the aggregate principal amount
of $955,756.22, plus all interest due thereunder (the "USM Stock Purchase")
which as of August 3, 1998 is approximately $33,000.
(3) The approval of the Stock Purchase Agreement, dated August 3, 1998,
pursuant to which the Company shall issue to William C. Martucci ("WCM")
11,197,413 shares of Common Stock in exchange for 100% of the issued and
outstanding shares of common Stock, par value $.01, per share of POS Financial,
Inc. (The "POS Acquisition");
(4) The approval of an amendment to the Certificate of Incorporation of the
Company to change the name of the Company from "Franklin Consolidated Mining
Co., Inc." to "WCM Capital, Inc." (The "Certificate of Incorporation
Amendment"); and
(5) The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
Only holders of the Company's Common Stock, of record on August 13, 1998
are entitled to notice of, and to vote at, the meeting or any adjournment
thereof. At August 13, 1998, the record date for determination of stockholders
entitled to vote at the meeting or any adjournments thereof, ______________
shares of Common Stock were issued and outstanding.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO FILL
OUT, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY TO THE COMPANY AT 76 BEAVER
STREET, SUITE 500, NEW YORK, NEW YORK 10005-3402. PROXIES FORWARDED BY OR FOR
BROKERS OR FIDUCIARIES SHOULD BE RETURNED AS REQUESTED BY THEM. THE PROMPT
RETURN OF PROXIES WILL SAVE THE EXPENSE INVOLVED IN FURTHER COMMUNICATION.
By Order of the Board of Directors,
New York, New York
August __,1998
Robert Waligunda, Secretary
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FRANKLIN CONSOLIDATED MINING COMPANY, INC.
-----------------------
ANNUAL MEETING OF SHAREHOLDERS
Monday, September 14, 1998
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PROXY STATEMENT
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GENERAL INFORMATION
This Proxy Statement (the "Proxy Statement") is furnished in connection with the
solicitation of proxies by the Board of Directors of Franklin Consolidated
Mining Company, Inc., a Delaware corporation (the "Company"), for use at the
Annual Meeting of Shareholders of the Company to be held on Monday, September
14, 1998 or any and all adjournments thereof, with respect to the following
matters:
(1) The election of five directors for a term expiring at the 1999 Annual
Meeting of Shareholders or until their respective successors have been duly
elected and qualified (the "Election of Directors");
(2) The approval of the Stock Purchase Agreement, dated August 3, 1998,
pursuant to which the Company shall issue 11,197,413 shares of Common Stock, par
value $.01 per share of the Company (the "Common Stock") to US Mining, Inc.
("USM"), in exchange for (a) the assignment of that portion of the Mining Lease,
dated November 12, 1996, by and among the Company, Audrey Hayden ("Hayden") and
Dorothy Kennec, sold by Hayden to USM (the "Hayden Leasehold") and (b) the
satisfaction of a note, dated March 5, 1998, in the aggregate principal amount
of $955,756.22, plus all interest due thereunder (the "USM Stock Purchase")
which as of August 3, 1998 is approximately $33,000.
(3) The approval of the Stock Purchase Agreement, dated August 3, 1998,
pursuant to which the Company shall issue to William C. Martucci ("WCM")
11,197,413 shares of Common Stock in exchange for 100% of the issued and
outstanding shares of common Stock, par value $.01, per share of POS Financial,
Inc. (The "POS Acquisition");
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(4) The approval of an amendment to the Certificate of Incorporation of the
Company to change the name of the Company from "Franklin Consolidated Mining
Co., Inc." to "WCM Capital, Inc." (The "Certificate of Incorporation
Amendment"); and
(5) The transaction of such other business as may properly come before the
meeting or any adjournment thereof.
The Annual Meeting (the "Meeting") will be held 7 p.m. at the Ocean Palace
Hilton Hotel, 1 Ocean Blvd., Long Branch, New Jersey. The Notice of Annual
Meeting, Proxy Statement, Proxy Card and the Annual Report will be mailed on or
about August 17, 1998 to shareholders of record of the Company as of August
13th, 1998.
If the enclosed proxy card is properly executed and returned in time to be voted
at the meeting, the shares of Common Stock represented will be voted in
accordance with the instructions contained therein. Executed proxies that
contain no instructions will be voted in favor of all of the proposals set forth
above.
VOTING RIGHTS AND OUTSTANDING SHARES
Only shareholders of record at the close of business on August 13th, 1998 are
entitled to notice of and to vote at the Annual Meeting. As of the close of
business on August 13th, 1998, 3,955,173 shares of common stock, par value $.01
per share (the "Common Stock") of the Company were issued and outstanding. Each
share of Common Stock entitles the record holder thereof to one (1) vote on all
matters properly brought before the Annual Meeting. Pursuant to Delaware law,
abstentions are not counted as votes against the election of directors, but
proxies on which abstentions are marked are counted for purposes of determining
the presence of a quorum. Broker non-voters are not counted as shares entitled
to vote at the meeting.
The presence in person or by proxy of a majority of the shares held by
shareholders entitled to vote at the Annual Meeting is necessary in order to
constitute a quorum for the meeting. If a quorum is present, the matters set
forth herein and in the accompanying notice will require an affirmative vote by
a majority of the votes to which shareholders voting at the meeting are entitled
with respect to each such matter.
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REVOCABILITY OF PROXIES
Shareholders who execute proxies for the Annual Meeting may revoke their proxies
at any time prior to their exercise, by delivering written notice of revocation
to the Company at the address on the Notice of Annual Meeting, by delivering a
duly executed proxy bearing a later date, or by attending the Annual Meeting and
voting in person.
BOARD OF DIRECTORS PROXY SOLICITATION
The costs of soliciting the proxies and of the meeting, including the costs of
preparing and mailing this Proxy Statement and other material, will be borne by
the Company. In addition to solicitation by mail, certain directors, officers
and regular employees of the Company may, without additional compensation,
solicit proxies by telephone, personal interview or facsimile transmission to
encourage shareholder participation in the voting process. The Board of
Directors has appointed directors J. Terry Anderson and Robert L. Waligunda as
the proxy holders for the Annual Meeting of Shareholders. The Company will also
request banks, brokers, and others who hold shares in the Company in nominee
names to distribute proxy soliciting material to beneficial owners, and will
reimburse such banks and brokers for reasonable out-of-pocket expenses which
they may incur in so doing.
The Company's executive offices are currently located at 76 Beaver Street, Suite
500, New York, New York 10005.
ELECTION OF DIRECTORS
Item 1 on Proxy Card
The Board of Directors has fixed the number of directors constituting the whole
Board as five and has selected the following nominees for election to a term
expiring at the 1999 Annual Meeting or until their successors have been elected
and qualified:
William C. Martucci
Robert Waligunda
Ronald Ginsberg
Robert W. Singer
Unless authority to vote for directors is withheld in the proxy, the persons
named in the accompanying proxy intend to vote for the election of the five
nominees listed above.
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All nominees have indicated a willingness to serve as directors, but if any of
them should decline or be unable to act as a director, the persons named in the
proxy will vote for the election of another person or persons as the Board of
Directors recommends. Of all of the nominees for director, only Mr. Waligunda
was previously elected by the Shareholders at the last Annual Meeting of
Shareholders held in 1995. There are no family relationships between the
nominees for the Board of Directors.
The following biographical information is furnished with respect to each of the
five nominees for election at the Annual Meeting. The information includes age
as of the date of the meeting, present position, if any, with the Company,
period served as director, and other business experience during the past five
years. The offices referred to in the second column refer to the offices with
the Company unless stated otherwise.
WILLIAM C. MARTUCCI, 56 From 1974 to the present, Mr. Martucci
has served as president and chairman of
United Grocers Clearing House, Inc. a
privately held company he founded to
serve the coupon redemption, fulfillment
and promotional needs of manufacturers
and retailers. Mr. Martucci is the sole
stockholder, director and president of
POS Financial, Inc., an ATM/Kiosk
network. In 1997 Mr. Martucci founded
and is the sole director, officer and
shareholder of Shoppers Online, Inc.
which transmits full-motion video
merchandising programs to retail
outlets. Mr. Martucci received a
Bachelor of Science in Philosophy from
Florida International University in
1973.
Robert L. Waligunda, 52. Mr. Waligunda has served as a Director
Director, Secretary, Treasurer of the Company since 1985 and as
Secretary of the Company since August
1995. From 1965 to the present, Mr.
Waligunda has served as founder,
President and principal stockholder of
Sky Promotions, Inc., a Pittstown, New
Jersey marketing and management company
involved in sales, advertising and
marketing of hot air balloons and
inflatable products. He
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is the founder and director of
International Professional Balloon
Pilots Racing Association, a member of
the advisory board of Aerostar
International, Inc., the world's oldest
and largest balloon manufacturing
company, and a member of the National
Aeronautic Association, the Experimental
Aircraft Association, and the Airplane
Owner and Pilots Association. Mr.
Waligunda received a Masters of Science
degree in guidance and psychological
services from Springfield College in
1968.
RONALD GINSBERG, 63 Mr. Ginsberg; is President of the
Foodtown Supermarket Cooperative,
headquartered in Edison, New Jersey. He
is also Secretary and Director of Twin
County Grocers located in Edison, New
Jersey and Director of the New Jersey
Food Council. Mr. Ginsberg attended
Drexel Institute of Technology and
Temple University.
ROBERT W. SINGER, 50 Mr. Singer currently holds the position
of Assistant Majority Leader in the New
Jersey Senate. Prior to being elected as
a state Senator, he served three terms
in the New Jersey Assembly. In this
latter capacity, Mr. Singer was named
Majority Whip, by his Colleagues and
served as both Vice Chairman of the
Commerce and Regulated Professions
Committee and Community Development,
Agriculture and Tourism Committee.
Senator Singer has distinguished
himself, among his national peers, for
his ability to create environments where
high technology and economic development
can coexist with environmental
priorities. Additionally, the Senator is
Vice-President of Corporate Relations
for Community/Kimball Medical Centers,
and affiliate of the St. Barnabas Health
Care System.
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The Board of Directors has established an Audit Committee currently comprised of
Messrs. Anderson, Otten and Schurman who are not slated for re-election and
whose term will expire when their successors are duly elected and qualified. The
Board of Directors will appoint new members to the Audit Committee at its annual
meeting, immediately following the Annual Meeting of Shareholders. Its functions
include recommending annually to the Board of Directors a firm of independent
auditors to audit and review the Company's books, records and the scope of such
firm's audit, reviewing reports and recommendations of the Company's independent
auditors, review the scope of all-internal audits and reports and
recommendations in connection therewith and review non-audit services provided
by the Company's principal independent auditors. The Audit Committee has not
held any meetings since its formation in February 1998.
EXECUTIVE OFFICERS
The executive officers of the Company are appointed annually by the Board and,
to date, have served an indefinite term. The current officers serve on a
part-time basis. No family relationship exists between any of the executive
officers of the Company.
Name Age Position
J. Terry Anderson 50 Chairman, President, Director
Robert L. Waligunda 52 Secretary, Treasurer, Director
Richard Brannon 48 Vice President - West Coast
Operations
BENEFICIAL OWNERSHIP OF COMMON STOCK
Directors and Executive Officers
The following table lists the beneficial ownership of shares of the Company's
Common Stock as of August 13th, 1998 for (a) all directors, (b) all nominees for
director (c) all executive officers, (d) each person who is known by the company
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to be the beneficial owner of five percent or more of the outstanding shares of
Common Stock, (e) all directors and executive officers as a group.
Name of Amount and Current Percent Percent of Class if
Beneficial Owner Nature of of Class Shareholders Approve
Beneficial Restated Certificate of
Ownership(1) Incorporation
J. Terry Anderson 167,586(2) 4.2% #
Robert Waligunda 7,700(3) 2.2% #
George Otten -0- #
Steven Schurman -0- #
Richard Brannon -0- #
Ronald Ginsberg -0- #
Robert W. Singer -0- #
------- ----
175,286 4.4%
All Officers and
Directors as a Group
(5 persons)
- ----------
# Less than one percent
(1) Prior to anticipated increase in authorized Common Stock
(2) Includes 67,526 shares owned by Mr. Anderson, 400 shares owned by Bruce E.
Anderson Trust under which Mr. Anderson acts as trustee and 99,661 shares
owned by Anderson Chemical Company for which Mr. Anderson serves as a
director and president and owns approximately 21% of the outstanding
shares. Mr. Anderson disclaims any beneficial ownership with respect to
shares of the Company owned by family members other than those specifically
set forth above.
(3) Includes 1200 shares pledged as collateral to a non-affiliate individual.
- ----------
To the Company's knowledge and based solely on a review of such materials as are
required by the Securities and Exchange Commission, no officer, director or
beneficial holder of more than ten percent of the Company's issued and
outstanding shares of Common Stock ("Beneficial Owner") has filed any forms and
reports required to be filed pursuant to Section 16(a) of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), during the fiscal year
ended December 31, 1997; and no officer, director or Beneficial Holder has
submitted any representation letter to the Company stating that they are not
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subject to the filing requirements under Section 16 of the Exchange Act for
fiscal year 1997.
CERTAIN PRINCIPAL OWNERS
As of the Record Date, no persons are known to the Company to be the beneficial
owners of more than (5%) of the Company's Common Stock, the only voting stock of
the Company as of the Record Date. The Company has 3,955,173 shares of Common
Stock issued and outstanding.
EXECUTIVE COMPENSATION
The Company's three executive officers, Messrs. Anderson, Waligunda and Brannon,
received no significant compensation in fiscal year 1997. The Company granted no
options to any of the Company's Executive Officers in 1997. None of the
Company's executive officers owns any options of the Company and there were no
exercise of any option in 1997 by any such persons.
The Company has not adopted any stock option plans, medical insurance plans or
retirement, pension, profit sharing or insurance plans for the benefit of its
directors, officers or employees.
No officer or director of the Company receives any cash compensation for
services rendered as a director and/or officer.
CERTAIN TRANSACTIONS WITH EXECUTIVE OFFICERS AND DIRECTORS
None of the Company officers have entered into written employment agreements
with the Company.
During fiscal year 1998, Mr. Anderson lent the Company approximately $23,000 and
Anderson Chemical Company, a company for which Mr. Anderson serves as director
and president, lent the Company approximately $85,000 for working capital and
other expenses.
USM STOCK PURCHASE
Item 2 on Proxy Card
On December 26, 1976, the Company leased 28 patented mining claims from Audrey
and David Hayden ("Hayden") and Dorothy Kennec pursuant to a mining lease and
option to purchase, dated November 12, 1976 (the "Hayden Kennec Lease"). On
November 13, 1997, USM entered into an agreement with Hayden
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to purchase her interest in the Hayden Kennec Lease (the "Hayden Contract"). It
is anticipated that the closing will occur on delivery by Hayden of clear title
to the property.
The Company has been informed that under Colorado law, if an owner of 50% of the
mineral rights desires to explore those rights, then the remaining 50% owner
could not object to the exploration of the rights, provided the
non-participating owner receives 50% of the net profits generated from such
exploitation. Therefore, the Company believes that it is advantageous for the
Company to acquire at least 50% of the leasehold rights represented by the
Hayden/Kennec Lease in order to assure that the Company would have adequate
access to the minerals located at the Franklin Mining Properties. For
information on Hayden/Kennec Lease, see 10-KSB year end 12/31/97.
On March 5, 1998, the Company executed a promissory note (the "Note") in the
aggregate principal amount of Nine Hundred Fifty Five Thousand Seven Hundred
Fifty Six Dollars and Twenty Two Cents ($955,756.22) in favor of US Mining,
Inc.("USM"), a New Jersey corporation owned and controlled by William C.
Martucci ("Martucci"). The aggregate principal amount of the Note represented
certain monies advanced by POS Financial, Inc., a New Jersey corporation owned
and controlled by Martucci ("POS") to fund operations and development of the
Company's mining properties. The Note was thereafter assigned to USM on March 9,
1998. The Note bears interest at a rate of 8% per annum. The Note was originally
due and payable on May 4, 1998; however, USM extended this date to July 4, 1998
(the "Maturity Date"). The Note was secured by a security interest in
substantially all of the assets of the Company (the "Secured Assets").
As of the Maturity Date, the Company was unable to pay the principal amount or
any of the accrued interest of the Note and remains unable to meet its
obligations thereunder. In settlement of the amounts owed pursuant to the Note,
the Company agreed, pursuant to the terms of a Stock Purchase Agreement, dated
August 3, 1998 (the "USM Purchase Agreement"), between the Company and USM, to
issue to USM 11,197,413 shares of Common Stock to USM in satisfaction of its
obligations under the Note and the sale of the USM interest.
Terms of the USM Purchase Agreement
Pursuant to the terms of the USM Purchase Agreement, the Company shall issue to
USM 11,197,413 shares of Common Stock in exchange for the (i) assignment to the
Company of the Hayden Contract and (ii) the satisfaction of the Note; which is
estimated to be approximately $1,100,000 (including principal and interest
accrued thereon) at the time of the closing (the "Closing"). Upon issuance of
the Common Stock, USM shall deem the indebtedness satisfied in full.
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The Closing of the transactions contemplated by the USM Purchase Agreement is
conditioned upon approval by the Company's stockholders of each of the USM
Purchase Agreement and the POS Acquisition (as described more fully below), the
accuracy of certain representations and warranties and the performance of
certain covenants and other agreements of each of the parties to the USM
Purchase Agreement. Additional terms and conditions of the USM Purchase
Agreement are incorporated by reference to the agreement which is attached
hereto as Appendix A. All holders are urged to review the Agreement in its
entirety.
Effect on Security Holders
The issuance of the Common Stock in connection with the forgiveness of the
indebtedness represented by the Note and the assignment of the Hayden Purchase
and Sale Agreement will result in USM owning approximately 42.5% of the Company.
In the event that the holders shall approve the purchase of POS as described
below, the issuance of securities in connection with the USM Stock Purchase,
taken together with the issuance of common Stock to Martucci in exchange for all
of the outstanding shares of Stock of POS will result in Martucci beneficially
owning and/or controlling approximately 85% of the Company. If the Company's
Stockholders approve the issuance of stock to USM and the acquisition of POS,
such actions would have the effect of changing the control of the Company from
the present situation where no person owns more than 5% of the Company's issued
and outstanding shares to one where approximately 85% of the Company's issued
and outstanding shares will be beneficially owned or controlled by Martucci.
The Board of Directors recommends a vote IN FAVOR OF the USM Stock Purchase
POS ACQUISITION
Item 3 on Proxy Card
POS Financial, Inc. ("POS") owns and operates it's own ATM machines and Kiosks.
POS is a New Jersey corporation with principal offices at 3 Dundar Road,
Springfield, New Jersey 07081.
POS currently has approximately 100 ATM's deployed in a broad base of retail
outlets including supermarkets, convenience stores, gas stations, restaurants,
colleges, hotels, motels, amusement parks, family fun centers, bowling centers
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and recreational resorts. Since POS does not issue ATM cards, each transaction
consummated at a POS owned terminal results in a surcharge fee from the
cardholders account. In addition, POS dispenses stamps in peel off sheets that
are sized much like a dollar bill. The company sells the 18 stamp sheets for
$6.75 at a 99 cent premium. POS also disburses coupons and prepaid phone cards
through the ATMs and earns a handling fee for each transaction.
The Company's staff members have extensive experience in marketing, to retail
outlets, as well as backgrounds in database development, computer systems and
high speed networks. In addition, management has for the past 22 years
cultivated a lucrative and loyal retail clientele, this will enhance the POS
plans for placement of ATM machines.
POS uses the EPS Systems for the driver software and network access required to
process transactions. All debit and major credit cards will be accepted
including but not limited to NYCE, MAC, Plus, Cirrus, MasterCard, Visa, American
Express, Diners Club and Discover/Novas. EPS Systems will also provide ongoing
network monitoring, remote troubleshooting, transferring of money and
reconciliation on a daily basis. EPS Systems charges POS a fee per transaction
for these services.
At present, POS funds its own ATM money to consumers and in the future, as POS
expands, it is anticipated that it will utilize outside funding sources.
In the future, POS plans to broaden the coverage offering more complex types of
transactions where the focus shifts to an exchange or flow of information. This
includes dispensing coupons based on data base marketing, check cashing to the
penny and the purchase of theater and event tickets.
Most of the above services are currently in the development stages; however,
management of POS believes that the implementation of these developmental
services will result in additional value to the POS ATM/Kiosk, resulting in an
increase in the companies revenue streams.
A copy of the audited Financial Statements for POS for the fiscal year ended
1997 are attached hereto as Appendix B and incorporated by reference hereon.
Mr. Martucci is currently the sole director, officer and 100% owner of all of
the issued and outstanding shares of POS. For biographical information about Mr.
Martucci, see Election of Directors.
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Terms of the POS Purchase Agreement.
Pursuant to the terms of the POS Purchase Agreement, the Company shall issue
11,197,413 shares of Common Stock in exchange for 100% of the outstanding shares
of POS.
The closing of the transactions contemplated by the POS Purchase Agreement is
conditioned upon the approval by the Company's stockholders of each of the POS
acquisition and the USM Stock Purchase (as described more fully above), the
accuracy of certain representations and warranties and the performance of
certain covenants and other agreements of each of the parties to the POS
Purchase Agreement. Additional terms and conditions of the POS Purchase
Agreement are incorporated by reference to the Agreement which is attached
hereto as Appendix C. All holders are urged to review the Agreement and
financial information in their entirety.
Effect on Security Holders
The issuance of the Common Stock in connection with the acquisition will result
in Martucci directly owning approximately 42.5% of the Company. In the event
that the holders shall approve the USM Stock Purchase as described above, the
issuance of securities in connection with the USM Stock Purchase, taken together
with the issuance of Common Stock to Martucci in exchange for all of the
outstanding shares of Stock of POS will result in Martucci beneficially owning
and/or controlling approximately 85% of the Company. If the Company's
Stockholders approve the issuance of stock to USM and the acquisition of POS,
such actions would have the effect of changing the control of the Company from
the present situation where no person owns more than 5% of the Company's issued
and outstanding shares to one where approximately 85% of the Company's issued
and outstanding shares will be beneficially owned by Martucci.
The Board of Directors recommends a vote IN FAVOR OF the POS Acquisition.
CERTIFICATE OF INCORPORATION AMENDMENT
Item 4 on Proxy Card
The Board of Directors of the Company has proposed that the Company's Amended
and Restated Certificate of Incorporation (the "Restated Certificate of
Incorporation") be further amended to change the name of the Company from
"Franklin Consolidated Mining Co., Inc." to "WCM Capital, Inc." The proposed
amendment is as follows:
"FIRST: The name of the corporation shall be "WCM Capital, Inc."
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The Amendment to the Company's Restated Certificate of Incorporation changing
the name of the Company, if passed, would become effective upon the filing with
the Secretary of State of Delaware a Certificate of Amendment, which filing is
expected to take place shortly after the Shareholders approve the amendment. The
affirmative vote of the holders of a majority of the outstanding shares of
Common Stock entitled to vote on the Amendment at the 1998 Annual Meeting is
required to approve the Certificate of Incorporation Amendment.
The Board of Directors believe that a name change would be beneficial to the
Company because it allows for a diversity of operations which is consistent with
the future plans of the Company.
The Board recommends a vote for IN FAVOR OF the Certificate of Amendment.
SUBMISSION OF SHAREHOLDER PROPOSALS
Proposals of Shareholders intended to be submitted at the next annual meeting
must be received by the Company on or before March 1, 1999 to be eligible for
inclusion in the Company's proxy statement, an accompanying notice of proxy for
such meeting.
INCORPORATION BY REFERENCE
Any document incorporated by reference and not delivered to holders herewith may
be obtained by any holder upon his or her request, whether written or oral,
within one business day of the receipt by the Company of such request, by
contacting Robert Waligunda, Secretary of the Company, 78 Beaver Street, Suite
500, New York, New York 10005, Telephone Number 212-344-2828, Facsimile Number
212-344-4537.
ANNUAL REPORT TO STOCKHOLDERS
A copy of the Company's Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1997 as filed with the Securities and Exchange Commission may be
obtained by written request to the Company at its principal offices in New York,
New York.
Date: By Order of the Board of Directors
By: ______________________________
Robert Waligunda, Secretary
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Appendix A
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated this 3rd day of
August, 1998 and is by and between Franklin Consolidated Mining Co., Inc., a
Delaware Corporation ("Franklin") and U.S. Mining Co., Inc. a New Jersey
corporation ("USM")
RECITALS
WHEREAS, USM is the holder of a certain Promissory Note, dated March 5,
1998 (the "Note"), executed by Franklin in the principal amount of Nine Hundred
Fifty Five Thousand Seven Hundred and Fifty Six Dollars and Twenty Two Cents
($955,756.22) which is secured by certain assets of Franklin (the "Secured
Assets"); and
WHEREAS, USM is the holder of 1/2 interest in certain mining properties
located in Idaho Springs, Colorado (the "Mining Property"); and
WHEREAS, the parties hereto desire to satisfy the principal amount of the
Note, together with all interest accrued thereon (the "Indebtedness") and sell
to Franklin the mining property in exchange for the issuance of Common Stock,
par value $.01 per share (the "Common Stock") of Franklin to USM upon the terms
and subject to the conditions set forth herein.
NOW THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, and for other good and valuable consideration, the
parties hereto agree as follows:
ARTICLE 1
1.1 Terms of the Exchange; Forgiveness of Indebtedness:
(a) In exchange for the forgiveness of the indebtedness evidenced by the
Note, Franklin hereby agrees to issue to USM $1,000,000 shares of Common Stock.
On the Closing Date, Franklin shall cause its transfer agent to issue and
deliver to USM, a certificate or certificates representing 11,000,000 shares of
Franklin Common Stock.
(b) Upon issuance of the Common Stock, USM shall mark the Note
paid-in-full, release any and all security interest in the Secured Assets, and
transfer to Franklin all of its right, title and interest in the mining
property.
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1.2 Taking of Necessary Action: Further Action: Each of Franklin and USM
shall take all reasonable and lawful action as may be necessary or appropriate
in order to effectuate the transactions contemplated by this Agreement. In case
at any time after the Closing Date any further action shall be necessary or
desirable to carry out the intentions of this Agreement, the officers and
directors of each of the parties hereto shall take all such lawful and necessary
action.
ARTICLE 2
Closing
2.1 Closing: The closing of the transactions contemplated by this Agreement
will be held at the offices of 3 Dundar Road, Springfield, N.J. 07081, at 10:00
a.m., local time on or about the fifth business day after the date upon which
all conditions contained in Articles 5 and 6 hereof have been satisfied or
waived or such other time and place as the parties may agree upon (the "Closing
Date").
2.2 Delivery of Certificates: Cancellation of Note. On the Closing Date (a)
Franklin shall issue to USM the Franklin Securities and (b) USM shall deliver to
Franklin the Note marked paid-in-full and any and all releases or other
documentation necessary to remove any security interest USM has or may have in
the Secured Assets.
ARTICLE 3
Representations and Warrantees of USM
USM hereby represents and warrants to Franklin as follows:
3.1 Organization and Good Standing. USM is a corporation duly incorporated
validly existing and in good standing under the laws of the State of New Jersey.
USM has the requisite corporate power and authority to own and operate its
properties and assets and to carry on its business as currently conducted. USM
is not qualified to do business as a foreign corporation in any other
jurisdiction and such qualification is not now required, except to the extent
that the failure to so qualify would not have a material adverse effect on USM's
business as currently conducted.
3.2 Corporate Power and Authorization. USM has the corporate power and
authority to execute and deliver this Agreement and to perform its obligations
under the terms of this Agreement. All corporate action on the part of USM
necessary for the authorization, execution, delivery and performance by USM of
this agreement has been taken or will be taken prior to the Closing Date. This
Agreement, when executed and delivered by USM shall constitute
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the valid and binding obligations of USM enforceable in accordance with its
terms, except as the enforceability thereof may be limited by bankruptcy
insolvency or other laws relating to or affecting creditor's rights generally or
by general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
3.3 Investment. USM is acquiring the Franklin Securities for investment for
its own account, not as a nominee or agent and not with a view to, or for resale
in connection with any distribution of any part thereof, and he has no present
intention of selling, granting any participation in or otherwise distributing
the same. USM understands that the Franklin Common Stock has not been registered
under the Securities Act of 1933, as amended (the "Act") or applicable state and
other Common Stock laws and is being issued to USM by reason of a specific
exemption from the registration provisions of the Act and applicable state and
other securities laws, the availability of which depends upon, among other
things, the bona fide nature of the investment intent and the accuracy of USM's
representations expressed herein.
3.4 Restricted Securities. USM has no need of liquidity in this investment
and acknowledges and understands that it must bear the economic risk of this
investment for an indefinite period of time because the Franklin Securities must
be held indefinitely unless subsequently registered under the Act and applicable
state and other securities laws or unless an exemption from such registration is
available. USM understands that any transfer agent of Franklin will be issued a
stop-transfer instructions with respect to such shares unless such transfer is
subsequently registered under the Act and applicable state and other securities
laws or unless an exemption from such registration is available, and that each
certificate representing the Franklin Securities will bear a restrictive legend
to such effect.
ARTICLE 4
Representations and Warranties of Franklin
Franklin hereby represents and warrants to USM as follows:
4.1 Organization and Good Standing; Articles of Incorporation and By-Laws:
Franklin is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Franklin has the requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as currently conducted. Franklin is qualified to do
business in those jurisdictions listed on Schedule 4.1 hereto. Franklin is not
qualified to do business as a foreign corporation in any other jurisdiction and
such qualification is not now required, except to the extent that the failure to
so qualify would not have a material adverse effect on Franklin's business as
currently conducted.
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4.2 Corporate Power and Authorization. Franklin has the corporate power and
authority to execute and deliver this Agreement, to issue the Common Stock
hereunder and to perform its obligations under the terms of this Agreement. All
corporate action on the part of Franklin, its directors and stockholders
necessary for the authorization, execution, delivery and performance by Franklin
of this Agreement and the authorization, sale, issuance and delivery of Franklin
stock has been taken or will be taken prior to the Closing Date. This Agreement,
when executed and delivered by Franklin, shall constitute valid and binding
obligations of Franklin, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Upon the Closing Date, the Common Stock will be
duly authorized and, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid, nonassessable, and free and clear
of any liens, pledges, claims, security interests or other encumbrances created
hereby; provided, however, that the Common Stock is subject to restrictions on
transfer under state or federal securities laws as set forth herein.
4.3 Capitalization. The authorized capital stock of Franklin consists of
100,000,000 shares of Common Stock, $0.01 par value, of which 3,955,173 shares
are issued and outstanding. All of the outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth on Schedule 4.3, there are no options, warrants or other
rights outstanding to purchase or acquire, or any securities convertible into,
nor has Franklin agreed to issue or reissue, other than pursuant to this
Agreement, any of Franklin's authorized and unissued capital stock. Except as
described on Schedule 4.3, there are no agreements or understandings that affect
or relate to the voting or giving of written consent with respect to any of
Franklin's outstanding securities. There are no preemptive rights with respect
to the issuance or sale of Franklin's capital stock.
4.4 Financial Statements. Franklin has provided the Stockholder with (i)
audited financial statements of Franklin as of and for the years ended December
31, 1996 and 1997 (the "Audited Financial Statements"), and (ii) unaudited
financial statements of Franklin as of and for the one month ended March 31,
1998 (the "Interim Financial Statements" and together with the Audited Financial
Statements, the "Financial Statements"). The Financial Statements are complete
and correct in all material respects and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the period indicated. The Financial Statements fairly present the
financial condition and operating results of Franklin as of the dates and for
the periods indicated, subject, with respect to the Interim Financial
Statements, to normal year-end audit adjustments.
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4.5 Absence of Certain Developments. Except as described on Schedule 4.5
since December 31, 1997, there has been no change in the assets, liabilities,
condition (financial or otherwise), operating results, business or prospects of
Franklin from that reflected in the Audited Financial Statements, except changes
in the ordinary course of business that have not been, individually or in the
aggregate, materially adverse to the assets, properties, condition (financial or
otherwise), operating results, business or prospects of Franklin or changes
reflected in the Interim Financial Statements. Without limiting the foregoing,
except as described on Schedule 4.5, Franklin has not, since December 31, 1997,
(i) directly or indirectly declared or paid any dividend or ordered or made any
other distribution on account of any shares of any class of the capital stock of
Franklin, (ii) directly or indirectly redeemed, purchased or otherwise acquired
any such shares or agreed to do so or set aside any sum or property for any such
purpose, (iii) made any capital expenditures exceeding $100,000, (iv) incurred
any indebtedness exceeding $100,000, (v) sold or encumbered any material assets,
property, rights licenses or permits used in Franklin's business, (v) suffered
any extraordinary loss, damage or casualty loss, (vi) received notification of
termination or significant decrease from any material customer or supplier, or
(vii) committed to any of the foregoing.
4.6 Absence of Undisclosed Liabilities. Except as disclosed on Schedule 4.6
Franklin does not have any liability or obligation, absolute or contingent, that
is not reflected in the Financial Statements, other than obligations and
liabilities which taken individually or in the aggregate would not have a
material adverse effect on Franklin's assets, liabilities, condition (financial
or otherwise), operating results, business or prospect.
4.7 Taxes. Except as disclosed on Schedule 4.7 Franklin has filed all tax
returns and reports required by law to be filed, and has paid all taxes,
assessments and other government al charges that are due and payable, except for
those matters reasonably being contested by Franklin and those matters which,
individually and in the aggregate, would not have a material adverse effect on
Franklin's assets, liabilities, condition (financial or otherwise), operating
results, business or prospects. The charges, accruals and reserves on the books
of Franklin in respect of taxes are considered adequate by Franklin, and
Franklin knows of no assessment for additional taxes or any basis therefor.
4.8 Title to Properties: Liens and Encumbrances. Except as set forth on
Schedule 5.8 Franklin has good title to all of its properties and assets, both
real and personal, tangible and intangible, reflected on the balance sheet
included in the Audited Financial Statements or acquired after the date thereof
(except inventory or other personal property disposed of in the ordinary course
of business subsequent to the date thereof), and such properties and assets are
not subject to any mortgage, pledge, lien, security interest encumbrance or
charge other than (o) liens for current taxes not yet due and
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payable, (ii) liens and encumbrances that do not materially detract from the
value of the property subject thereto or materially impair the operations of
Franklin or (iii) liens securing obligations reflected in the Financial
Statements. With respect to properties or assets it leases, except as set forth
on Schedule 4.8, Franklin is in compliance with such leases (except for such
defaults or breaches that would not, individually or in the aggregate, have a
material adverse affect on assets, liabilities, condition (financial or
otherwise), operating results, business or prospects) and holds valid leasehold
interests free of any liens, claims or encumbrances except for those described
in subsections (i) through (iii) hereof.
4.9 Compliance with Other instruments. Franklin is not in violation or
default of any provision of its Certificate of Incorporation or By-Laws, or,
except as described on Schedule 4.9 in default of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree to
which Franklin is a party or by which it is bound. The execution, delivery and
performance by Franklin of this Agreement, and the consummation of transactions
contemplated hereby and thereby, will not, except as described on Schedule 4.9
result in any violation of or conflict with the Franklin's Certificate of
Incorporation or By-Laws, and, will not result in any violation of or conflict
with, or constitute a default under, any material mortgage, indebtedness,
indenture, contract, agreement, instrument, judgment or decree to which Franklin
is a party or by which it is bound or in the creation of any material mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of
Franklin.
4.10 Litigation, etc. Except as described on Schedule 4.10, there are no
actions, suits, proceedings (arbitration, regulatory or otherwise) or
investigations pending or, to Franklin's best knowledge, threatened, against
Franklin or against any if its officers or directors in their capacity as such
or which otherwise involves Franklin's business or operations. Franklin has not
commenced or had commenced against it any case under applicable bankruptcy laws.
Franklin is not engaged in any legal action to recover moneys due it or for
damages sustained by it in connection with Franklin's business.
4.11 Employees. Franklin does not have any employees employed at will or
pursuant to an employment agreement with Franklin.
4.12 Registration Rights. Except as described on Schedule 4.12, Franklin is
not under any contractual obligation to register under the Act, any of its
currently outstanding securities or any of its securities which may hereafter be
issued.
4.13 Governmental Consent. Except as set forth on Schedule 4.13, no
consent, approval or authorization of or registration, qualification,
designation, declaration or filing with any governmental authority on the part
of Franklin is required in connection with the valid execution, delivery and
performance of this Agreement, the offer, sale or issuance of the Franklin
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securities, or the consummation of any other transactions contemplated hereby or
thereby, except for filings that may be required to comply with applicable
federal and state securities laws.
*
4.14 Compliance with Law. Except as set forth on Schedule 4.14 Franklin is
conducting its business and operations in compliance in all material respects
with all governmental rules and regulations applicable thereto, including
without limitation those relating to occupational safety, environmental, health
and employment practices, and is not in violation or default in any material
respects under any statute, law, ordinance, rule, regulation, judgment, order,
decree, concession, grant, franchise, license or other governmental
authorization or approval applicable to it or any of its properties.
4.15 Permits. Franklin has all permits, licenses, orders and approvals of
any federal, state, local or foreign governmental or regulatory body that are
material to or necessary in the conduct of its business as now conducted
(collectively, the "Permits"); all such Permits are in full force and effect; no
violations have been recorded in respect of any such Permits; and not proceeding
is pending or, to the knowledge of Franklin, threatened to revoke or limit any
such Permits. Schedule 4.15 contains a complete and accurate list of all
Permits.
4.16 Offering. Subject to accuracy of the USM's representations in Article
3, hereof, the offer, sale and issuance of the Common Stock as contemplated by
this Agreement will constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act.
4.17 Brokers or Finders. Franklin has not retained any broker or finder in
connection with the transactions contemplated by this Agreement, and there are
no brokerage commissions, finder's fees or similar items of compensation payable
in connection therewith based on any arrangement or agreement made by or on
behalf of Franklin.
4.18 Intellectual Property. Franklin does not have any patents, patent
applications, trademarks and trademark applications or other registrations of
intellectual property rights registered in its name or licensed to Franklin.
4.19 Property, Equipment, etc. To the best of Franklin's knowledge, the
property and equipment owned or leased by Franklin, taken as a whole, are in
good operating condition (except for ordinary wear and tear which do not
adversely affect Franklin's businesses and are generally suitable for the uses
for which they are currently used.
4.20 Insurance. Except as set forth on Schedule 4.20, the physical
properties and assets used in connection with Franklin's businesses are covered
by insurance with reputable companies against casualty and other losses
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customarily obtained to cover comparable properties and assets by similar
businesses in the region in which such properties and assets of Franklin are
located, in amounts and coverage which are reasonable in light of existing
conditions. Franklin has not failed to give any notice or present any claim
under any insurance policy in a due and timely fashion except for such failures
that would not have a material adverse effect on Franklin's assets, liabilities,
condition (financial or otherwise), operating results, business or prospects.
4.21 No Misrepresentations or Omissions. To Franklin's best knowledge, all
information provided in connection herewith and all representations and
warranties hereunder, including the disclosures in the Financial Statements,
this Agreement or the Schedules hereto, are complete and correct in all material
respects and do not contain any misleading statement or omit any material
information.
4.22 ERISA. Franklin does not maintain any "Plan" subject to the Employment
Retirement Income Security Act of 1974, as amended ("ERISA").
4.23 Securities Filings. Franklin has made all filings with the Securities
and Exchange Commission (the "SEC") that it has been required to make under the
Act and the rules and regulations promulgated thereunder and under the Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
promulgated thereunder. Franklin has provided USM with complete and correct
copies of all of Franklin's filings made with the SEC (including all exhibits to
such filings) since January 1, 1993 (all such documents which have been filed
with the SEC, as amended, the "SEC Documents"), including, without limitation
all Annual Reports on Form 10-KSB, all Quarterly Reports on Form 10-QSB, all
Current Reports on Form 8-K, all registration statements and all proxy
statements and annual reports to shareholders. Except as set forth on Schedule
4.23 and to the best knowledge of Franklin, the SEC Documents comply in all
material respects with the requirements of the Securities Act or the Exchange
Act, as the case may be, and to the best knowledge of Franklin, none of the SEC
Documents contain any untrue statement of a material fact or omit to state 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.
4.24 Contracts. Schedule 4.24 sets forth a list of all written contracts,
agreements, mortgages, notes, instruments, leases, licenses (other than licenses
set forth in Schedule 4.16) hereof), franchises, arrangements or understandings
with respect to Franklin (the "Franklin Contracts"). Except as set forth on
Schedule 4.14, all of Franklin Contracts are valid and in full force and effect
and there are no existing defaults, or events which with the passage of time or
the giving of notice, or both, would constitute defaults by Franklin, or to the
knowledge of Franklin, by any other party to any Franklin Contract.
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ARTICLE 5
Conditions to Closing of Franklin
The obligations of Franklin to issue the Common Stock on the Closing Date are
subject to the fulfillment as of the Closing Date of the following conditions:
5.1 Representations and Warranties Correct. The representations and
warranties made by USM in Article 3 hereof be true and correct at and as of the
Closing Date, with the same effect as though such representations and warranties
had been made at and as of the Closing Date.
5.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by USM at or prior to the Closing Date shall have been
performed or complied with, including the obtaining of all consents necessary
for the consummation of the transaction by USM.
5.3 Compliance Certificate of each of USM and the Stockholder. USM shall
have delivered to Franklin a certificate executed by the President of USM dated
the Closing Date, and certifying to the fulfillment of the conditions specified
in Sections 5.1 and 5.2 of this Agreement as they relate to USM.
5.4 Note Paid-in-Full. USM shall have delivered to Franklin the original
note marked Paid in Full and all documents, instruments, filings and other forms
duly executed in proper form for filing in order to remove all liens and
encumbrances on the Secured Assets.
5.5 Transfer of Mining Property. USM shall have transferred the Mining
Property to Franklin
5.6 Compliance Certificate. Franklin shall have received a certificate of
the Secretary of USM certifying as to (a) the Certificate of Incorporation of
USM, (b) By-Laws of USM, (c) the good standing of USM in New Jersey, (d)
resolutions of the Board of Directors authorizing the execution of this
Agreement and the other transactions contemplated herein and (e) incumbency of
USM's signatory.
ARTICLE 6
Conditions to Closing of USM
USM's obligation to convert the Note at the Closing Date is subject to the
fulfillment as of the Closing Date of the following conditions:
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6.1 Representations and Warranties Correct. The representations and
warranties made by Franklin in Article 4 hereof shall be true and correct at and
as of the Closing Date, with the same effect as though such representations and
warranties had been made at and as of the Closing Date.
6.2 Convenants. All covenants, agreements and conditions contained in this
Agreement to be performed by Franklin at or prior to the Closing shall have been
complied with.
6.3 Compliance Certificate. Franklin shall have delivered to USM a
certificate executed by the President of Franklin dated the Closing Date, and
certifying to the fulfillment of the conditions specified in Sections 6.1 and
6.2 of this Agreement.
6.4 Stock Certificate/Warrant Certificates. Franklin shall have issued or
cause to be issued to USM a certificate or certificates representing the Common
Stock.
6.5 Compliance Certificate. USM shall have received a certificate of the
Secretary of certifying as to (a) the Certificate of Incorporation of Franklin,
(b) By-Laws of Franklin, (c) the good standing of Franklin in Delaware and the
jurisdictions listed on Schedule 4.1 hereto, (d) resolutions of the Franklin's
Board of Directors authorizing the execution of this Agreement and the other
transactions contemplated hereby, (e) resolutions of Franklin's stockholders
approving the execution and delivery of this Agreement and the consummation of
the transactions contemplated herein and (f) incumbency of Franklin signatory.
6.6 Purchase of POS Financial, Inc. Franklin shall have consummated the
purchases of all of the outstanding shares of common stock of POS Financial,
Inc. ("POS").
ARTICLE 7
Stockholder Approvals, Board of Directors' Recommendations; Filings:
7.1 Stockholder Approvals; Board of Directors' Recommendations. A meeting
of the stockholders of Franklin shall be held in accordance with the General
Corporation Law of the State of Delaware ("GCL"), as promptly as possible, after
at least 20 days' prior written notice there of to the stockholders of Franklin,
to consider and vote upon, among other things, the adoption and approval of this
Agreement, the acquisition of POS, changing of the corporate name of Franklin,
the election of the Board of Directors of Franklin and such other transactions
as contemplated hereby (collectively, the "Proxy Proposals"). Subject to its
fiduciary duty to stockholders, the Board of Directors
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of Franklin shall recommend to its stockholders that the Agreement and the other
Proxy Proposals be adopted and approved.
7.2 Filings. As soon as practicable after the adoption and approval of this
Agreement and the other Proxy Proposals, Franklin shall undertake to prepare and
submit to USM, for review and approval, any and all documentation and/or filings
required by the GCL or the Act or the exchange Act to be submitted and/or filed.
Upon the approval of such documentation and/or filings by USM, Franklin shall
undertake to file same, as applicable, with the office of the Secretary of State
of the State of Delaware and the SEC.
7.3 Proxy Statement. As soon as practicable, Franklin shall prepare and
file, or cause to be prepared and filed with the SEC, a proxy statement (such
proxy statement, together with all financial statements, exhibits, and
supplements thereto, being herein called the "Proxy Statement" and such proxy
statement, together with all financial statements and exhibits thereto, in the
form to be filed with the SEC being herein called the "Preliminary Proxy
Statement" to be used in connection with the meeting of the stockholders of
Franklin, or for inclusion in Franklin's filings under any applicable state
takeover laws.
ARTICLE 8
Indemnification
8.1 Indemnification by USM. USM agrees to indemnify, defend and hold
Franklin harmless, and its officers, directors, stockholders, agents, employees,
attorneys, affiliates, successors and assigns, from and against, and pay or
reimburse each of them for, any and all claims, losses, damages, judgments,
amounts paid in settlement, costs and legal, accounting or other expenses
(collectively, "Losses") that any of them may sustain or incur as a result of
any misrepresentation, any inaccuracy in, or any breach of, any warranty or
representation or any non-performance of any convenant or other obligation on
the part of USM contained in this Agreement, or any document delivered
hereunder; provided that USM shall not be required to indemnify Franklin for
Losses unless such Losses exceed $50,000 in the aggregate, in which event USM
shall be obligated to indemnify Franklin for the amount of such Losses in excess
of $50,000.
8.2 Indemnification by Franklin. Franklin agrees to indemnify, defend and
hold harmless USM, and officers, directors, stockholders, agents, employees,
attorneys, affiliates, successors and assigns and each of them, from and
against, and pay or reimburse each of them for, any and all Losses that any of
them may sustain or incur as a result of any misrepresentation, breach of
warranties or representations or non-performance of any covenants or other
obligations on the part of Franklin contained in this Agreement or any document
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delivered hereunder; provided that Franklin shall not be required to indemnify
USM and/or the Stockholder for losses unless such Losses exceed $50,000 in the
aggregate, in which event Franklin shall indemnify such indemnified party for
the amount of such Losses in excess of $50,000.
8.3 Indemnification Procedures.
(a) Promptly after receipt by a party entitled to indemnification hereunder
(an "Indemnified Party") of notice of any claim or of the commencement of any
action, investigations, suit or proceeding ("Proceeding") with respect to which
such party may make a claim for Indemnification hereunder, the Indemnified Party
will notify the party against whom indemnification is sought (the "Indemnifying
Party") in writing of such claim or Proceeding, and the Indemnifying Party may
in his or its discretion assume the defense of such claim or Proceeding, in
which case he or it shall employ counsel reasonably satisfactory to the
Indemnified Party and shall pay the fees and expenses of such counsel.
Notwithstanding the preceding sentence, an Indemnified Party will be entitled to
employ counsel separate from counsel for the Indemnifying Party and to
participate in the defense of such claim or Proceeding at the Indemnified
Party's expense. No settlement or compromise of any claim or Proceeding shall
give rise to liability of the Indemnifying Party unless such party shall have
been notified of any proposed settlement or compromise and shall have consented
thereto; provided that the Indemnifying Party shall obtain the written consent
of the Indemnified Party, which consent shall not be unreasonably withheld,
prior to ceasing to defend, settling or otherwise disposing of any such claim or
proceeding, if as a result of the failure of the Indemnified Party to do so
would cause it or him to become subject to injunctive or other equitable relief,
or the business of the Indemnified Party (or that of its subsidiary) would be
materially adversely affected in any manner.
(a) Other Losses. In the event that any Indemnified Party suffers a Loss or
otherwise becomes entitled to indemnification hereunder from an Indemnifying
Party in a situation that does not involve a Proceeding being instituted by a
third party, the Indemnified Party shall send notice as it would pursuant to
Section 8.3(a) in order to provide reasonable notice to the Indemnifying Party
as to the nature and extent of the Loss.
(c) Effect. Any notice of a claim or Proceeding or a claim for indemnity
provided for herein shall be in writing and shall specify, to the extent known
by the Indemnified Party, the nature and extent of the claim or Proceeding and
the amount being asserted as damages or Losses, as the case may be.
Notwithstanding the foregoing, the failure to so provide notice on a timely and
adequate basis (except to the extent that such notice is given after the
survival period contained in Section 8.2) shall not relieve the Indemnifying
Party of its obligations to indemnify hereunder except to the extent that such
Indemnifying Party can establish prejudice to it by the lack of timely or
adequate notice.
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ARTICLE 9
Termination
9.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing, whether prior to
or after approval by the stockholders of Franklin by consent of all of the
parties hereto, or by either Franklin, on the one hand, or USM on the other, if;
(i) the other party shall, when made, have breached in any material respect any
of its representations or warranties contained in this Agreement; (ii) any such
representation or warranty shall not be correct or accurate in all material
respects at and as of the Closing Date with the same effect as if made at such
time (with such exceptions as are permitted hereunder); (iii) the other party
shall have failed top comply in all material respects with any of its convents
or agreements contained in this Agreement to be complied with or performed by it
at or prior to the Closing Date; (iv) if a permanent injunction is entered,
enforced or deemed applicable to this Agreement which prohibits the consummation
of the transactions contemplated hereby and all appeals of such injunction shall
have been taken and shall have been unsuccessful; (v) if any governmental
entity, the consent of which is a condition to the obligation of such party to
consummate the transactions contemplated hereby, shall have determined not to
grant its consent and all appeals of such determination shall have been taken
and shall have been unsuccessful, or (vi) the Closing Date shall not have
occurred within 180 days of the date hereof.
9.2 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 9.1 hereof, all rights of all parties hereto shall cease and
terminate, except for such rights as any party may otherwise have for breach of
contract, including, without limitation, rights for breach of any
representations, warranties or covenants contained herein.
ARTICLE 10
Miscellaneous
11.1 Governing Law. This agreement shall be governed by an construed under
the laws of the State of New York without regard to the conflicts of law
principles thereof.
11.2 Survival. The representations and warranties made herein shall survive
the Closing Date of the transactions contemplated hereby for a period of three
(3) years from the Closing Date.
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11.3 Successors and Assigns. Except as otherwise provided herein, this
Agreement shall insure to the benefit of, and be binding upon, the successors,
assigns, heirs, executors and administrators of the parties hereto. Franklin may
not assign its rights under this Agreement without the express written consent
of USM.
11.4 Entire Agreement: Amendment. This Agreement, its attachments, and the
other documents and agreements delivered pursuant hereto at the Closing Date
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Except as expressly provided
herein, neither this Agreement no any term hereof my be amended, waived,
discharged or terminated other than by a written agreement of USM, and Franklin.
11.5 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or by messenger, including
Federal Express or similar courier services, addressed (a) if to Franklin, 76
Beaver Street, Room 500, New York, New York 10005 or at such other address as
Franklin shall have furnished to the other parties hereto in writing or (b) if
to USM to P.O. Box 343, Millburn, New Jersey 07041, or such other address as USM
shall have furnished to the other parties hereto in writing. Each such notice or
other communication shall for all purposes of this Agreement be treated as
effective or having been given when delivered if delivered personally, or, if
sent by mail or courier, at the earlier of its receipt or 48 hours after the
same has been deposited in a regularly maintained receptacle for the deposit of
the United States mail, addressed and mailed as aforesaid.
11.6 Delays or Omissions. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement, shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character of any breach or default under this
Agreement, or any waiver of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party to this Agreement, shall be cumulative and not
alternative.
11.7 Expenses. USM agrees to pay the expenses and legal fees incurred on
its behalf and on behalf of the other parties to this Agreement with respect to
this Agreement and the transactions contemplated hereby.
14
<PAGE>
11.8 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be an original, and all of which together shall constitute
one instrument.
11.9 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision. Furthermore, in lieu of such illegal, unenforceable or
void provision, there shall be added automatically as part of this Agreement a
provision as similar in terms to such illegal, unenforceable or void provision
as may be possible and be legal, enforceable and valid.
11.10 Effect of Headings. The section headings used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
11.11 Announcements. Each party shall give to the other parties hereto
reasonable prior notice and shall consult with the other parties hereto on the
timing, contents and manner of making all announcements or press releases,
written or otherwise, relating to the transactions contemplated hereby, whether
to employees, stockholders or the public, by or on behalf of any of the parties
hereto, except to the extent required by law.
15
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the
parties hereto effective as of the date first set forth above.
FRANKLIN CONSOLIDATED MINING CO., INC.
By: ____________________________
J. Terry Anderson, President
U.S. MINING, INC.
By: ______________________________
William Martucci, President
16
<PAGE>
U.S. MINING, INC.
(a development stage company)
FINANCIAL STATEMENTS
MARCH 31, 1998
<PAGE>
U.S. MINING, INC.
(a development stage company)
MARCH 31, 1998
CONTENTS
Page(s)
Independent Auditors' Report 1.
Financial Statements:
Balance Sheet 2.
Statement of Operations 3.
Statement of Stockholder's Deficit 4.
Statement of Cash Flows 5.
Notes to Financial Statements 6. - 8.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholder
U.S. Mining, Inc.
Springfield, NJ 07081
We have audited the accompanying balance sheet of U.S. Mining, Inc. (a
development stage company) as of March 31, 1998 and the related statements of
operations, stockholder's equity (deficit) and cash flows for the period from
inception November 4, 1997 through March 31, 1998. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of U.S. Mining, Inc. as of March
31, 1998 and the results of its operations and its cash flows for the period
from inception November 4, 1997 through March 31, 1998 in conformity with
generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed, in Note 4 to the financial
statements, the Company has incurred a net loss and an accumulated deficit from
inception. In addition, the Company's major asset is a note receivable from an
affiliate and the ability of the affiliate to continue as a going concern is in
question. This situation raises substantial doubt about the Company's ability to
continue as a going concern. The accompanying financial statements do not
include any adjustments to the recorded asset amounts and to the recorded
liability amounts that might be necessary should the Company be unable to
continue as a going concern.
________________________
LAZAR LEVINE & FELIX LLP
New York, New York
July 9, 1998
<PAGE>
U.S. MINING, INC.
(a development stage company)
BALANCE SHEET
MARCH 31, 1998
- ASSETS -
CURRENT ASSETS:
Due from Franklin Consolidated Mining Co., Inc. $ 26,657
NOTE RECEIVABLE, Franklin Consolidated Mining Co., Inc. 995,773
MINING, MILLING AND OTHER PROPERTY AND EQUIPMENT 75,000
-----------
TOTAL ASSETS $ 1,097,430
===========
- LIABILITIES AND STOCKHOLDER'S DEFICIT -
CURRENT LIABILITIES:
Accounts payable $ 2,925
Accrued interest payable 27,882
Notes payable - POS Financial, Inc. 1,010,070
Note payable - Hayden lease 70,000
-----------
TOTAL CURRENT LIABILITIES 1,110,877
-----------
NON-CURRENT LIABILITIES:
Loans payable - stockholder 43,500
Loans payable - Electronic Marketing, Inc. 20,500
-----------
TOTAL NON-CURRENT LIABILITIES 64,000
-----------
TOTAL LIABILITIES 1,174,877
-----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S DEFICIT:
Common stock, no par value; 2,500 shares authorized,
issued and outstanding 25
Deficit accumulated during the development stage (77,472)
-----------
TOTAL STOCKHOLDER'S DEFICIT (77,447)
-----------
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 1,097,430
===========
The accompanying notes are an integral part of these financial statements.
Page 2.
<PAGE>
U.S. MINING, INC.
(a development stage company)
STATEMENT OF OPERATIONS
FOR THE PERIOD NOVEMBER 4, 1997 (DATE OF INCEPTION) THROUGH MARCH 31, 1998
REVENUES:
Interest $ 26,657
---------
EXPENSES:
Professional fees 75,947
Interest 27,882
---------
TOTAL EXPENSES 103,829
LOSS BEFORE PROVISION FOR INCOME TAXES (77,172)
PROVISION FOR INCOME TAXES 300
---------
NET LOSS $ (77,472)
=========
The accompanying notes are an integral part of these financial statements.
Page 3.
<PAGE>
U.S. MINING, INC.
(a development stage company)
STATEMENT OF STOCKHOLDER'S DEFICIT
PERIOD NOVEMBER 4, 1997 (DATE OF INCEPTION) THROUGH MARCH 31, 1998
Accumulated
Deficit
During
Common Development
Stock Stage Total
-------- -------- --------
Capital contribution $ 25 $ -- $ 25
-------- -------- --------
Net loss -- (77,472) (77,472)
-------- -------- --------
BALANCE - MARCH 31, 1998 $ 25 $(77,472) $(77,447)
======== ======== ========
The accompanying notes are an integral part of these financial statements.
Page 4.
<PAGE>
U.S. MINING, INC.
(a development stage company)
STATEMENT OF CASH FLOWS
PERIOD NOVEMBER 4, 1997 (DATE OF INCEPTION) THROUGH MARCH 31, 1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (77,472)
Adjustments to reconcile net loss to net cash
from operating activities:
Increase in:
Due from Franklin Consolidated Mining Co., Inc. (26,657)
Accounts payable 2,925
Accrued interest payable 27,882
-----------
Net cash utilized by operating activities (73,322)
-----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in note receivable -
Franklin Consolidated Mining Co., Inc. (995,773)
Purchase of mineral rights (75,000)
-----------
Net cash used by investing activities (1,070,773)
-----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in note payable - Hayden 70,000
Increase in note payable - POS Financial, Inc. 1,010,070
Increase in loans payable - stockholder 43,500
Increase in loans payable - Electronic Marketing Inc. 20,500
Equity contribution 25
-----------
Net cash provided by financing activities 1,144,095
-----------
NET INCREASE (DECREASE) IN CASH $ --
===========
The accompanying notes are an integral part of thesefinancial statements.
Page 5.
<PAGE>
U.S. MINING, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Nature of Business:
The Company was formed on November 4, 1997 as a New Jersey
corporation. The Company owns certain mining claims and properties
located in the County of Clear Creek, Colorado ("the Hayden lease").
(b) Accounting Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
(c) Mining, Milling and Other Property and Equipment:
Mining, milling and other property and equipment are recorded at cost.
Costs incurred to acquire, explore, improve and develop mining and
milling properties are capitalized and amortized in relation to the
production of estimated reserves. Mine development expenditures
incurred substantially in advance of production are deferred on an
individual property basis until the viability of a property is
determined. When a property is placed in commercial production, such
deferred costs are depleted using the units-of-production method.
General exploration costs and costs to maintain the mineral rights and
leases are expensed as incurred. Management of the Company
periodically reviews the recoverability of the capitalized mineral
properties and mining equipment. Management takes into consideration
various information including, but not limited to, historical
production records taken from previous mine operations, results of
exploration activities conducted to date, estimated future prices and
reports and opinions of outside geologists, mine engineers, and
consultants. When it is determined that a project or property will be
abandoned or its carrying value has been impaired, a provision is made
for any expected loss on the project or property.
Depletion of mining and milling improvements and mine development
expenditures is computed using the units-of-production method based on
probable reserves (there has been no charge for depletion because the
Company has not yet commenced operations). Depreciation of equipment
is computed using the straight-line method over the estimated useful
lives of the related assets.
(d) Development Stage:
In accordance with Statement of Financial Accounting Standards No. 7,
the Company is being treated as a development stage company since
inception, November 4, 1997, since it did not generate any significant
revenues to date.
Page 6.
<PAGE>
U.S. MINING, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING (Continued):
(e) Statements of Cash Flows:
For the purpose of the statements of cash flows the Company considers
all highly liquid investments purchased with a remaining maturity of
three months or less to be cash equilvalents.
(f) Income Taxes:
The Company has adopted Statement of Financial Accounting Standards
No. 109 (SFAS No. 109), "Accounting for Income Taxes." SFAS No. 109
requires the use of the asset and liability approach of providing for
income taxes. The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying
amounts and the tax basis of assets and liabilities.
NOTE 2 - RELATED PARTY TRANSACTIONS:
(a) Commitments:
The Company and POS Financial, Inc. ("POS"), a company owned by the
stockholder of the Company, have pledged to provide financing to
Franklin Consolidated Mining Co., Inc. ("Franklin") on an as needed
basis until on or about January 1, 1999. The funds received from the
Company and its affiliates will cover the general, administrative and
other costs of Franklin approximated at $20,000 per month plus
interest. Additional monies raised from the Company and POS will help
finance $750,000 of funds the Company estimates will be needed to
ready the Franklin Mine and Milling properties for the commencement of
extraction and milling. Additional funds will be needed to support the
extraction and milling processes once underway as well as to upgrade
the processing facilities to allow for an increase in ore processing
capacity.
(b) Note Receivable:
The Company has outstanding an 8% promissory note receivable balance
of $995,773 at March 31, 1998, which represents monies advanced by the
Company and by POS. The note was due on May 4, 1998, and is secured by
all of Franklin's mining claims and mining properties, (which have a
net cost of approximately $5,700,000 at March 31, 1998) as well as its
interest in the Hayden/Kennec Leases. The note is subject to
successive 30 day extensions throughout 1998 upon the mutual agreement
of the maker and lender for no additional consideration. Accrued
interest receivable at March 31, 1998 was $26,657.
There can be no assurance that Franklin will have adequate funds
available to repay the note. In the event that Franklin defaults on
its obligations, the Company may foreclose on the assets secured by
the note receivable.
Page 7.
<PAGE>
U.S. MINING, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
NOTE 2 - RELATED PARTY TRANSACTIONS (Continued):
Substantially all of the $5,700,000 of mineral properties and
equipment collateralizing the note receivable at March 31, 1998 is
related to exploration properties. The ultimate realization of the
Company's note receivable is dependent upon the success of future
property sales, the existence of economically recoverable reserves,
the ability to obtain financing or make other arrangements for
development, and upon future profitable production.
(c) Note Payable - POS:
During 1997, the Company issued a $955,756 or 8% note payable to POS
in exchange for an 8% note receivable from Franklin in the same amount
(see above).
(d) Loans Payable to Stockholder:
The Company has an obligation to the stockholder which bears interest
at the rate of 8% per annum.
(e) Loans Payable to Electronic Marketing, Inc.:
During the period ended March 31, 1998, Electronic Marketing, Inc., a
company owned by the stockholder of the Company, paid professional
fees of $20,500 on behalf of the Company.
NOTE 3 - PURCHASE AND LEASE AGREEMENTS - HAYDEN LEASE:
On November 13, 1997, the Company purchased the Hayden lease for
$75,000. The Company paid $5,000 of the purchase price on November 13,
1997, the balance is evidenced by a note, due on January 2, 1998,
bearing interest at the per annum rate of 7% after the due date.
Payment on the note has been extended until the Company receives a
report of clear title. The Company is currently in negotiations to
extend the rights to exploit these properties to Franklin.
NOTE 4 - GOING CONCERN UNCERTAINTY:
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. The Company incurred a
net loss of $77,472, and a stockholder's deficit of $77,447 for the
period from inception November 4, 1997 through March 31, 1998. In
addition, the Company's major asset is a note receivable from an
affiliate. The ability of this affiliate to continue as a going
concern is in question. These factors create an uncertainty about the
Company's ability to continue as a going concern. The financial
statements do not include adjustments relating to the recoverability
and classification of recorded asset amounts and classification of
liabilities that might be necessary should the Company be unable to
continue in existence. Management is currently monitoring the
situation with the affiliate and believes they will be able to
continue as a going concern.
Page 8.
<PAGE>
POS FINANCIAL, INC.
FINANCIAL STATEMENTS
APRIL 30, 1998 AND 1997
<PAGE>
POS FINANCIAL, INC.
APRIL 30, 1998 AND 1997
- CONTENTS -
Page(s)
Independent Auditors' Report 1.
Financial Statements:
Balance Sheets 2.
Statements of Income 3.
Statements of Stockholder's Equity 4.
Statements of Cash Flows 5.
Notes to Financial Statements 6.- 8.
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Stockholder
POS Financial, Inc.
Springfield, NJ 07081
We have audited the accompanying balance sheet of POS Financial, Inc. as of
April 30, 1998 and the related statements of income, stockholder's equity and
cash flows for the year ended April 30, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of POS Financial, Inc. as of April
30, 1998 and the results of its operations and its cash flows for the year ended
April 30, 1998 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed, in Note 4 to the financial
statements, the Company's major asset is a note receivable from an affiliate.
The ability of the affiliate to continue as a going concern is in question. This
matter raises substantial doubt about the Company's ability to continue as a
going concern. The accompanying financial statements do not include any
adjustments to the recorded asset amounts and to the recorded liability amounts
that might be necessary should the Company be unable to continue as a going
concern.
________________________
LAZAR LEVINE & FELIX LLP
New York, New York
July 9, 1998
<PAGE>
POS FINANCIAL, INC.
BALANCE SHEETS
APRIL 30, 1998 AND 1997
- ASSETS -
<TABLE>
<CAPTION>
1998 1997
---------- ----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 223,727 $ 332,801
Stamp inventory 9,773 --
Due from U.S. Mining, Inc. 1,010,070 --
Accrued interest receivable 26,657 --
Other current assets -- 25
---------- ----------
TOTAL CURRENT ASSETS 1,270,227 332,826
MACHINERY AND EQUIPMENT,
less accumulated depreciation of $18,275 (1998)
and $2,125 (1997) 24,224 40,374
---------- ----------
TOTAL ASSETS $1,294,451 $ 373,200
========== ==========
- LIABILITIES AND STOCKHOLDER'S EQUITY -
CURRENT LIABILITIES:
Accrued interest payable $ 35,000 $ --
Income taxes payable 44,000 3,000
Loans payable - other 4,700 --
Loans payable - stockholder and affiliate 1,148,426 359,010
---------- ----------
TOTAL CURRENT LIABILITIES 1,232,126 362,010
---------- ----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDER'S EQUITY:
Common stock, no par value; 2,500 shares authorized,
issued and outstanding 25 25
Retained earnings 62,300 11,165
---------- ----------
TOTAL STOCKHOLDER'S EQUITY 62,325 11,190
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDER'S EQUITY $1,294,451 $ 373,200
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 2.
<PAGE>
POS FINANCIAL, INC.
STATEMENTS OF INCOME
YEAR ENDED APRIL 30, 1998 AND FOR THE
PERIOD FEBRUARY 20, 1997 (DATE OF INCEPTION) THROUGH APRIL 30, 1997
1998 1997
-------- --------
(Unaudited)
REVENUES:
Commission income $152,008 $ 26,451
Stamp income 2,481 --
Interchange fees 4,708 --
Interest 26,657 --
-------- --------
TOTAL REVENUES 185,854 27,451
-------- --------
EXPENSES:
Advertising 7,159 --
Commission 17,738 --
Depreciation 16,150 2,125
Equipment lease 6,945 --
Interest 35,000
Other 2,129 74
Stamps 1,768 --
Supplies 1,101 5,430
Telephone 5,084 4,299
Travel 645 1,358
-------- --------
TOTAL EXPENSES 93,719 13,286
-------- --------
INCOME BEFORE PROVISION FOR INCOME TAXES 92,135 14,165
Provision for income taxes 41,000 3,000
-------- --------
NET INCOME $ 51,135 $ 11,165
======== ========
The accompanying notes are an integral part of these financial statements.
Page 3.
<PAGE>
POS FINANCIAL, INC.
STATEMENTS OF STOCKHOLDER'S EQUITY
YEAR ENDED APRIL 30, 1998 AND FOR THE
PERIOD FEBRUARY 20, 1997 (DATE OF INCEPTION) THROUGH APRIL 30, 1997
Common Retained
Stock Earnings Total
----- -------- -----
Capital contribution (unaudited) $ 25 $ -- $ 25
Net income (unaudited) -- 11,165 11,165
------- ------- -------
Balance - April 30, 1997 (unaudited) 25 11,165 11,190
Net income -- 51,135 51,135
------- ------- -------
BALANCE - APRIL 30, 1998 $ 25 $62,300 $62,325
======= ======= =======
The accompanying notes are an integral part of these financial statements.
Page 4.
<PAGE>
POS FINANCIAL, INC.
STATEMENTS OF CASH FLOWS
YEAR ENDED APRIL 30, 1998 AND FOR THE
PERIOD FEBRUARY 20, 1997 (DATE OF INCEPTION) THROUGH APRIL 30, 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 51,135 $ 11,165
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation 16,150 2,125
(Increase) decrease in assets:
Stamp inventory (9,773) --
Accrued interest receivable (26,657) --
Other current assets 25 (25)
Increase in liabilities:
Accrued interest payable 35,000 --
Income taxes payable 41,000 3,000
----------- -----------
Net cash provided by operating activities 106,880 16,265
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in due from U.S. Mining, Inc. (1,010,070) --
Purchase of property and equipment -- (42,499)
----------- -----------
Net cash used by investing activities (1,010,070) (42,499)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable - stockholder and affiliate 789,416 359,010
Increase in loans payable - other 4,700 --
Equity contribution -- 25
----------- -----------
Net cash provided by financing activities 794,116 359,035
----------- -----------
NET (DECREASE) INCREASE IN CASH (109,074) 332,801
BALANCE - BEGINNING OF PERIOD 332,801 --
----------- -----------
BALANCE - END OF PERIOD $ 223,727 $ 332,801
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
Page 5.
<PAGE>
POS FINANCIAL, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(a) Nature of Business:
The Company was formed on February 20,1997 as a New Jersey
corporation. The Company is engaged in the operation of automated
teller machines ("ATMs"), and earns a fee on each transaction as
executed. The ATMs are located in retail establishments throughout the
United States.
The ATMs currently dispense cash and postage stamps. The Company
anticipates that additional products and services will be dispensed
from the ATMs within the next two years.
(b) Accounting Estimates:
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues
and expenses during the period. Actual results could differ from those
estimates.
(c) Stamp inventory:
Stamp inventory is recorded at cost.
(d) Property and Equipment:
Property and equipment is stated at cost.
Provision is made for depreciation on the straight-line and declining
- balance methods by annual charges to operations calculated to absorb
the costs of the assets over their estimated useful lives. A salvage
value is provided when considered necessary. Depreciation methods and
life used for tax purposes differ from those used for financial
statement purposes.
Expenditures for repairs and maintenance are charged to income as
incurred. Expenditures for major renewals, betterments and additions
are capitalized. When assets are retired or otherwise disposed of, the
costs of the assets and the related accumulated depreciation are
eliminated from the accounts. Any gain or loss on disposition is
credited or charged to income.
Page 6.
<PAGE>
POS FINANCIAL, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 AND 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued):
(e) Statements of Cash Flows:
For the purpose of the statements of cash flows the Company considers
all highly liquid investments purchased with a remaining maturity of
three months or less to be cash equilvalents.
(f) Income Taxes:
The Company has adopted Statement of Financial Accounting Standards
No. 109 (SFAS No. 109), "Accounting for Income Taxes." SFAS No. 109
requires the use of the asset and liability approach of providing for
income taxes. The asset and liability approach requires the
recognition of deferred tax assets and liabilities for the expected
future tax consequences of temporary differences between the carrying
amounts and the tax basis of assets and liabilities.
NOTE 2 - RELATED PARTY TRANSACTIONS:
(a) Due from Affiliate:
The sole shareholder of the Company is an officer and sole shareholder
of a company (U.S. Mining, Inc.) which has an obligation payable to
POS Financial, Inc. in the amount of $1,010,070 (1998) and $-0-
(1997). Such obligations bear interest at the rate of 8% per annum.
These amounts represent advances and expenses paid on behalf of the
Company. The outstanding balance is payable on demand.
Interest income of $26,657 has been accrued as of April 30, 1998.
(b) Loan Payable to Stockholder and Affiliate:
The Company has an obligation to the stockholder and an affiliate
(Electronic Marketing, Inc.), which is payable on demand.
Such obligations bear interest at the rate of 8% per annum. Interest
expense of $35,000 has been accrued as of April 30, 1998.
NOTE 3 - COMMITMENTS:
The Company has no written purchase or lease agreements with ATM
owners. There are also no written agreements with the owners of the
locations where the ATM's are placed.
Page 7.
<PAGE>
POS FINANCIAL, INC.
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998 AND 1997
NOTE 3 - COMMITMENTS (Continued):
Substantially all ATMs operated by the Company from inception consist
of test equipment offered by the manufacturer. Accordingly, equipment
rental expense $6,945 has been recorded for the period.
NOTE 4 - GOING CONCERN UNCERTAINTY:
The accompanying financial statements have been prepared in conformity
with generally accepted accounting principles, which contemplates
continuation of the Company as a going concern. The Company's major
asset is a note receivable from an affiliate. The ability of this
affiliate to continue as a going concern is in question. This creates
an uncertainty about the Company's ability to continue as a going
concern. The financial statements do not include adjustments relating
to the recoverability and classification of recorded asset amounts and
classification of liabilities that might be necessary should the
Company be unable to continue in existence. Management is currently
monitoring the situation with the affiliate and believes that they
will be able to continue as a going concern.
Page 8.
<PAGE>
Appendix C
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement") is dated this 3rd day of
August, 1998 and is by and between Franklin Consolidated Mining Co., Inc., a
Delaware Corporation ("Franklin"), William C. Martucci ("WMC") and POS
Financial, Inc. a New Jersey corporation.
RECITALS
WHEREAS, WCM is the owner of 100% of the outstanding shares of Common
Stock, par value $.01 per share of POS (the "POS Common Stock") and
WHEREAS, Franklin desires to acquire the POS Common Stock in exchange for
11,197,413 shares of Common Stock, par value $.01 per share of Franklin (the
"Franklin Common Stock") upon the terms and subject to the conditions
hereinafter set forth.
NOW THEREFORE, in consideration of the mutual agreements and covenants
hereinafter set forth, and for other good and valuable consideration, the
parties hereto agree as follows:
ARTICLE 1
1.1 Terms of the Exchange:
(a) WCM shall sell, assign, assign, transfer and convey at the closing date
the POS Common Stock to Franklin.
(b) In consideration for the POS Common Stock, Franklin shall cause its
transfer agent to issue to WCM or its assignees on the Closing Date a
certificate or certificates representing the Franklin Common Stock, each duly
executed on behalf of Franklin in the name of WCM or his assignees.
1.2 Taking of Necessary Action: Further Action: Each of Franklin and WCM
shall take all reasonable and lawful action as may be necessary or appropriate
in order to effectuate the transactions contemplated by this Agreement. In case
at any time after the Closing Date any further action shall be necessary or
desirable to carry out the intentions of this Agreement, the officers and
directors of each of the parties hereto shall take all such lawful and necessary
action.
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ARTICLE 2
Closing
2.1 Closing: The closing of the transactions contemplated by this Agreement
will be held at the offices of 3 Dundar Road, Springfield, N.J. 07081, at 10:00
a.m., local time on or about the fifth business day after the date upon which
all conditions contained in Articles 6 and 7 hereof have been satisfied or
waived or such other time and place as the parties may agree upon (the "Closing
Date").
2.2 Delivery of Certificates. On the Closing Date (a) Franklin shall issue
to WCM the Franklin Common Stock and (b) WCM shall deliver to Franklin the POS
Common Stock duly endorsed for transfer to Franklin.
ARTICLE 3
Representations and Warrantees of WCM
WCM hereby represents and warrants to Franklin as follows:
3.1 Power and Authorization. WCM has the power and authority to execute and
deliver this Agreement and to perform his obligations under the terms of this
Agreement. All action on the part of WCM necessary for the execution, delivery
and performance by WCM of this Agreement has been taken or will be taken prior
to the Closing Date. This Agreement, when executed and delivered by WCM shall
constitute the valid and binding obligations of WCM enforceable in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy insolvency or other laws relating to or affecting creditor's rights
generally or by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
3.2 Investment. WCM is acquiring the Franklin Common Stock for investment
for his own account, not as a nominee or agent and not with a view to, or for
resale in connection with any distribution of any part thereof, and he has no
present intention of selling, granting any participation in or otherwise
distributing the same. WCM understands that the Franklin Common Stock has not
been registered under the Securities Act of 1933, as amended (the "Act") or
applicable state and other Common Stock laws and is being issued to WCM by
reason of a specific exemption from the registration provisions of the Act and
applicable state and other Common Stock laws, the availability of which depends
upon, among other things, the bona fide nature of the investment intent and the
accuracy of WCM's representations expressed herein.
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3.4 Restricted Common Stock. WCM has no need of liquidity in this
investment and acknowledges and understands that he must bear the economic risk
of this investment for an indefinite period of time because the Franklin Common
Stock must be held indefinitely unless subsequently registered under the Act and
applicable state and other Common Stock laws or unless an exemption from such
registration is available. WCM understands that any transfer agent of Franklin
will be issued a stop-transfer instructions with respect to such shares unless
such transfer is subsequently registered under the Act and applicable state and
other Common Stock laws or unless an exemption from such registration is
available, and that each certificate representing the Franklin Common Stock will
bear a restrictive legend to such effect.
ARTICLE 4
Representations and Warranties of Franklin
Franklin hereby represents and warrants to WCM and POS as follows:
4.1 Organization and Good Standing; Articles of Incorporation and By-Laws:
Franklin is a corporation duly incorporated, validly existing and in good
standing under the laws of the State of Delaware. Franklin has the requisite
corporate power and authority to own and operate its properties and assets and
to carry on its business as currently conducted. Franklin is qualified to do
business in those jurisdictions listed on Schedule 4.1 hereto. Franklin is not
qualified to do business as a foreign corporation in any other jurisdiction and
such qualification is not now required, except to the extent that the failure to
so qualify would not have a material adverse effect on Franklin's business as
currently conducted.
4.2 Corporate Power and Authorization. Franklin has the corporate power and
authority to execute and deliver this Agreement, to issue the Common Stock
hereunder and to perform its obligations under the terms of this Agreement. All
corporate action on the part of Franklin, its directors and stockholders
necessary for the authorization, execution, delivery and performance by Franklin
of this Agreement and the authorization, sale, issuance and delivery of Franklin
stock has been taken or will be taken prior to the Closing Date. This Agreement,
when executed and delivered by Franklin, shall constitute valid and binding
obligations of Franklin, enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency or other laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law). Upon the Closing Date, the Common Stock will be
duly authorized and, when issued in compliance with the provisions of this
Agreement, will be validly issued, fully paid, nonassessable, and free and clear
of any liens, pledges, claims, security interests or other
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encumbrances created hereby; provided, however, that the Common Stock is subject
to restrictions on transfer under state or federal Common Stock laws as set
forth herein.
4.3 Capitalization. The authorized capital stock of Franklin consists of
100,000,000 shares of Common Stock, $0.01 par value, of which 3,955,173 shares
are issued and outstanding. All of the outstanding shares of Common Stock have
been duly authorized and validly issued and are fully paid and nonassessable.
Except as set forth on Schedule 4.3, there are no options, warrants or other
rights outstanding to purchase or acquire, or any Common Stock convertible into,
nor has Franklin agreed to issue or reissue, other than pursuant to this
Agreement, any of Franklin's authorized and unissued capital stock. Except as
described on Schedule 4.3, there are no agreements or understandings that affect
or relate to the voting or giving of written consent with respect to any of
Franklin's outstanding Common Stock. There are no preemptive rights with respect
to the issuance or sale of Franklin's capital stock.
4.4 Financial Statements. Franklin has provided the Stockholder with (i)
audited financial statements of Franklin as of and for the years ended December
31, 1996 and 1997 (the "Audited Financial Statements"), and (ii) unaudited
financial statements of Franklin as of and for the one month ended March 31,
1998 (the "Interim Financial Statements" and together with the Audited Financial
Statements, the "Financial Statements"). The Financial Statements are complete
and correct in all material respects and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the period indicated. The Financial Statements fairly present the
financial condition and operating results of Franklin as of the dates and for
the periods indicated, subject, with respect to the Interim Financial
Statements, to normal year-end audit adjustments.
4.5 Absence of Certain Developments. Except as described on Schedule 4.5
since December 31, 1997, there has been no change in the assets, liabilities,
condition (financial or otherwise), operating results, business or prospects of
Franklin from that reflected in the Audited Financial Statements, except changes
in the ordinary course of business that have not been, individually or in the
aggregate, materially adverse to the assets, properties, condition (financial or
otherwise), operating results, business or prospects of Franklin or changes
reflected in the Interim Financial Statements. Without limiting the foregoing,
except as described on Schedule 4.5, Franklin has not, since December 31, 1997,
(i) directly or indirectly declared or paid any dividend or ordered or made any
other distribution on account of any shares of any class of the capital stock of
Franklin, (ii) directly or indirectly redeemed, purchased or otherwise acquired
any such shares or agreed to do so or set aside any sum or property for any such
purpose, (iii) made any capital expenditures exceeding $100,000, (iv) incurred
any indebtedness exceeding $100,000, (v) sold or encumbered any material assets,
property, rights licenses or permits used in
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Franklin's business, (v) suffered any extraordinary loss, damage or casualty
loss, (vi) received notification of termination or significant decrease from any
material customer or supplier, or (vii) committed to any of the foregoing.
4.6 Absence of Undisclosed Liabilities. Except as disclosed on Schedule 4.6
Franklin does not have any liability or obligation, absolute or contingent, that
is not reflected in the Financial Statements, other than obligations and
liabilities which taken individually or in the aggregate would not have a
material adverse effect on Franklin's assets, liabilities, condition (financial
or otherwise), operating results, business or prospect.
4.7 Taxes. Except as disclosed on Schedule 4.7 Franklin has filed all tax
returns and reports required by law to be filed, and has paid all taxes,
assessments and other government al charges that are due and payable, except for
those matters reasonably being contested by Franklin and those matters which,
individually and in the aggregate, would not have a material adverse effect on
Franklin's assets, liabilities, condition (financial or otherwise), operating
results, business or prospects. The charges, accruals and reserves on the books
of Franklin in respect of taxes are considered adequate by Franklin, and
Franklin knows of no assessment for additional taxes or any basis therefor.
4.8 Title to Properties: Except as set forth on Schedule 4.8 Franklin has
good title to all of its properties and assets, both real and personal, tangible
and intangible, reflected on the balance sheet included in the Audited Financial
Statements or acquired after the date thereof (except inventory or other
personal property disposed of in the ordinary course of business subsequent to
the date thereof), and such properties and assets are not subject to any
mortgage, pledge, lien, security interest encumbrance or charge other than (o)
liens for current taxes not yet due and payable, (ii) liens and encumbrances
that do not materially detract from the value of the property subject thereto or
materially impair the operations of Franklin or (iii) liens securing obligations
reflected in the Financial Statements. With respect to properties or assets it
leases, except as set forth on Schedule 4.8, Franklin is in compliance with such
leases (except for such defaults or breaches that would not, individually or in
the aggregate, have a material adverse affect on assets, liabilities, condition
(financial or otherwise), operating results, business or prospects) and holds
valid leasehold interests free of any liens, claims or encumbrances except for
those described in subsections (i) through (iii) hereof.
4.9 Compliance with Other instruments. Franklin is not in violation or
default of any provision of its Certificate of Incorporation or By-Laws, or,
except as described on Schedule 4.9 in default of any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree to
which Franklin is a party or by which it is bound. The execution, delivery and
performance by Franklin of this Agreement, and the consummation of transactions
contemplated hereby and thereby, will not, except as described on
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Schedule 4.9 result in any violation of or conflict with the Franklin's
Certificate of Incorporation or By-Laws, and, will not result in any violation
of or conflict with, or constitute a default under, any material mortgage,
indebtedness, indenture, contract, agreement, instrument, judgment or decree to
which Franklin is a party or by which it is bound or in the creation of any
material mortgage, pledge, lien, encumbrance or charge upon any of the
properties or assets of Franklin.
4.10 Litigation, etc. Except as described on Schedule 4.10, there are no
actions, suits, proceedings (arbitration, regulatory or otherwise) or
investigations pending or, to Franklin's best knowledge, threatened, against
Franklin or against any if its officers or directors in their capacity as such
or which otherwise involves Franklin's business or operations. Franklin has not
commenced or had commenced against it any case under applicable bankruptcy laws.
Franklin is not engaged in any legal action to recover moneys due it or for
damages sustained by it in connection with Franklin's business.
4.11 Employees. Franklin does not have any employees employed at will or
pursuant to an employment agreement with Franklin.
4.12 Registration Rights. Except as described on Schedule 4.12, Franklin is
not under any contractual obligation to register under the Act, any of its
currently outstanding Common Stock or any of its Common Stock which may
hereafter be issued.
4.13 Governmental Consent. Except as set forth on Schedule 4.13, no
consent, approval or authorization of or registration, qualification,
designation, declaration or filing with any governmental authority on the part
of Franklin is required in connection with the valid execution, delivery and
performance of this Agreement, the offer, sale or issuance of the Franklin
Common Stock, or the consummation of any other transactions contemplated hereby
or thereby, except for filings that may be required to comply with applicable
federal and state Common Stock laws.
4.14 Compliance with Law. Except as set forth on Schedule 4.14 Franklin is
conducting its business and operations in compliance in all material respects
with all governmental rules and regulations applicable thereto, including
without limitation those relating to occupational safety, environmental, health
and employment practices, and is not in violation or default in any material
respects under any statute, law, ordinance, rule, regulation, judgment, order,
decree, concession, grant, franchise, license or other governmental
authorization or approval applicable to it or any of its properties.
4.15 Permits. Franklin has all permits, licenses, orders and approvals of
any federal, state, local or foreign governmental or regulatory body that are
material to or necessary in the conduct of its business as now conducted
(collectively, the "Permits"); all such Permits are in full force and effect; no
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violations have been recorded in respect of any such Permits; and not proceeding
is pending or, to the knowledge of Franklin, threatened to revoke or limit any
such Permits. Schedule 4.15 contains a complete and accurate list of all
Permits.
4.16 Offering. Subject to accuracy of the WCM's representations in Article
3, hereof, the offer, sale and issuance of the Common Stock as contemplated by
this Agreement will constitute transactions exempt from the registration
requirements of Section 5 of the Securities Act.
4.17 Brokers or Finders. Franklin has not retained any broker or finder in
connection with the transactions contemplated by this Agreement, and there are
no brokerage commissions, finder's fees or similar items of compensation payable
in connection therewith based on any arrangement or agreement made by or on
behalf of Franklin.
4.18 Intellectual Property. Franklin does not have any patents, patent
applications, trademarks and trademark applications or other registrations of
intellectual property rights registered in its name or licensed to Franklin.
4.19 Property, Equipment, etc. To the best of Franklin's knowledge, the
property and equipment owned or leased by Franklin, taken as a whole, are in
good operating condition (except for ordinary wear and tear which do not
adversely affect Franklin's businesses and are generally suitable for the uses
for which they are currently used.
4.20 Insurance. Except as set forth on Schedule 4.20, the physical
properties and assets used in connection with Franklin's businesses are covered
by insurance with reputable companies against casualty and other losses
customarily obtained to cover comparable properties and assets by similar
businesses in the region in which such properties and assets of Franklin are
located, in amounts and coverage which are reasonable in light of existing
conditions. Franklin has not failed to give any notice or present any claim
under any insurance policy in a due and timely fashion except for such failures
that would not have a material adverse effect on Franklin's assets, liabilities,
condition (financial or otherwise), operating results, business or prospects.
4.21 No Misrepresentations or Omissions. To Franklin's best knowledge, all
information provided in connection herewith and all representations and
warranties hereunder, including the disclosures in the Financial Statements,
this Agreement or the Schedules hereto, are complete and correct in all material
respects and do not contain any misleading statement or omit any material
information.
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4.22 ERISA. Franklin does not maintain any "Plan" subject to the Employment
Retirement Income Security Act of 1974, as amended ("ERISA").
4.23 Common Stock Filings. Franklin has made all filings with the
Securities and Exchange Commission (the "SEC") that it has been required to make
under the Act and the rules and regulations promulgated thereunder and under the
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder. Franklin has provided WCM with complete and
correct copies of all of Franklin's filings made with the SEC (including all
exhibits to such filings) since January 1, 1993 (all such documents which have
been filed with the SEC, as amended, the "SEC Documents"), including, without
limitation all Annual Reports on Form 10-KSB, all Quarterly Reports on Form
10-QSB, all Current Reports on Form 8-K, all registration statements and all
proxy statements and annual reports to shareholders. Except as set forth on
Schedule 4.23 and to the best knowledge of Franklin, the SEC Documents comply in
all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and to the best knowledge of Franklin, none of
the SEC Documents contain any untrue statement of a material fact or omit to
state 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.
4.24 Contracts. Schedule 4.24 sets forth a list of all written contracts,
agreements, mortgages, notes, instruments, leases, licenses (other than licenses
set forth in Schedule 4.16) hereof), franchises, arrangements or understandings
with respect to Franklin (the "Franklin Contracts"). Except as set forth on
Schedule 4.14, all of Franklin Contracts are valid and in full force and effect
and there are no existing defaults, or events which with the passage of time or
the giving of notice, or both, would constitute defaults by Franklin, or to the
knowledge of Franklin, by any other party to any Franklin Contract.
ARTICLE 5
Representations and Warranties of POS
POS hereby represents and warrants to Franklin as follows:
5.1 Organization and Good Standing; Articles of Incorporation and By-Laws:
POS is a corporation duly incorporated, validly existing and in good standing
under the laws of the State of New Jersey. POS has the requisite corporate power
and authority to own and operate its properties and assets and to carry on its
business as currently conducted. POS is qualified to do business in those
jurisdictions listed on Schedule 5.1 hereto. POS is not qualified to do business
as a foreign corporation in any other jurisdiction and such qualification is not
now required, except to the extent that the failure to so qualify would not have
a material adverse effect on POS's business as currently conducted.
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5.2 Corporate Power and Authorization. POS has the corporate power and
authority to execute and deliver this Agreement, and to perform its obligations
under the terms of this Agreement. All corporate action on the part of POS, its
directors and stockholders necessary for the authorization, execution, delivery
and performance by POS of this Agreement has been taken or will be taken prior
to the Closing Date. This Agreement, when executed and delivered by POS, shall
constitute valid and binding obligations of POS, enforceable in accordance with
its terms, except as the enforceability thereof may be limited by bankruptcy,
insolvency or other laws relating to or affecting creditors' rights generally or
by general equitable principles (regardless of whether such enforceability is
considered in a proceeding in equity or at law).
5.3 Capitalization. The authorized capital stock of POS consists of 2,500
shares of Common Stock, $0.01 par value, of which 2,500 shares are issued and
outstanding. All of the outstanding shares of common stock have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
options, warrants or other rights outstanding to purchase or acquire, or any
Common Stock convertible into, nor has POS agreed to issue or reissue, other
than pursuant to this Agreement, any of POS's authorized and unissued capital
stock. There are no agreements or understandings that affect or relate to the
voting or giving of written consent with respect to any of POS's outstanding
Common Stock. There are no preemptive rights with respect to the issuance or
sale of POS's capital stock.
5.4 Financial Statements. POS has provided Franklin with (i) audited
financial statements of POS as of and for the years ended December 31, 1997 (the
"POS Audited Financial Statements"), and (ii) unaudited financial statements of
POS as of and for the one quarter ended March 31, 1998 (the "POS Interim
Statements" and together with the POS Audited Financial Statements, the "POS
Financial Statements"). The POS Financial Statements are complete and correct in
all material respects and have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
period indicated. The POS Financial Statements fairly present the financial
condition and operating results of POS as of the dates and for the periods
indicated, subject, with respect to the POS Interim Financial Statements, to
normal year-end audit.
5.5 Absence of Certain Developments. Since December 31, 1997, there has
been no change in the assets, liabilities, condition (financial or otherwise),
operating results, business or prospects of POS from that reflected in the POS
Audited Financial Statements, except changes in the ordinary course of business
that have not been, individually or in the aggregate, materially adverse to the
assets, properties, condition (financial or otherwise), operating results,
business or prospects of POS or changes reflected in the POS Interim Financial
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Statements. Without limiting the foregoing, except as described on Schedule 5.5,
POS has not, since December 31, 1997, (i) directly or indirectly declared or
paid any dividend or ordered or made any other distribution on account of any
shares of any class of the capital stock of POS, (ii) directly or indirectly
redeemed, purchased or otherwise acquired any such shares or agreed to do so or
set aside any sum or property for any such purpose, (iii) made any capital
expenditures exceeding $100,000, (iv) incurred any indebtedness exceeding
$100,000, (v) sold or encumbered any material assets, property, rights licenses
or permits used in POS's business, (v) suffered any extraordinary loss, damage
or casualty loss, (vi) received notification of termination or significant
decrease from any material customer or supplier, or (vii) committed to any of
the foregoing.
5.6 Absence of Undisclosed Liabilities. Except as disclosed on Schedule 5.6
POS does not have any liability or obligation, absolute or contingent, that is
not reflected in the POS Financial Statements, other than obligations and
liabilities which taken individually or in the aggregate would not have a
material adverse effect on POS's assets, liabilities, condition (financial or
otherwise), operating results, business or prospect.
5.7 Taxes. Except as disclosed on Schedule 5.7, POS has filed all tax
returns and reports required by law to be filed, and has paid all taxes,
assessments and other government al charges that are due and payable, except for
those matters reasonably being contested by POS and those matters which,
individually and in the aggregate, would not have a material adverse effect on
POS's assets, liabilities, condition (financial or otherwise), operating
results, business or prospects. The charges, accruals and reserves on the books
of POS in respect of taxes are considered adequate by POS, and POS knows of no
assessment for additional taxes or any basis therefor.
5.8 Title to Properties: POS has good title to all of its properties and
assets, both real and personal, tangible and intangible, reflected on the
balance sheet included in the Audited Financial Statements or acquired after the
date thereof (except inventory or other personal property disposed of in the
ordinary course of business subsequent to the date thereof), and such properties
and assets are not subject to any mortgage, pledge, lien, security interest
encumbrance or charge other than (o) liens for current taxes not yet due and
payable, (ii) liens and encumbrances that do not materially detract from the
value of the property subject thereto or materially impair the operations of POS
or (iii) liens securing obligations reflected in the POS Financial Statements.
With respect to properties or assets it leases, POS is in compliance with such
leases (except for such defaults or breaches that would not, individually or in
the aggregate, have a material adverse affect on assets, liabilities, condition
(financial or otherwise), operating results, business or prospects) and holds
valid leasehold interests free of any liens, claims or encumbrances except for
those described in subsections (i) through (iii) hereof.
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5.9 Compliance with Other instruments. POS is not in violation or default
of any provision of its Certificate of Incorporation or By-Laws, or, in default
of any material mortgage, indebtedness, indenture, contract, agreement,
instrument, judgment or decree to which POS is a party or by which it is bound.
The execution, delivery and performance by POS of this Agreement, and the
consummation of the transactions contemplated hereby and thereby, will not,
result in any violation of or conflict with the POS's Certificate of
Incorporation or By-Laws, and, will not result in any violation of or conflict
with, or constitute a default under, any material mortgage, indebtedness,
indenture, contract, agreement, instrument, judgment or decree to which POS is a
party or by which it is bound or in the creation of any material mortgage,
pledge, lien, encumbrance or charge upon any of the properties or assets of POS.
5.10 Litigation, etc. There are no actions, suits, proceedings
(arbitration, regulatory or otherwise) or investigations pending or, to POS's
best knowledge, threatened, against POS or against any if its officers or
directors in their capacity as such or which otherwise involve POS's business or
operations. POS has not commenced or had commenced against it any case under
applicable bankruptcy laws. POS is not engaged in any legal action to recover
moneys due it or for damages sustained by it in connection with POS's business.
5.11 Employees. POS does not have any employees employed at will or
pursuant to an employment agreement with POS.
5.12 Registration Rights. POS is not under any contractual obligation to
register under the Act, any of its currently outstanding Common Stock or any of
its Common Stock which may hereafter be issued.
5.13 Governmental Consent. No consent, approval or authorization of or
registration, qualification, designation, declaration or filing with any
governmental authority on the part of POS is required in connection with the
valid execution, delivery and performance of this Agreement, or the consummation
of any other transactions contemplated hereby or thereby.
5.14 Compliance with Law. POS is conducting its business and operations in
compliance in all material respects with all governmental rules and regulations
applicable thereto, including without limitation those relating to occupational
safety, environmental, health and employment practices, and is not in violation
or default in any material respects under any statute, law, ordinance, rule,
regulation, judgment, order, decree, concession, grant, franchise, license or
other governmental authorization or approval applicable to it or any of its
properties.
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5.15 Permits. POS does not have any permits, licenses, orders and approvals
of any federal, state, local or foreign governmental or regulatory body that are
material to or necessary in the conduct of its business as now conducted.
5.16 Brokers or Finders. POS has not retained any broker or finder in
connection with the transactions contemplated by this Agreement, and there are
no brokerage commissions, finder's fees or similar items of compensation payable
in connection therewith based on any arrangement or agreement made by or on
behalf of POS.
5.17 Intellectual Property. POS does not have any patents, patent
applications, trademarks and trademark applications or other registrations of
intellectual property rights registered in its name or licensed to POS.
5.18 Property, Equipment, etc. To the best of POS's knowledge, the property
and equipment owned or leased by POS, taken as a whole, are in good operating
condition (except for ordinary wear and tear which do not adversely affect POS's
businesses and are generally suitable for the uses for which they are currently
used.
5.19 Insurance. The physical properties and assets used in connection with
POS's businesses are covered by insurance with reputable companies against
casualty and other losses customarily obtained to cover comparable properties
and assets by similar businesses in the region in which such properties and
assets of POS are located, in amounts and coverage which are reasonable in light
of existing conditions. POS has not failed to give any notice or present any
claim under any insurance policy in a due and timely fashion except for such
failures that would not have a material adverse effect on POS's assets,
liabilities, condition (financial or otherwise), operating results, business or
prospects.
5.20 No Misrepresentations or Omissions. To POS's best knowledge, all
information provided in connection herewith and all representations and
warranties hereunder, including the disclosures in the Financial Statements,
this Agreement or the Schedules hereto, are complete and correct in all material
respects and do not contain any misleading statement or omit any material
information.
5.21 ERISA. POS does not maintain any "Plan" subject to ERISA.
5.22 Contracts. Schedule 5.22 sets forth a list of all written contracts,
agreements, mortgages, notes, instruments, leases, licenses (other than licenses
set forth in Schedule 5.16 hereof), franchises, arrangements or understandings
with respect to POS (the "POS Contracts"). Except as set forth on Schedule 5.14,
all of POS Contracts are valid and in full force and effect and
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there are no existing defaults, or events which with the passage of time or the
giving of notice, or both, would constitute defaults by POS, or to the knowledge
of POS, by any other party to any POS Contract.
ARTICLE 6
The obligations of Franklin to issue the Common Stock on the Closing Date are
subject to the fulfillment as of the Closing Date of the following conditions:
6.1 Representations and Warranties Correct. The representations and
warranties made by WCM and POS in Article 3 and 5 hereof be true and correct at
and as of the Closing Date, with the same effect as though such representations
and warranties had been made at and as of the Closing Date.
6.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by WCM and POS at or prior to the Closing Date shall
have been performed or complied with, including the obtaining of all consents
necessary for the consummation of the transaction by WCM and POS.
6.3 Compliance Certificate of each of POS and WCM. POS shall have delivered
to Franklin a certificate executed by the President of POS dated the Closing
Date and WCM shall have delivered a certificate executed by WCM certifying to
the fulfillment of the conditions specified in Sections 6.1 and 6.2 of this
Agreement as they relate to WCM.
6.4 POS Common Stock WCM shall have delivered to Franklin Certificates
representing POS Common Stock, duly endorsed for transfer to Franklin.
6.5 Compliance Certificate. Franklin shall have received a certificate of
the Secretary of POS certifying as to (a) the Certificate of Incorporation of
POS, (b) By-Laws of POS, (c) the good standing of POS in New Jersey, (d)
resolutions of the Board of Directors authorizing the execution of this
Agreement and the other transactions contemplated herein and (e) incumbency of
POS's signatory.
ARTICLE 7
Conditions to Closing of WCM and POS
WCM's obligation to sell the POS Common Stock at the Closing Date is subject to
the fulfillment as of the Closing Date of the following conditions:
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7.1 Representations and Warranties Correct. The representations and
warranties made by Franklin in Article 4 hereof shall be true and correct at and
as of the Closing Date, with the same effect as though such representations and
warranties had been made at and as of the Closing Date.
7.2 Convenants. All covenants, agreements and conditions contained in this
Agreement to be performed by Franklin at or prior to the Closing shall have been
complied with.
7.3 Compliance Certificate. Franklin shall have delivered to WCM a
certificate executed by the President of Franklin dated the Closing Date, and
certifying to the fulfillment of the conditions specified in Sections 7.1 and
7.2 of this Agreement.
7.4 Stock Certificates. Franklin shall have issued or cause to be issued to
WCM a certificate or certificates representing the Franklin Common Stock.
7.5 Compliance Certificate. POS and WCM shall have received a certificate
of the Secretary of certifying as to (a) the Certificate of Incorporation of
Franklin, (b) By-Laws of Franklin, (c) the good standing of Franklin in Delaware
and the jurisdictions listed on Schedule 4.1 hereto, (d) resolutions of the
Franklin's Board of Directors authorizing the execution of this Agreement and
the other transactions contemplated hereby, (e) resolutions of Franklin's
stockholders approving the execution and delivery of this Agreement and the
consummation of the transactions contemplated herein and (f) incumbency of
Franklin signatory.
7.6 Purchase of USM Stock Purchase. Franklin shall have consummated the
transactions contemplated by the Stock Purchase Agreement between Franklin and
USM (the "USM Stock Purchase").
ARTICLE 8
Stockholder Approvals, Board of Directors' Recommendations; Filings:
8.1 Stockholder Approvals; Board of Directors' Recommendations. A meeting
of the stockholders of Franklin shall be held in accordance with the General
Corporation Law of the State of Delaware ("GCL"), as promptly as possible, after
at least 20 days' prior written notice there of to the stockholders of Franklin,
to consider and vote upon, among other things, the adoption and approval of this
Agreement, the USM Stock Purchase, changing of the corporate name of Franklin,
the election of the Board of Directors of Franklin and such other transactions
as contemplated hereby (collectively, the "Proxy Proposals"). Subject to its
fiduciary duty to stockholders, the Board of Directors
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of Franklin shall recommend to its stockholders that the Agreement and the other
Proxy Proposals be adopted and approved.
8.2 Filings. As soon as practicable after the adoption and approval of this
Agreement and the other Proxy Proposals, Franklin shall undertake to prepare and
submit to WCM, for review and approval, any and all documentation and/or filings
required by the GCL or the Act or the exchange Act to be submitted and/or filed.
Upon the approval of such documentation and/or filings by WCM, Franklin shall
undertake to file same, as applicable, with the office of the Secretary of State
of the State of Delaware and the SEC.
8.3 Proxy Statement. As soon as practicable, Franklin shall prepare and
file, or cause to be prepared and filed with the SEC, a proxy statement (such
proxy statement, together with all financial statements, exhibits, and
supplements thereto, being herein called the "Proxy Statement" and such proxy
statement, together with all financial statements and exhibits thereto, in the
form to be filed with the SEC being herein called the "Preliminary Proxy
Statement" to be used in connection with the meeting of the stockholders of
Franklin, or for inclusion in Franklin's filings under any applicable state
takeover laws.
ARTICLE 9
Indemnification
9.1 Indemnification by WCM and POS. WCM agrees to indemnify, defend and
hold Franklin harmless, and its officers, directors, stockholders, agents,
employees, attorneys, affiliates, successors and assigns, from and against, and
pay or reimburse each of them for, any and all claims, losses, damages,
judgments, amounts paid in settlement, costs and legal, accounting or other
expenses (collectively, "Losses") that any of them may sustain or incur as a
result of any misrepresentation, any inaccuracy in, or any breach of, any
warranty or representation or any non-performance of any convenant or other
obligation on the part of WCM and POS contained in this Agreement, or any
document delivered hereunder; provided that WCM and POS shall not be required to
indemnify Franklin for Losses unless such Losses exceed $50,000 in the
aggregate, in which event WCM and POS shall be obligated to indemnify Franklin
for the amount of such Losses in excess of $50,000.
9.2 Indemnification by Franklin. Franklin agrees to indemnify, defend and
hold harmless WCM and officers, directors, stockholders, agents, employees,
attorneys, affiliates, successors and assigns and each of them, from and
against, and pay or reimburse each of them for, any and all Losses that any of
them may sustain or incur as a result of any misrepresentation, breach of
warranties or representations or non-performance of any covenants or other
obligations on the part of Franklin contained in this Agreement or any document
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delivered hereunder; provided that Franklin shall not be required to indemnify
WCM and POS for losses unless such Losses exceed $50,000 in the aggregate, in
which event POS shall indemnify such indemnified party for the amount of such
Losses in excess of $50,000.
9.3 Indemnification Procedures.
(a) Promptly after receipt by a party entitled to indemnification hereunder
(an "Indemnified Party") of notice of any claim or of the commencement of any
action, investigations, suit or proceeding ("Proceeding") with respect to which
such party may make a claim for Indemnification hereunder, the Indemnified Party
will notify the party against whom indemnification is sought (the "Indemnifying
Party") in writing of such claim or Proceeding, and the Indemnifying Party may
in his or its discretion assume the defense of such claim or Proceeding, in
which case he or it shall employ counsel reasonably satisfactory to the
Indemnified Party and shall pay the fees and expenses of such counsel.
Notwithstanding the preceding sentence, an Indemnified Party will be entitled to
employ counsel separate from counsel for the Indemnifying Party and to
participate in the defense of such claim or Proceeding at the Indemnified
Party's expense. No settlement or compromise of any claim or Proceeding shall
give rise to liability of the Indemnifying Party unless such party shall have
been notified of any proposed settlement or compromise and shall have consented
thereto; provided that the Indemnifying Party shall obtain the written consent
of the Indemnified Party, which consent shall not be unreasonably withheld,
prior to ceasing to defend, settling or otherwise disposing of any such claim or
proceeding, if as a result of the failure of the Indemnified Party to do so
would cause it or him to become subject to injunctive or other equitable relief,
or the business of the Indemnified Party (or that of its subsidiary) would be
materially adversely affected in any manner.
(b) Other Losses. In the event that any Indemnified Party suffers a Loss or
otherwise becomes entitled to indemnification hereunder from an Indemnifying
Party in a situation that does not involve a Proceeding being instituted by a
third party, the Indemnified Party shall send notice as it would pursuant to
Section 9.3(a) in order to provide reasonable notice to the Indemnifying Party
as to the nature and extent of the Loss.
(c) Effect. Any notice of a claim or Proceeding or a claim for indemnity
provided for herein shall be in writing and shall specify, to the extent known
by the Indemnified Party, the nature and extent of the claim or Proceeding and
the amount being asserted as damages or Losses, as the case may be.
Notwithstanding the foregoing, the failure to so provide notice on a timely and
adequate basis (except to the extent that such notice is given after the
survival period contained in Section 9.2) shall not relieve the Indemnifying
Party of its obligations to indemnify hereunder except to the extent that such
Indemnifying Party can establish prejudice to it by the lack of timely or
adequate notice.
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ARTICLE 10
Termination
10.1 Termination. This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to the Closing, whether prior to
or after approval by the stockholders of Franklin by consent of all of the
parties hereto, or by either Franklin, on the one hand, or WCM on the other, if;
(i) the other party shall, when made, have breached in any material respect any
of its representations or warranties contained in this Agreement; (ii) any such
representation or warranty shall not be correct or accurate in all material
respects at and as of the Closing Date with the same effect as if made at such
time (with such exceptions as are permitted hereunder); (iii) the other party
shall have failed top comply in all material respects with any of its convents
or agreements contained in this Agreement to be complied with or performed by it
at or prior to the Closing Date; (iv) if a permanent injunction is entered,
enforced or deemed applicable to this Agreement which prohibits the consummation
of the transactions contemplated hereby and all appeals of such injunction shall
have been taken and shall have been unsuccessful; (v) if any governmental
entity, the consent of which is a condition to the obligation of such party to
consummate the transactions contemplated hereby, shall have determined not to
grant its consent and all appeals of such determination shall have been taken
and shall have been unsuccessful, or (vi) the Closing Date shall not have
occurred within 180 days of the date hereof.
10. 2 Effect of Termination. In the event of termination of this Agreement
pursuant to Section 10.1 hereof, all rights of all parties hereto shall cease
and terminate, except for such rights as any party may otherwise have for breach
of contract, including, without limitation, rights for breach of any
representations, warranties or covenants contained herein.
ARTICLE 11
Miscellaneous
11.1 Governing Law. This agreement shall be governed by an construed under
the laws of the State of New York without regard to the conflicts of law
principles thereof.
11.2 Survival. The representations and warranties made herein shall survive
the Closing Date of the transactions contemplated hereby for a period of three
(3) years from the Closing Date.
11.3 Successors and Assigns. Except as otherwise provided herein, this
Agreement shall insure to the benefit of, and be binding upon, the
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successors, assigns, heirs, executors and administrators of the parties hereto.
Franklin may not assign its rights under this Agreement without the express
written consent of POS and WCM.
11.4 Entire Agreement: Amendment. This Agreement, its attachments, and the
other documents and agreements delivered pursuant hereto at the Closing Date
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof. Except as expressly provided
herein, neither this Agreement no any term hereof my be amended, waived,
discharged or terminated other than by a written agreement of POS and WCM, and
Franklin.
11.5 Notices. All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by registered or certified
mail, postage prepaid, or otherwise delivered by hand or by messenger, including
Federal Express or similar courier services, addressed (a) if to Franklin, 76
Beaver Street, Room 500, New York, New York 10005 or at such other address as
Franklin shall have furnished to the other parties hereto in writing or (b) if
to WCM or POS to P.O. Box 343, Millburn, New Jersey 07041, or such other address
as WCM or POS shall have furnished to the other parties hereto in writing. Each
such notice or other communication shall for all purposes of this Agreement be
treated as effective or having been given when delivered if delivered
personally, or, if sent by mail or courier, at the earlier of its receipt or 48
hours after the same has been deposited in a regularly maintained receptacle for
the deposit of the United States mail, addressed and mailed as aforesaid.
11.6 Delays or Omissions. Except as expressly provided herein, no delay or
omission to exercise any right, power or remedy accruing to any party to this
Agreement, shall impair any such right, power or remedy of such party nor shall
it be construed to be a waiver of any such breach or default, or an acquiescence
therein, or of or in any similar breach or default thereafter occurring; nor
shall any waiver of any single breach or default be deemed a waiver of any other
breach or default theretofore or thereafter occurring. Any waiver, permit,
consent or approval of any kind or character of any breach or default under this
Agreement, or any waiver of any provisions or conditions of this Agreement, must
be in writing and shall be effective only to the extent specifically set forth
in such writing. All remedies, either under this Agreement or by law or
otherwise afforded to any party to this Agreement, shall be cumulative and not
alternative.
11. 7 Expenses. WCM agrees to pay the expenses and legal fees incurred on
its behalf and on behalf of the other parties to this Agreement with respect to
this Agreement and the transactions contemplated hereby.
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11.8 Counterparts. This Agreement may be executed in multiple counterparts,
each of which shall be an original, and all of which together shall constitute
one instrument.
11.9 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision. Furthermore, in lieu of such illegal, unenforceable or
void provision, there shall be added automatically as part of this Agreement a
provision as similar in terms to such illegal, unenforceable or void provision
as may be possible and be legal, enforceable and valid.
11.10 Effect of Headings. The section headings used in this Agreement are
used for convenience only and are not to be considered in construing or
interpreting this Agreement.
11.11 Announcements. Each party shall give to the other parties hereto
reasonable prior notice and shall consult with the other parties hereto on the
timing, contents and manner of making all announcements or press releases,
written or otherwise, relating to the transactions contemplated hereby, whether
to employees, stockholders or the public, by or on behalf of any of the parties
hereto, except to the extent required by law.
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IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto
effective as of the date first set forth above.
FRANKLIN CONSOLIDATED MINING CO., INC.
By: _________________________________
J. Terry Anderson, President
POS FINAICAL, INC.
By: _________________________________
William C. Martucci, President
By: __________________________________
William C. Martucci, Individually
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