EXHIBIT 99.2
LETTER OF UNDERSTANDING
This Letter of Understanding (this "XXX") is made and entered into as
of June 23, 2004, by and between FRANKLIN CAPITAL CORPORATION, a Delaware
corporation ("FRANKLIN"), and XXXX XXXXXX & COMPANY INVESTMENT MANAGEMENT LLC, a
Delaware limited liability company ("XXXX XXXXXX").
RECITALS
WHEREAS, Franklin and Xxxx Xxxxxx, a major stockholder of Franklin,
have been engaged in discussions relating to a proposed restructuring and
recapitalization plan for Franklin (the "RESTRUCTURING PLAN") designed to
maximize the value of Franklin for the benefit of its stockholders;
WHEREAS, this XXX is intended to confirm the mutual understandings and
agreements of Franklin and Xxxx Xxxxxx with respect to the initial steps of the
Restructuring Plan and the operation of Franklin's business while such steps are
being taken; and
WHEREAS, in connection with the Restructuring Plan, and concurrently
with the execution of this XXX, Xxxxxxxx and Xxxxxxx X. Xxxxx, Xxxxxxxx'x
Chairman and Chief Executive Officer, are entering into a termination agreement
with respect to Xx. Xxxxx which will become effective if the Requisite Approval
(as defined below) of the Stockholder Proposal (as defined below) set forth in
Section 2.1(a) is obtained.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
AGREEMENT
1. BOARD COMPOSITION. Concurrently with the execution of this XXX by the parties
hereto, Franklin shall take any and all actions necessary to: (i) increase the
authorized number of directors constituting the Franklin Board of Directors (the
"BOARD") from four (4) directors to five (5) directors; and (ii) appoint Xxxxxx
"Xxxx" Xxxx III (the "XXXX XXXXXX REPRESENTATIVE") to serve as a member of the
Board. In the event that Franklin does not receive the Requisite Approval for
the Stockholder Proposal set forth in Section 2.1(a) below, Franklin and Xxxx
Xxxxxx acknowledge and agree that, until such time as Franklin holds its next
annual or special meeting of stockholders for the election of directors of
Franklin, the Board shall be reconstituted in the manner set forth on Schedule 1
hereto. In addition, concurrently with the execution of the XXX, Xxxxxxxx shall
deliver to the Xxxx Xxxxxx Representative a summary of the estimated sources and
uses of income and expenses of Franklin for the period beginning on the date
hereof and ending on September 30, 2004 (the "SOURCES AND USES"). The Chief
Executive Officer of Franklin will provide the Board with a detailed six-month
budget at the next scheduled meeting of the Board.
2. PROXY STATEMENT; STOCKHOLDERS' MEETING.
2.1 STOCKHOLDER PROPOSALS. As set forth in more detail in Sections 2.2 and 2.3
below, Franklin shall, by means of the Proxy Statement (as defined below),
solicit the necessary approvals as required by applicable law from the holders
of Franklin's outstanding capital stock (the "REQUISITE APPROVAL") of each of
the following proposed actions (each, a "STOCKHOLDER PROPOSAL" and, together,
the "STOCKHOLDER PROPOSALS") at the Stockholders' Meeting (as defined below):
(a) The election of the slate of director nominees recommended by the
Board (the "SLATE") to serve as members of the Board until each of their
successors is elected and qualified or until each such member's earlier death,
resignation or removal, in accordance with Franklin's bylaws, as amended;
provided, however, that the Slate shall consist of the Xxxx Xxxxxx
Representative and four additional individuals mutually agreed upon by Franklin
and Xxxx Xxxxxx from the list of potential nominees set forth on EXHIBIT A
hereto; and provided, further, that the Xxxx Xxxxxx Representative shall be
nominated in Class III (as defined in the Restated Certificate (as defined
below)) of the Board;
(b) The sale by Franklin of all shares of capital stock of Excelsior
Radio Networks, Inc. ("EXCELSIOR") beneficially owned by Franklin;
(c) The issuance by Franklin of capital stock of Franklin and warrants
to purchase capital stock of Franklin upon terms that are (i) approved by a
majority of the Board consistent with their fiduciary duties; (ii) consistent
with prevailing market conditions at the time of such issuance; and (iii)
consistent with the plan set forth on EXHIBIT C hereto under the heading
"Capital Raising Transaction";
(d) The amendment and restatement of Franklin's certificate of
incorporation, as amended, in substantially the form attached hereto as EXHIBIT
B (the "RESTATED CERTIFICATE"), to, among other things: (i) increase the
authorized number of shares of Franklin's common stock, par value $1.00 (the
"COMMON STOCK") from 5,000,000 shares to 50,000,000 shares; (ii) increase the
authorized number of shares of Franklin's Preferred Stock, par value $1.00 per
share (the "PREFERRED STOCK") from 5,000,000 shares to 10,000,000 shares; (iii)
provide for the exculpation of director liability to the fullest extent
permitted by law; and (iv) provide for the classification of the Board into
three classes of directors;
(e) The ratification of the Board's adoption of a new equity incentive
plan for Franklin containing terms to be approved by a majority of the Board,
including the Xxxx Xxxxxx Representative, or a committee thereof; and
(f) The approval of the sale of equity securities of Franklin to
certain "interested stockholders" (as such term is defined in Section 203 of the
Delaware General Corporation Law) of Franklin on terms that that are approved by
a majority of the Board consistent with its fiduciary duties and consistent with
market terms for such equity securities at the time such securities are sold;
provided, however, that the parties hereto acknowledge and agree that the
receipt of the Requisite Approvals for each of the Stockholder Proposals set
forth in subsections (a), (b), (c), (d) and (e) above shall not be contingent in
any way upon the receipt of the Requisite Approval for the Stockholder Proposal
set forth in this subsection (f).
2.2 PROXY STATEMENT.
(a) As soon as practicable (but in no event more than thirty calendar
(30) days) after the date of this XXX, Xxxx Xxxxxx shall prepare on behalf of
Franklin and at Xxxx Xxxxxx'x sole expense, in consultation with Franklin, and
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Franklin shall cause to be filed with the Securities and Exchange Commission
(the "SEC"), such preliminary and definitive proxy statements as are reasonably
acceptable to each of Franklin and Xxxx Xxxxxx consistent with the terms of this
XXX (collectively, the "PROXY STATEMENT") as are required to call, give notice
of, and solicit the approval by Franklin's stockholders of each of the
Stockholder Proposals at the Stockholder's Meeting.
(b) For each Stockholder Proposal, the Proxy Statement shall include a
statement to the effect that the Board recommends that Franklin's stockholders
vote in favor of the approval of such Stockholder Proposal (such recommendation
being referred to herein as the "BOARD RECOMMENDATION"). Except as may be
required by applicable law, after receiving the advice of outside legal counsel,
no Board Recommendation shall be withdrawn or modified in any manner, and no
resolution by the Board to withdraw or modify any Board Recommendation shall be
adopted or proposed, absent the prior written consent of the Xxxx Xxxxxx
Representative. Notwithstanding the foregoing, in no event shall the Board
withdraw or modify any Board Recommendation, or adopt or propose for adoption
any resolution relating to the withdrawal or modification of any Board
Recommendation, unless it has first delivered to Xxxx Xxxxxx eight (8) business
days prior written notice of its intent to withdraw such Board Recommendation
and given Xxxx Xxxxxx a reasonable opportunity during such eight (8) business
days to discuss with the Board the matters that have given rise to the need to
withdraw or modify such Board Recommendation; provided, however, that if the
Board meeting relating to the matters that have given rise to the need to
withdraw or modify such Board Recommendation is to be held fewer than eight (8)
business days following the occurrence or development of such matters, the Board
shall fulfill its obligations pursuant to this Section 2.2(b) by delivering to
Xxxx Xxxxxx notice of such Board meeting promptly following the calling of such
meeting.
(c) Franklin hereby acknowledges and agrees that it shall use its
commercially reasonable efforts to: (i) cause the Proxy Statement to comply with
the rules and regulations promulgated by the SEC; (ii) respond promptly to any
comments of the SEC or its staff with respect to the Proxy Statement; (iii)
cause the Proxy Statement to be mailed, as promptly as practicable in accordance
with applicable legal requirements, to Franklin's stockholders; and (iv)
prepare, file and cause to be delivered to Franklin's stockholders any and all
amendments and supplements to such Proxy Statement necessary to comply with all
applicable legal requirements. Franklin agrees that it shall deliver copies of
any SEC comments relating to the Proxy Statement to Xxxx Xxxxxx promptly
following Franklin's receipt thereof and shall consult with Xxxx Xxxxxx
regarding any responses to such SEC comments or amendments or supplements to the
Proxy Statement prepared in connection therewith or otherwise prior to the
delivery to the SEC of any such response and/or the filing with the SEC of any
such amendment or supplement to the Proxy Statement.
(d) Promptly (but in no event later than five (5) calendar days) after
Franklin is permitted by SEC rules and regulations to mail the Proxy Statement
to its stockholders, Franklin shall mail the Proxy Statement to the stockholders
of record on the record date for the Stockholders' Meeting; provided, however,
that Franklin and Xxxx Xxxxxx agree and acknowledge that Franklin will not have
an obligation to mail the Proxy Statement to the stockholders until and unless
Xxxx Xxxxxx has provided to the Board a letter or similar written communication
from an unaffiliated investment bank or another unaffiliated financing source to
the effect that, subject to any customary qualifications and conditions, such
investment bank or financing source is highly confident that it can raise for
the benefit of, or otherwise provide to, Franklin equity and/or debt financing
in an aggregate amount of no less than $1,200,000.
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2.3 STOCKHOLDERS' MEETING.
(a) At the time and location set forth in the Proxy Statement, and in
accordance with the Proxy Statement and all applicable legal requirements,
Franklin shall take all action necessary to hold a special meeting of Franklin's
stockholders (the "STOCKHOLDERS' MEETING") for the purpose of approving the
Stockholder Proposals no later than thirty (30) calendar days after the mailing
of the Proxy Statement.
(b) In the event that, as of the date of the Stockholders' Meeting,
Franklin has not received executed proxies in favor of each of the Stockholder
Proposals from stockholders holding shares of Franklin capital stock
representing the Requisite Approval (after giving effect to the vote to be cast
in favor of the Stockholder Proposals by Xxxx Xxxxxx and its affiliates and any
affiliates of Franklin), Franklin and Xxxx Xxxxxx acknowledge and agree that at
the request of the Xxxx Xxxxxx Representative: (i) the first item of business at
the Stockholders' Meeting shall be a vote to adjourn such Stockholders' Meeting
for a period of thirty (30) days; and (ii) following the adjournment of such
Stockholders' Meeting, Franklin shall take all action necessary to call, give
notice of and reconvene the Stockholders' Meeting within thirty (30) days from
the original date thereof (such reconvened Stockholders' Meeting being referred
to herein as the "RECONVENED STOCKHOLDERS MEETING").
(c) Xxxx Xxxxxx will, and will cause each of its affiliates to, vote
their shares of capital stock of Franklin in favor of each of the Stockholder
Proposals.
(d) During the Interim Period, without the consent of the Board, Xxxx
Xxxxxx shall not, and shall cause its affiliates not to: (i) make any other
proposals to be submitted for a vote by the stockholders of Franklin; (ii) take
any action, directly or indirectly, to interfere with the Stockholders Meeting,
including attempting to call a special meeting of stockholders; or (iii) make
any proposal with respect to any form of business combination, restructuring or
recapitalization involving Franklin or Excelsior, except as expressly
contemplated by this XXX. Except as set forth in this XXX or the Proxy
Statement, during the Interim Period, Xxxx Xxxxxx will not, and will cause its
affiliates not to, propose additional directors to the Board or attempt to
remove any existing directors currently serving on the Board.
3. ADDITIONAL REPRESENTATIONS, WARRANTIES AND COVENANTS.
3.1 ORGANIZATION; AUTHORIZATION; NO CONFLICTS. Franklin represents and
warrants to and for the benefit of Xxxx Xxxxxx that: (i) it is a corporation
duly incorporated, validly existing, and in good standing under the laws of the
State of Delaware; (ii) it has all requisite corporate power and authority, and
has taken all necessary corporate action on the part of it, its officers and
directors, to execute and deliver this XXX and to perform its obligations
hereunder; and (iii) its execution and delivery of this XXX and the performance
of its obligations hereunder do not and will not (a) conflict with or violate
any applicable laws or regulations (subject to clearance by the SEC), (b)
violate any provision of Franklin's certificate of incorporation or bylaws, each
as amended, or (c) conflict with, or constitute a default under, any material
contract to which Franklin is a party. Xxxx Xxxxxx represents and warrants to
and for the benefit of Franklin that it has all requisite power and authority to
execute and deliver this XXX and to perform its obligations hereunder.
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3.2 OPERATION OF BUSINESS. During the period (the "INTERIM PERIOD")
commencing on the date of this XXX and ending upon the termination of this XXX,
Xxxxxxxx represents, warrants and covenants to and for the benefit of Xxxx
Xxxxxx that it shall conduct its business and operations in the ordinary course
and in accordance with past practices and all applicable legal requirements. In
addition to, and without limiting the generality of the foregoing, except as
expressly contemplated by this XXX, Franklin acknowledges and agrees that during
the Interim Period, absent the unanimous consent of the Board, it shall not:
(a) declare, accrue, set aside or pay any dividend or make any other
distribution in respect of any shares of Franklin capital stock or repurchase,
redeem or otherwise reacquire any shares of Franklin capital stock or other
securities, except dividends paid on Franklin's preferred stock in accordance
with its terms and repurchases of unvested shares at cost in connection with the
termination of the employment or consulting relationship with any employee or
consultant pursuant to stock option or purchase agreements;
(b) sell, issue, grant or authorize the sale, issuance or grant of any
Franklin capital stock (except that Franklin may issue shares of Common Stock
upon the exercise of any outstanding options to purchase shares of such Common
Stock);
(c) amend or permit the adoption of any amendment to Franklin's bylaws
or certificate of incorporation, as amended, except as set forth in the Restated
Certificate;
(d) form any subsidiary or acquire any equity interest or other
interest in any other corporation (including any non-profit corporation),
general partnership, limited partnership, limited liability partnership, joint
venture, estate, trust, company (including any limited liability company or
joint stock company), firm or other enterprise, association, organization or
entity (each of the foregoing, an "ENTITY");
(e) incur any expense or pay any amounts that are not contemplated to
be paid in the Sources and Uses;
(f) sell or otherwise dispose of, or lease or license, any asset of
Franklin (or its subsidiaries) to any other person or entity, except as
contemplated in the Sources and Uses;
(g) increase the size of the Board or take any action that may result
in the failure of Franklin to perform it obligations under the XXX; or
(h) agree or commit to take any of the actions described in clauses
"(a)" through "(g)" of this Section 3.2.
Notwithstanding the foregoing, the parties hereto expressly acknowledge and
agree that, during the Interim Period, Franklin may (i) sell not more than
200,000 shares of capital stock of Excelsior beneficially owned by Franklin at a
price of not less than the price previously agreed to between Franklin and Xxxx
Xxxxxx and (ii) pay any and all outstanding professional fees associated with
the sale of Excelsior capital stock in accordance with the terms of any invoices
for such professional fees received by Franklin and any and all professional
fees set forth in the Sources and Uses contemplated to be paid thereby.
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3.3 PUBLICITY. Except as expressly contemplated by this XXX or as
Xxxxxxxx'x or Xxxx Xxxxxx'x legal counsel may advise is required by law or the
rules of the market or exchange on which Franklin's Common Stock is then listed,
during the Interim Period, neither party shall make or disseminate any press
release, notice, disclosure or other public statement relating to the matters
contemplated by this XXX without the prior written approval of the other party.
Notwithstanding the foregoing, Franklin and Xxxx Xxxxxx will issue a joint press
release in connection with the execution of this XXX.
3.4 EXPENSES.
(a) Subject to Section 3.4(b) below, the parties hereto acknowledge and
agree that each party shall be responsible for and pay all of their own expenses
incurred by either party in connection with the matters contemplated by this
XXX.
(b) Notwithstanding Sections 2.2(a) and 3.4(a) above, it is the
intention of the parties that, so long as Franklin receives the Requisite
Approval for each of the Stockholder Proposals set forth in subsections (a),
(b), (c), (d) and (e) of Section 2.1, all expenses incurred by either party in
connection with the matters contemplated by this XXX shall ultimately be borne
by Franklin. Without limiting the generality of the foregoing, Franklin and Xxxx
Xxxxxx expressly acknowledge and agree that Franklin shall, within one hundred
twenty (120) days of the approval of the Stockholder Proposals set forth in
subsections (a), (b), (c), (d) and (e) of Section 2.1 at the Stockholders'
Meeting or Reconvened Stockholders' Meeting, as applicable, reimburse Xxxx
Xxxxxx for all invoiced costs incurred by Xxxx Xxxxxx in connection with: (i)
the preparation, filing and delivery to stockholders of the Proxy Statement and
any amendments or supplements thereto; (ii) the solicitation of proxies from
Franklin stockholders, including any fees of professional proxy solicitors
engaged by Franklin or Xxxx Xxxxxx; and (iii) the holding of the Stockholders'
Meeting and, as applicable, the Reconvened Stockholders' Meeting.
3.5 OUTSTANDING PREFERRED STOCK. Franklin represents and warrants to
and for the benefit of Xxxx Xxxxxx that, as of the date of this XXX, there are
10,950 shares of Preferred Stock issued and outstanding.
3.6 XXXX XXXXXX STOCK. Xxxx Xxxxxx represents and warrants to and for
the benefit of Franklin that, as of the date of Xxxx Xxxxxx'x most recent filing
with the SEC on Schedule 13D, Xxxx Xxxxxx had discretionary authority to sell
and vote 329,727 shares of Common Stock held by its investment advisory clients.
3.7 COMMERCIALLY REASONABLE EFFORTS. Each party hereto will use its
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable law to: (i) consummate the transactions contemplated by this XXX; and
(ii) maintain the listing of Franklin's Common Stock on the American Stock
Exchange.
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3.8 AMENDMENT TO BYLAWS. Xxxx Xxxxxx and Xxxxxxxx agree that,
notwithstanding anything to the contrary in this XXX, prior to the Stockholders'
Meeting, Franklin shall amend Article IV, Section 4 of Franklin's bylaws to
delete the phrase "Unless the Board of Directors otherwise determines in a
specific case," from the first sentence of such section.
4. RESTRUCTURING PLAN NEXT STEPS. Franklin and Xxxx Xxxxxx agree to use
commercially reasonable efforts to continue to execute the Restructuring Plan by
taking the next steps set forth on EXHIBIT C hereto (the "RESTRUCTURING PLAN
NEXT STEPS") as soon as practicable following the receipt of the Requisite
Approval.
5. TERMINATION. This XXX shall automatically terminate and be of no
further force and effect upon the earliest to occur of each of the following:
(i) the date upon which Franklin and Xxxx Xxxxxx mutually agree in writing to
terminate this XXX; (ii) September 1, 2004, in the event that Franklin has not
mailed the Proxy Statement to its stockholders as of such date; or (iii) October
31, 2004. Upon written notice to the other party, each party has the right to
terminate this XXX, and this XXX shall be of no further force and effect, in the
event that the Stockholder Proposals set forth in subsections (a) or (d) of
Section 2.1 are defeated by the vote of the stockholders at the Stockholders'
Meeting or Reconvened Stockholders' Meeting, as applicable. Upon written notice
to Xxxx Xxxxxx, Xxxxxxxx shall have the right to terminate this XXX, and this
XXX shall be of no further force and effect, in the event that the Stockholder
Proposal set forth in subsection (b) of Section 2.1 is defeated by the vote of
the stockholders at the Stockholders' Meeting or Reconvened Stockholders'
Meeting, as applicable. Upon written notice to Franklin, Xxxx Xxxxxx shall have
the right to terminate this XXX, and this XXX shall be of no further force and
effect, in the event that the Board withdraws or modifies any Board
Recommendation, or adopts or proposes to adopt any resolution relating to the
withdrawal or modification of any Board Recommendation, pursuant to Section
2.2(b) of this XXX. If this XXX is terminated, it shall become void and of no
effect with no liability on the part of any party hereto, except that no such
termination shall relieve any party of any liability or damages resulting from a
breach by that party of this XXX. Notwithstanding the foregoing, Sections
2.2(a), 3.3, 3.4, 5, 6 and 7 shall survive the termination or expiration of this
XXX for any reason.
6. INDEMNIFICATION OF OFFICERS AND DIRECTORS OF FRANKLIN.
6.1 During and following the termination of the Interim Period, Xxxx
Xxxxxx and Xxxxxxxx agree that Franklin shall fully comply with all rights to
indemnification and advancement of expenses existing in favor of those persons
who are or were directors and officers of Franklin (the "INDEMNIFIED PERSONS")
for acts and omissions occurring prior to the termination of the Interim Period,
as provided in Franklin's certificate of incorporation or bylaws (each as in
effect as of the date of this XXX), to the fullest extent permitted by Delaware
and applicable federal law. Such rights shall not be amended, or otherwise
modified in any manner that would adversely affect the rights of the Indemnified
Persons, unless such amendment or modification is required by law. Xxxx Xxxxxx
and Xxxxxxxx agree that from and after the termination of the Interim Period,
Franklin shall cause: (i) the certificate of incorporation (or Restated
Certificate, as applicable) and bylaws of Franklin to contain provisions no less
favorable to the Indemnified Persons with respect to the limitation of certain
liabilities of directors, officers, employees and agents and indemnification
than are set forth as of the date of this XXX in the certificate of
incorporation and bylaws of Franklin; and (ii) the certificate of incorporation
and bylaws (or similar organizational documents) of each subsidiary of Franklin
to contain the current provisions regarding indemnification of directors,
officers, employees and agents, which provisions in each case shall not be
amended, repealed or otherwise modified in a manner that would adversely affect
the rights thereunder of the Indemnified Persons.
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6.2 During and following the termination of the Interim Period and
until the sixth anniversary of the termination of such Interim Period, Xxxx
Xxxxxx and Xxxxxxxx agree that Franklin shall maintain in effect, for the
benefit of the Indemnified Persons with respect to acts or omissions occurring
prior to the termination of the Interim Period, the existing policy of
directors' and officers' liability insurance maintained by Franklin as of the
date of this XXX (the "EXISTING POLICY"); provided, however, that Franklin may
substitute for the Existing Policy a policy or policies of no less favorable
coverage.
7. MISCELLANEOUS.
7.1 SUCCESSORS AND ASSIGNS. Neither party may assign or delegate its
rights or obligations under to this XXX to any third party absent the prior
written consent of the other party hereto. Subject to the foregoing, the terms
and conditions of this XXX shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties hereto. Nothing in this XXX,
express or implied, is intended to confer upon any party, other than the parties
hereto, their respective permitted successors and assigns, and in the case of
Section 6 hereof, the directors and officers of Franklin, any rights, remedies,
obligations or liabilities under or by reason of this XXX, except as expressly
provided in this XXX.
7.2 GOVERNING LAW. This XXX shall be construed in accordance with, and
governed in all respects by, the laws of the State of Delaware as applied to
contracts to be performed entirely within such state. Each party hereby
irrevocably submits to the jurisdiction of the state and federal courts located
in the State of Delaware in any action, suit or proceeding arising in connection
with this XXX, and agrees that any such action, suit or proceeding may be
brought in such court (and waives any objection based on forum non conveniens or
any other objection to venue therein); provided, however, that such consent to
jurisdiction is solely for the purpose referred to in this Section 7.2 and shall
not be deemed to be a general submission to the jurisdiction of such court or in
the State of Delaware other than for such purposes. The parties agree that
irreparable damage would occur if any of the provisions of this XXX is not
performed in accordance with its specific terms or is otherwise breached. Each
party agrees that, following any breach or threatened breach by such party of
any covenant or obligation contained in this XXX, the other party shall be
entitled (in addition to any other remedy that may be available to it, including
monetary damages) to (a) a decree or order of specific performance to enforce
the observance and performance of such covenant or obligation and (b) an
injunction restraining such breach or threatened breach. Neither party shall be
required to provide any bond or other security in connection with any such
decree, order or injunction or in connection with any related action or
proceeding.
7.3 NOTICES. All notices and other communications given or made
pursuant hereto shall be in writing and shall be deemed effectively given: (i)
upon personal delivery to the party to be notified; (ii) when sent by confirmed
electronic mail or facsimile if sent during normal business hours of the
recipient; if not, then on the next business day; (iii) five days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid; or (iv) one day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt. All
communications shall be sent to the respective parties at the following
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addresses (or at such other addresses as shall be specified by notice given in
accordance with this Section 7.3):
(a) if to Franklin:
Franklin Capital Corporation
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to (which copy shall not constitute notice):
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(b) If to Xxxx Xxxxxx:
Xxxx Xxxxxx & Company Investment Management LLC
000 Xxxxxxxx Xxxxxxxxx, 00xx Xxxxx
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxxx "Xxxx" Xxxx III
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
with a copy to (which copy shall not constitute notice):
Paul, Hastings, Xxxxxxxx & Xxxxxx LLP
0000 Xxxxxx Xxxxxx Xxxxx
Xxx Xxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx, Esq.
Xxxxx X. Xxxxxxxxxx, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
7.4 AMENDMENTS AND WAIVERS. Any term of this XXX may be amended and the
observance of any term of this XXX may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of Franklin and Xxxx Xxxxxx.
7.5 SEVERABILITY. If one or more provisions of this XXX are held to be
unenforceable under applicable law, each such provision shall be excluded from
this XXX and the balance of the XXX shall be interpreted as if such provision
were so excluded and shall be enforceable in accordance with its terms.
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7.6 ENTIRE AGREEMENT. This XXX, together with the exhibits hereto,
constitutes the entire agreement among the parties, and no party shall be liable
or bound to any other party in any manner by any warranties, representations or
covenants except as specifically set forth herein or therein.
7.7 COUNTERPARTS. This XXX may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Facsimile signature pages shall be
effective as originals for all purposes hereunder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have duly executed and delivered this
Letter of Understanding as of the date first written above.
FRANKLIN CAPITAL CORPORATION
/s/ Xxxxxxx X. Xxxxx
-----------------------------------------------
XXXXXXX X. XXXXX
Chairman and Chief Executive Officer
XXXX XXXXXX & COMPANY INVESTMENT MANAGEMENT LLC
/s/ Xxxxxx Xxxx III
-----------------------------------------------
XXXXXX "XXXX" XXXX III
Managing Partner
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SCHEDULE 1
1. In the event that Xxxx Xxxxxx owns at least 51% of the Preferred Stock at the
time of the Stockholders' Meeting:
(a) Directors elected by holders of Franklin's Common Stock:
(1) Xxxxxxx X. Xxxxx
(2) Xxxxx X. Lender
(3) Xxxxxxxx X. Xxxxxx
(b) Directors elected by holders of Franklin's Preferred Stock:
(1) Xxxxxx "Xxxx" Xxxx III
(2) A second designee of Xxxx Xxxxxx
2. In the event that Xxxx Xxxxxx does not own at least 51% of the Preferred
Stock at the time of the Stockholders' Meeting:
(a) Directors elected by holders of Franklin's Common Stock:
(1) Xxxxxxx X. Xxxxx
(2) Xxxxx X. Lender
(3) Xxxxxxxx X. Xxxxxx
(b) Directors elected by holders of Franklin's Preferred Stock:
(1) Xxxxxx "Xxxx" Xxxx III
(2) Xxxxxx Xxxxxx
EXHIBIT A
LIST OF POTENTIAL NOMINEES
1. BRIGADIER GENERAL (RET.) XXXXX XXXXX III. BS Engineering, Vanderbilt
University. Former head of the Army's Corps of Engineers, manager of extensive
real estate investments and a former owner of Tennessee's largest architectural
engineering firm.
2. XXXX XXXXXXX. BS in Pharmacy, University of Oklahoma. Former Vice President
of Omnicare Pharmacy Services. Founder, President and CEO of Xxxxxxx Health
Services, a conglomerate of health care companies that serviced 17,000 long term
care residents, which was acquired by Omnicare, Inc. in 1991. Member of the
Board of Trustees for Geriatric Research Drug Therapy Institute. Adjunct
Professor, University of Oklahoma Pharmacy School.
3. XXXXX XXXXXX, MD. BS Pharmacy, University of Oklahoma. Former Chief
Pharmacist at Tokyo General while serving in the US Army in Tokyo Japan from
1953-1955. In 1964, he attended the University of Bologna School of Medicine, in
Italy, having the prestige of being the oldest medical school in the western
world, graduating in 1969, in the minimum time required. Xx. Xxxxxx served his
internship at Newark Xxxx Israel Hospital. In 1972, he completed his residency
in Anesthesiology at the University of Tennessee School of Medicine. In 1973, he
taught obstetrics anesthesia at the University of Tennessee, while practicing
Anesthesiology at Baptist East Hospital, St. Xxxxxxx Hospital and Baptist
Memorial Hospital, where he established the anesthesia program. Xx. Xxxxxx was
chief anesthesiologist and Medical Director for the Vitreo-Retinal Clinic in
Memphis until 2002.
4. XXXXXXX XXXXXX. Banking, BA History, Vanderbilt University. Former special
assistant to a Nashville, TN Congressman. Bank officer and associate director of
business development at United Bank American starting in 1976. She became a VP
and branch manager of Investors Savings & Loan Association in Nashville,
Tennessee. With 35 years of stock market experience she has been an analyst for
financial services and special situations with Xxxx Xxxxxx & Co. since 1999.
Currently owns Xxxxxx Xxxxxx Realty in Memphis, TN.
5. XXXXX X. XXXXXXXX. BA University of North Carolina, Chapel Hill. Retired
Special Agent, U.S. Treasury Dept., Internal Revenue Service, Criminal
Investigative Division. Coordinated projects for the I.R.S, and conducted
criminal investigations with the F.B.I., Secret Service, U.S. Customs, State
Dept., A.T.F., D.E.A., the U.S.P.S. and other agencies. Presently, a Private
Investigator/Consultant specializing in research/litigation services, financial
investigations, computer forensics specialist and more. Also, an I.R.S.
Certified Instructor for the Regional Training Center. Holds P.I. licenses and
reciprocal licenses in AR, FL, LA, NC, OR, TN and VA. Consults for several
Fortune 500 companies.
EXHIBIT B
RESTATED CERTIFICATE
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FRANKLIN CAPITAL CORPORATION
Franklin Capital Corporation (the "CORPORATION"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware (the "DGCL"), does hereby certify as follows:
FIRST: The name of the Corporation is Franklin Capital Corporation.
SECOND: The Corporation's original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on March 31, 1987,
under the name The Franklin Holding Corporation (Delaware).
THIRD: The Amended and Restated Certificate of Incorporation of this
Corporation, in the form attached hereto as EXHIBIT A, has been duly adopted by
the Board of Directors and stockholders in accordance with the provisions of
Sections 228, 242 and 245 of the DGCL.
FOURTH: The Amended and Restated Certificate of Incorporation so
adopted reads in full as set forth in EXHIBIT A attached hereto and is hereby
incorporated by reference.
IN WITNESS WHEREOF, Franklin Capital Corporation has caused this
Amended and Restated Certificate of Incorporation to be signed by its
_______________ this ____ day of ____________, 2004.
FRANKLIN CAPITAL CORPORATION
By:
-------------------------------
[NAME]
[Title]
EXHIBIT A
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
FRANKLIN CAPITAL CORPORATION
I.
The name of this Corporation is Franklin Capital Corporation.
II.
The address of its registered office in the State of Delaware is 0000
Xxxxxx Xxxxxx in the City of Wilmington, County of New Castle. The name of its
registered agent at such address is The Corporation Trust Company.
III.
The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the DGCL.
IV.
A. This Corporation is authorized to issue two classes of stock to be
designated, respectively, "COMMON STOCK" and "PREFERRED STOCK". The total number
of shares which the Corporation is authorized to issue is 60,000,000 shares, of
which (i) 50,000,000 shares shall be Common Stock, each having a par value of
$1.00 and (ii) 10,000,000 shares shall be Preferred Stock, each having a par
value of $1.00.
B. The Preferred Stock may be issued from time to time in one or more
series. The Board of Directors is hereby expressly authorized to: (i) provide
for the issuance of all or any of the remaining shares of the Preferred Stock in
one or more series; (ii) fix or alter from time to time the designation, powers,
preferences and rights of the shares of each such series and the qualifications,
limitations or restrictions of any wholly unissued series of Preferred Stock;
(iii) establish from time to time the number of shares constituting any such
series or any of them; and (iv) increase or decrease the number of shares of any
series subsequent to the issuance of shares of that series, but not below the
number of shares of such series then outstanding. In case the number of shares
of any series shall be decreased in accordance with the foregoing sentence, the
shares constituting such decrease shall resume the status that they had prior to
the adoption of the resolution originally fixing the number of shares of such
series.
C. Each outstanding share of Common Stock shall entitle the holder
thereof to one vote on each matter properly submitted to the stockholders of the
Corporation for their vote; provided, however, that, except as otherwise
required by law, holders of Common Stock shall not be entitled to vote on any
amendment to this Certificate of Incorporation (including any certificate of
designation filed with respect to any series of Preferred Stock) that relates
solely to the terms of one or more outstanding series of Preferred Stock if the
holders of such affected series of Preferred Stock are entitled, either
separately or together as a class with the holders of one or more other series
of Preferred Stock, to vote thereon by law or pursuant to this Certificate of
Incorporation (including any certificate of designation filed with respect to
any series of Preferred Stock).
D. SERIES A PREFERRED STOCK. Of the authorized number of shares of
Preferred Stock, 500,000 shares shall be designated as "Series A Convertible
Preferred Stock" (the "SERIES A PREFERRED STOCK") with the following voting
powers, preferences and relative participating, optional and other special
rights and qualifications, limitations and restrictions:
1. RANKING. The Series A Preferred Stock shall, with respect to
distributions upon the liquidation, winding-up and dissolution of the
Corporation, rank: (i) senior to all classes of Common Stock of the Corporation
and to each other class of capital stock or series of Preferred Stock other than
the Series A Preferred Stock issued by the Corporation after the first date upon
which shares of Series A Preferred Stock were originally issued by the
Corporation (the "INITIAL CLOSING DATE"), the terms of which do not expressly
provide that it ranks senior to or on a parity with the Series A Preferred Stock
as to dividend distributions and distributions upon the liquidation, winding-up
and dissolution of the Corporation (collectively referred to with the Common
Stock of the Corporation as "JUNIOR SECURITIES"); (ii) on a parity with any
additional shares of Series A Preferred Stock issued by the Corporation after
the Initial Closing Date and any other class of capital stock or any additional
series of preferred stock issued by the Corporation established after the
Initial Closing Date by the Board of Directors, the terms of which expressly
provide that such class or series will rank on a parity with the Series A
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Corporation (collectively
referred to as "PARITY SECURITIES"); and (iii) junior to each class of capital
stock or series of Preferred Stock other than the Series A Preferred Stock
issued by the Corporation after the Initial Closing Date by the Board of
Directors, the terms of which expressly provide that such class or series will
rank senior to the Series A Preferred Stock as to dividend distributions and
distributions upon the liquidation, winding-up and dissolution of the
Corporation (collectively referred to as "SENIOR SECURITIES"). Notwithstanding
the foregoing, a security shall not be deemed to be a "Senior Security" solely
because such security has a stated dividend or interest coupon.
2. DIVIDENDS.
a. So long as any shares of Series A Preferred Stock shall be
outstanding, the holders of such Series A Preferred Stock shall be entitled to
receive out of any funds legally available therefor, when, as and if declared by
the Board of Directors of the Corporation, preferential dividends in cash at a
rate of 7% per annum on the Liquidation Preference (as defined below) hereunder,
payable quarterly on the first day other than a Saturday, a Sunday, or any day
on which banking institutions in New York, New York are required or authorized
by law or other governmental action to be closed (a "BUSINESS DAY") of each
calendar quarter on a pro rata basis with any Parity Securities. Such dividends
shall be cumulative and begin to accrue from the date of issuance of such
shares, whether or not declared and whether or not there shall be net profits or
net assets of the Corporation legally available for the payment of those
dividends.
2
b. So long as any shares of Series A Preferred Stock shall be
outstanding, no dividend whatsoever (except a dividend payable in Common Stock)
shall be paid or declared and no distribution shall be made, on account of any
Junior Securities of the Corporation and no Junior Securities shall be purchased
unless (i) all dividends in respect of the Series A Preferred Stock for all past
and current dividend periods have been paid and all amounts in respect of the
redemption of the Series A Preferred Stock required to be paid herein have been
paid in full and (ii) such Junior Securities have an "asset coverage" (as such
term is used under the Investment Company Act of 1940, as amended (the
"INVESTMENT COMPANY ACT")) of at least 200% after deducting the amount of such
dividend, distribution or purchase price, as the case may be.
3. CONVERSION RIGHTS.
a. OPTIONAL CONVERSION OF SERIES A PREFERRED STOCK INTO COMMON STOCK.
A holder of shares of Series A Preferred Stock may, at any time prior to the
tenth anniversary of the Initial Closing Date, convert such shares into Common
Stock, unless previously redeemed, at the option of the holder thereof. The
Series A Preferred Stock will cease to be convertible after the tenth
anniversary of the Initial Closing Date. For the purposes of conversion, each
share of Series A Preferred Stock shall be valued at the Liquidation Preference,
which shall be divided by the greater of $20 or a rate equal to 15% above the
average closing price for the ten consecutive days on which the American Stock
Exchange or other applicable stock exchange or market is open for business
(each, a "TRADING DAY") prior to the Initial Closing Date (the "CONVERSION
RATE") to determine the number of shares of Common Stock issuable upon
conversion. Immediately following such conversion, the rights of the holders of
converted Series A Preferred Stock shall cease and the persons entitled to
receive the Common Stock upon the conversion of Series A Preferred Stock shall
be treated for all purposes as having become the owners of such Common Stock.
b. MECHANICS; TRANSFER TAX; CONVERSION RATE.
(i) To convert the Series A Preferred Stock, a holder must (A)
surrender the certificate or certificates evidencing the shares of Series A
Preferred Stock to be converted, duly endorsed in a form satisfactory to the
Corporation, at the office of the Corporation or the transfer agent, if any, for
the Series A Preferred Stock (the "TRANSFER AGENT"), (B) notify the Corporation
at such office that holder elects to convert the Series A Preferred Stock and
the number of shares holder wishes to convert, (C) state in writing the name or
names in which holder wishes the certificate or certificates for shares of
Common Stock to be issued, and (D) pay any transfer or similar tax if required
by subparagraph (iii) below. In the event that holder fails to notify the
Corporation of the number of shares of Series A Preferred Stock which holder
wishes to convert, holder shall be deemed to have elected to convert all shares
represented by the certificate or certificates surrendered for conversion. The
date on which any such holder satisfies all those requirements is the
"CONVERSION DATE". As soon as practicable thereafter, the Corporation shall
deliver a certificate for the number of full shares of Common Stock issuable
upon the conversion, and a new certificate representing the unconverted portion,
if any, of the shares of Series A Preferred Stock represented by the certificate
or certificates surrendered for conversion. The person in whose name the Common
Stock certificate is registered shall be treated as the stockholder of record on
and after the Conversion Date.
3
(ii) The Corporation shall not issue any fractional shares of
Common Stock upon conversion of the Series A Preferred Stock. Instead the
Corporation shall pay a cash adjustment based upon the closing price of the
Common Stock on the principal securities exchange on which the Common Stock is
then listed on the Business Day prior to the Conversion Date.
(iii) If a holder converts shares of Series A Preferred Stock,
the Corporation shall pay any documentary, stamp or similar issue or transfer
tax due on the issue of shares of Common Stock upon the conversion. However, the
holder shall pay any such tax that is due because the shares are issued in a
name other than the holder's name.
(iv) The Corporation has reserved and shall continue to reserve
out of its authorized but unissued Common Stock, or its Common Stock held in
treasury, enough shares of Common Stock to permit the conversion, in full, of
the Series A Preferred Stock to Common Stock. All shares of Common Stock that
may be issued upon conversion of the Series A Preferred Stock shall be fully
paid and nonassessable. The Corporation shall endeavor to comply with all
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of the Series A Preferred Stock and shall endeavor to list such
shares of Common Stock on each national securities exchange or automated
quotation system on which the Common Stock is then listed.
(v) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Rate
shall be reduced, and, conversely, in case the outstanding shares of Common
Stock shall be combined into a smaller number of shares of Common Stock, the
Conversion Rate shall be increased by the product of the Conversion Rate and a
fraction the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such subdivision or combination, as the case
may be, and the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such subdivision or combination, as the case
may be. Such reduction or increase, as the case may be, shall become effective
immediately after the opening of business on the Business Day following the day
upon which such subdivision or combination becomes effective.
(vi) If the Corporation at any time while the Series A Preferred
Stock, or any portion thereof, remains outstanding, shall change any of the
securities as to which conversion rights under this Amended and Restated
Certificate of Incorporation exist into the same or a different number of
securities of any other class or classes, the Series A Preferred Stock shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the conversion rights under this Amended and
Restated Certificate of Incorporation immediately prior to such reclassification
or other change and the Conversion Rate of the Series A Preferred Stock shall be
appropriately adjusted.
(vii) Shares issuable on conversion of shares of Series A
Preferred Stock shall include only shares of the class designated as Common
Stock of the Corporation on the Initial Closing Date or shares of any class or
classes resulting from any reclassification thereof and which have no
preferences in respect of dividends or amounts payable in the event of any
4
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation and which are not subject to redemption by the Corporation; provided
that, if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications bears to the total number of shares of all such classes
resulting from all such reclassifications.
(viii) No adjustment in the Conversion Rate shall reduce the
Conversion Rate below the then par value of the Common Stock.
(ix) Whenever the Conversion Rate is adjusted, the Corporation
shall promptly mail to holders of Series A Preferred Stock, first class, postage
prepaid, a notice of the adjustment. The Corporation shall file with the
Transfer Agent for the Series A Preferred Stock, if any, a certificate from the
Corporation's chief financial officer briefly stating the facts requiring the
adjustment and the manner of computing it. In the event of any dispute thereon,
the opinion of the Corporation's independent public accountants, if accepted by
the Board of Directors of the Corporation, shall be conclusive and binding on
the holders of the Series A Preferred Stock absent manifest error.
(x) The Corporation from time to time may reduce the Conversion
Rate if it considers such reductions to be advisable in order that any event
treated for federal income tax purposes as a dividend of stock or stock rights
will not be taxable to the holders of Common Stock by any amount.
(xi) If:
(a) the Corporation takes any action which would require an
adjustment in the Conversion Rate pursuant to paragraph 3(b)(v) or 3(b)(vi)
above;
(b) the Corporation consolidates or merges with, or
transfers all or substantially all of its assets to, another corporation (other
than a wholly owned subsidiary of the Corporation), and stockholders of the
Corporation must approve the transaction; or
(c) there is a dissolution or liquidation of the
Corporation;
the Corporation shall mail to the holders of the Series A Preferred
Stock, first class, postage prepaid, a notice stating the proposed record or
effective date, as the case may be. The Corporation shall mail the notice at
least 10 days before such date. However, failure to mail the notice or any
defect in it shall not affect the validity of any transaction referred to in
subparagraph (a), (b) or (c) of this paragraph 3(b)(xi).
(xii) In the case of any consolidation of the Corporation or the
merger of the Corporation with or into any other entity or the sale or transfer
of all or substantially all the assets of the Corporation pursuant to which the
Common Stock is converted into other securities, cash or assets, then, upon
consummation of such transaction, each share of Series A Preferred Stock shall
automatically become convertible into the kind and amount of securities, cash or
5
other assets receivable upon the consolidation, merger, sale or transfer by a
holder of the number of shares of Common Stock into which such share of Series A
Preferred Stock might have been converted immediately prior to such
consolidation, merger, transfer or sale (assuming such holder of Common Stock
failed to exercise any rights of election and received per share the kind and
amount of consideration receivable per share by a plurality of non electing
shares). Appropriate adjustment (as determined by the Board of Directors of the
Corporation) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of Series A
Preferred Stock, to the end that the provisions set forth herein (including
provisions with respect to changes in and other adjustment of the Conversion
Rate) shall thereafter be applicable, as nearly as reasonably may be, in
relation to any shares of stock or other securities or property thereafter
deliverable upon the conversion of Series A Preferred Stock. If this paragraph
3(b)(xii) applies, paragraph 3(b)(v) and 3(b)(vi) do not apply.
(xiii) In any case in which this paragraph 3 shall require that
an adjustment as a result of any event becomes effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event the issuance to the holder of any shares of Series A Preferred Stock
converted after such record date and before the occurrence of such event of the
additional shares of Common Stock issuable upon such conversion over and above
the shares issuable on the basis of the Conversion Rate in effect immediately
prior to adjustment; provided, however, that if such event shall not have
occurred and authorization of such event shall be rescinded by the Corporation,
the Conversion Rate shall be recomputed immediately upon such rescission to the
price that would have been in effect had such event not been authorized,
provided that such rescission is permitted by and effective under applicable
laws.
4. LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation or reduction or
decrease in its capital stock resulting in a distribution of assets to the
holders of any class or series of the Corporation's capital stock, each holder
of shares of the Series A Preferred Stock will be entitled to payment out of the
assets of the Corporation available for distribution of an amount equal to $100
per share of Series A Preferred Stock (the "LIQUIDATION PREFERENCE") held by
such holder, plus accrued and unpaid dividends, if any, to the date fixed for
liquidation, dissolution, winding-up or reduction or decrease in capital stock,
before any distribution is made on any Junior Securities, including, without
limitation, Common Stock of the Corporation. After payment in full of the
Liquidation Preference and all accrued and unpaid dividends, if any, to which
holders of Series A Preferred Stock are entitled, such holders will not be
entitled to any further participation in any distribution of assets of the
Corporation. If, upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, the amounts payable with respect to the Series A
Preferred Stock and all other Parity Securities are not paid in full, the
holders of the Series A Preferred Stock and the Parity Securities will share
equally and ratably in any distribution of assets of the Corporation in
proportion to the full liquidation preference and accumulated and unpaid
dividends, if any, to which each is entitled. However, neither the voluntary
sale, conveyance, exchange or transfer (for cash, shares of stock, securities or
other consideration) of all or substantially all of the property or assets of
the Corporation nor the consolidation or merger of the Corporation with or into
one or more individuals, partnerships, companies, associations, joint stock
companies, limited liability companies, trusts, joint ventures, unincorporated
organizations or governmental authorities (each, a "PERSON") will be deemed to
be a voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation or reduction or decrease in capital stock, unless such sale,
conveyance, exchange or transfer shall be in connection with a liquidation,
dissolution or winding-up of the business of the Corporation or reduction or
decrease in capital stock.
6
5. REDEMPTIONS.
a. The Series A Preferred Stock shall not be redeemed by the
Corporation prior to the first anniversary of the Initial Closing Date.
b. The Series A Preferred Stock may be redeemed by the Corporation at
any time on or after the one-year anniversary of the Initial Closing Date, in
whole or in part, on a pro rata basis, if at any time on or after the Initial
Closing Date the average trading price of the Common Stock for at least twenty
days during any thirty consecutive Trading Days is equal to or in excess of 150%
of the Conversion Rate; provided, however, that the holders of the Series A
Preferred Stock shall have the right, up until 5 p.m., New York time, on the
third Business Day preceding the Redemption Date to convert the Series A
Preferred Stock to Common Stock at the Conversion Rate. If any holder fails to
convert the Series A Preferred Stock during the period contemplated above, the
Corporation may redeem the Series A Preferred Stock in cash at a price per share
equal to the Liquidation Preference plus any accrued and unpaid dividends
thereon through to the date of such redemption plus any dividends which were
scheduled to accrue thereon up through the end of the calendar year of such
redemption.
c. The Series A Preferred Stock may be redeemed by the Corporation at
any time on or after the three-year anniversary of the Initial Closing Date
(whether or not the circumstances described in subparagraph (b) shall have
occurred prior to such time), at a redemption price in cash equal to the
Liquidation Preference per share of Series A Preferred Stock plus any accrued
and unpaid dividends thereon through the date of such redemption.
d. At least 15 Business Days prior to the date fixed for any
redemption of the Series A Preferred Stock (the "REDEMPTION DATE"), written
notice (the "REDEMPTION NOTICE") shall be given by first-class mail, postage
prepaid, to each holder of record on the record date fixed for such redemption
of the Series A Preferred Stock at such holder's address as the same appears on
the stock register of the Corporation, provided that failure to give such notice
or any deficiency therein shall not affect the validity of the procedure for the
redemption of any shares of Series A Preferred Stock to be redeemed except as to
the holder or holders to whom the Corporation has failed to give said notice or
except as to the holder or holders whose notice was defective. The Redemption
Notice shall state:
(i) whether the redemption is pursuant to subparagraph (b) or
(c) hereof;
(ii) the redemption price;
(iii) whether all or less than all the outstanding shares of the
Series A Preferred Stock are to be redeemed and the total number of shares of
the Series A Preferred Stock being redeemed;
7
(iv) the number of shares of Series A Preferred Stock held, as
of the appropriate record date, by the holder that the Corporation intends to
redeem;
(v) the Redemption Date;
(vi) that the holder has the right to convert the Series A
Preferred Stock to Common Stock until 5 p.m., New York time, on the third
Business Day preceding the Redemption Date by complying with the provisions of
Section 3 hereof;
(vii) that the holder is to surrender to the Corporation, at the
place or places where certificates for shares of Series A Preferred Stock are to
be surrendered for redemption, in the manner and at the price designated, its
certificate or certificates representing the shares of Series A Preferred Stock
to be redeemed; and
(viii) that dividends on the shares of the Series A Preferred
Stock to be redeemed shall cease to accrue on the Redemption Date unless the
Corporation defaults in the payment of the redemption price.
e. Each holder of Series A Preferred Stock shall surrender the
certificate or certificates representing such shares of Series A Preferred Stock
to the Corporation, duly endorsed, in the manner and at the place designated in
the Redemption Notice and on the date of redemption. The full redemption price
for such shares of Series A Preferred Stock shall be payable in cash to the
Person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be canceled and retired. In the
event that less than all of the shares represented by any such certificate are
redeemed, a new certificate shall be issued representing the unredeemed shares.
f. Unless the Corporation defaults in the payment in full of the
applicable redemption price, dividends on the Series A Preferred Stock called
for redemption shall cease to accumulate on the Redemption Date, and the holders
of such redeemed shares shall cease to have any further rights with respect
thereto from and after the Redemption Date, other than the right to receive the
redemption price, without interest.
6. VOTING RIGHTS.
a. The holders of Series A Preferred Stock shall be entitled to
notice of all stockholders meetings in accordance with the Corporation's bylaws
and the DGCL, and except as otherwise required by applicable law, the holders of
the Series A Preferred Stock shall be entitled to vote on all matters submitted
to the stockholders for a vote, voting together with the holders of the Common
Stock as a single class, with each share of Series A Preferred Stock entitled to
one vote per share.
b. The holders of the Series A Preferred Stock, voting separately as
one class, shall have the right to elect (i) two directors at all times during
which the Series A Preferred Stock is outstanding and (ii) a majority of the
directors, if at any time dividends on the Series A Preferred Stock shall be
unpaid in an amount equal to two full years' dividends on such securities, and
to continue to be so represented until all dividends in arrears shall have been
paid or otherwise provided for (subject, however to the prior rights, if any, of
the holders of any class of Senior Securities outstanding.) If any vacancies
shall exist in the offices of directors elected by the holders of the Series A
Preferred Stock, such vacancy shall be filled as follows:
8
(i) Upon the written request of the holders of record of at
least 25% of the shares of Series A Preferred Stock then outstanding addressed
to the Secretary of the Corporation, a proper officer of the Corporation shall
call a special meeting of the holders of Series A Preferred Stock for the
purpose of electing the directors which such holders are entitled to elect. If
such meeting shall not be called by the proper officer of the Corporation within
30 days after personal service of said written request upon the Secretary of the
Corporation, or within 30 days after mailing the same within the United States
by certified mail, addressed to the Secretary of the Corporation at its
principal executive offices, then the holders of record of at least 25% of the
outstanding shares of the Series A Preferred Stock may designate in writing one
of their number to call such meeting at the expense of the Corporation, and such
meeting may be called by the Person so designated upon the notice required for
the annual meetings of stockholders of the Corporation and shall be held at the
place for holding the annual meetings of stockholders or such other place in the
United States as shall be designated in such notice. Notwithstanding the
provisions of this subparagraph, no such special meeting shall be called if any
such request is received less than 60 days before the date fixed for the next
ensuing annual or special meeting of stockholders of the Corporation. Any holder
of shares of the Series A Preferred Stock so designated shall have, and the
Corporation shall provide, access to the lists of holders of shares of the
Series A Preferred Stock for purposes of calling a meeting pursuant to the
provisions of this subparagraph.
(ii) At any meeting held for the purpose of electing directors
at which the holders of Series A Preferred Stock shall have the right to elect
directors, the presence in person or by proxy of the holders of at least a
majority of the holders of the Series A Preferred Stock present at such meeting,
or represented by proxy, shall have the right to elect directors.
(iii) Any vacancy occurring in the office of a director elected
by the holders of the Series A Preferred Stock may be filled by the remaining
director elected by such holders unless and until such vacancy shall be filled
by such holders.
c. The Corporation shall not, without the affirmative vote or consent
of the holders of at least a majority of the shares of Series A Preferred Stock
then outstanding voting as one class:
(i) amend or otherwise alter this Amended and Restated
Certificate of Incorporation in any manner that under the DGCL or the Investment
Company Act requires the prior vote as a separate class of the holders of Series
A Preferred Stock;
(ii) take any action which detracts from the voting powers,
preferences and relative, participating, optional and other special rights, and
qualifications, limitations, and restrictions of the Series A Preferred Stock;
provided, however, that the Corporation shall be entitled, without the consent
of any holders of Series A Preferred Stock, to make additional issuances of
Series A Preferred Stock, Senior Securities, Parity Securities or Junior
Securities;
9
(iii) waive compliance with any provision of paragraph D of
Article IV of this Amended and Restated Certificate of Incorporation; or
(iv) complete any plan of reorganization adversely affecting the
Series A Preferred Stock or take any of the actions enumerated in Section 13(a)
of the Investment Company Act.
d. Without the consent of each holder affected, an amendment or
waiver of this Amended and Restated Certificate of Incorporation may not (with
respect to any shares of Series A Preferred Stock held by a non-consenting
holder):
(i) alter the voting rights with respect to the Series A
Preferred Stock or reduce the number of shares of Series A Preferred Stock whose
holders must consent to an amendment, supplement or waiver;
(ii) reduce the Liquidation Preference or alter the provisions
with respect to the redemption of the Series A Preferred Stock;
(iii) alter in any manner the conversion rights of the holders
of Series A Preferred Stock set forth in paragraph 3 hereof;
(iv) reduce the rate of or change the time for payment of
dividends on any share of Series A Preferred Stock;
(v) waive the consequences of any failure to pay dividends on
the Series A Preferred Stock;
(vi) make any share of Series A Preferred Stock payable in any
form other than as stated in this Amended and Restated Certificate of
Incorporation;
(vii) make any change in the provisions of this Amended and
Restated Certificate of Incorporation relating to waivers of the rights of
holders of Series A Preferred Stock to receive the Liquidation Preference and
dividends on the Series A Preferred Stock;
(viii) waive a redemption payment with respect to any share of
Series A Preferred Stock; or
(ix) make any change in the foregoing amendment and waiver
provisions.
e. The Corporation in its sole discretion may without the vote or
consent of any holders of the Series A Preferred Stock amend or supplement this
Amended and Restated Certificate of Incorporation:
(i) to cure any ambiguity, defect or inconsistency in any manner
that does not adversely affect the holders of Series A Preferred Stock;
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(ii) to provide for uncertificated Series A Preferred Stock in
addition to or in place of certificated Series A Preferred Stock;
(iii) to make any change that would provide any additional
rights; or
(iv) in any manner that benefits the holders of the Series A
Preferred Stock or that does not adversely affect the rights under this Amended
and Restated Certificate of Incorporation of any such holder.
7. EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by
law, the shares of Series A Preferred Stock shall not have any voting powers,
preferences and relative, participating, optional or other special rights, other
than those specifically set forth in this Amended and Restated Certificate of
Incorporation (as the same may be amended from time to time). The shares of
Series A Preferred Stock shall have no preemptive or subscription rights.
8. HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
9. SEVERABILITY OF PROVISIONS. If any voting powers, preferences and
relative, participating, optional and other special rights of the Series A
Preferred Stock and qualifications, limitations and restrictions thereof set
forth in this Amended and Restated Certificate of Incorporation (as the same may
be amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other voting powers,
preferences and relative, participating, optional and other special rights of
Series A Preferred Stock and qualifications, limitations and restrictions
thereof set forth in this resolution (as so amended) which can be given effect
without the invalid, unlawful or unenforceable voting powers, preferences and
relative, participating, optional or other special rights of Series A Preferred
Stock and qualifications, limitations and restrictions thereof shall,
nevertheless, remain in full force and effect and no voting powers, preferences
and relative, participating, optional or other special rights of Series A
Preferred Stock and qualifications, limitations and restrictions thereof herein
set forth shall be deemed dependent upon any other such voting powers,
preferences and relative, participating, optional or other special rights of
Series A Preferred Stock and qualifications, limitations and restrictions
thereof unless so expressed herein.
10. RE-ISSUANCE OF SERIES A PREFERRED STOCK. Shares of Series A
Preferred Stock that have been issued and reacquired in any manner, including
shares purchased or redeemed or exchanged or converted, shall (upon compliance
with any applicable provisions of the laws of Delaware) have the status of
authorized but unissued shares of preferred stock of the Corporation
undesignated as to series and may be designated or re-designated and issued or
reissued, as the case may be, as part of any series of preferred stock of the
Corporation, provided that any issuance of such shares as Series A Preferred
Stock must be in compliance with the terms hereof.
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11. MUTILATED OR MISSING SERIES A PREFERRED STOCK CERTIFICATES. If
any of the Series A Preferred Stock certificates shall be mutilated, lost,
stolen or destroyed, the Corporation shall issue, in exchange and in
substitution for and upon cancellation of the mutilated Series A Preferred Stock
certificate, or in lieu of and substitution for the Series A Preferred Stock
certificate lost, stolen or destroyed, a new Series A Preferred Stock
certificate of like tenor and representing an equivalent amount of shares of
Series A Preferred Stock, but only upon receipt of evidence of such loss, theft
or destruction of such Series A Preferred Stock certificate and indemnity, if
requested, satisfactory to the Corporation and the Transfer Agent (if other than
the Corporation).
V.
For the management of the business and for the conduct of the affairs
of the Corporation, and in further definition, limitation and regulation of the
powers of the Corporation, of its directors and of its stockholders or any class
thereof, as the case may be, it is further provided that:
A. BOARD OF DIRECTORS.
1. POWERS AND NUMBERS OF DIRECTORS. The management of the business
and the conduct of the affairs of the Corporation shall be vested in its Board
of Directors. The number of directors which shall constitute the whole Board of
Directors shall be fixed exclusively by one or more resolutions adopted by the
Board of Directors and not inconsistent with the Certificate of Incorporation of
the Corporation.
2. CLASSIFICATION. Subject to the rights of the holders of any series
of Preferred Stock to elect additional directors under specified circumstances,
the directors shall be divided into three classes designated as "CLASS I",
"CLASS II" and "CLASS III", respectively. Directors shall initially be assigned
to each class in accordance with a resolution or resolutions adopted by the
Board of Directors. At the first annual meeting of stockholders following the
date upon which this Certificate of Incorporation is filed with the Secretary of
State of the State of Delaware (the "EFFECTIVE DATE"), the term of office of the
Class I directors shall expire and Class I directors shall be elected for a full
term of three years. At the second annual meeting of stockholders following the
Effective Date, the term of office of the Class II directors shall expire and
Class II directors shall be elected for a full term of three years. At the third
annual meeting of stockholders following the Effective Date, the term of office
of the Class III directors shall expire and Class III directors shall be elected
for a full term of three years. At each succeeding annual meeting of
stockholders, directors shall be elected for a full term of three years to
succeed the directors of the class whose terms expire at such annual meeting.
Notwithstanding the foregoing provisions of this section, each director shall
serve until his successor is duly elected and qualified or until his death,
resignation or removal. No decrease in the number of directors constituting the
Board of Directors shall shorten the term of any incumbent director.
3. REMOVAL OF DIRECTORS.
a. Subject to the rights of any series of Preferred Stock to elect
additional directors under specified circumstances, neither the Board of
Directors nor any individual director may be removed without cause.
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b. Subject to any limitation imposed by law, any individual director
or directors may be removed with cause by the affirmative vote of the holders of
a majority of the voting power of all then-outstanding shares of capital stock
of the Corporation entitled to vote generally at an election of directors. 4.
VACANCIES. Subject to the rights of the holders of any series of Preferred
Stock, any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other causes and any newly created
directorships resulting from any increase in the number of directors, shall,
unless the Board of Directors determines by resolution that any such vacancies
or newly created directorships shall be filled by the stockholders, except as
otherwise provided by law, be filled only by the affirmative vote of a majority
of the directors then in office, even though less than a quorum of the Board of
Directors, and not by the stockholders. Any director elected in accordance with
the preceding sentence shall hold office for the remainder of the full term of
the director for which the vacancy was created or occurred and until such
director's successor shall have been elected and qualified.
B. BYLAW AMENDMENTS. The Board is expressly empowered to adopt, amend
or repeal the Bylaws of the Corporation. The stockholders shall also have power
to adopt, amend or repeal the Bylaws of the Corporation; provided, however,
that, in addition to any vote of the holders of any class or series of stock of
the Corporation required by law or by this Certificate of Incorporation, the
affirmative vote of the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the voting power of all of the then-outstanding shares of the
capital stock of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to adopt, amend
or repeal any provision of the Bylaws of the Corporation. The directors of the
Corporation need not be elected by written ballot unless the Bylaws so provide.
C. STOCKHOLDER ACTION. No action shall be taken by the stockholders
of the Corporation except at an annual or special meeting of stockholders called
in accordance with the Bylaws. No action shall be taken by the stockholders by
written consent or electronic transmission.
D. ADVANCE NOTICE. Advance notice of stockholder nominations for the
election of directors and of business to be brought by stockholders before any
meeting of the stockholders of the Corporation shall be given in the manner
provided in the Bylaws of the Corporation.
VI.
A. A current or former director of the Corporation shall not be
personally liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty as a director, except for liability: (i) for any
breach of the director's duty of loyalty to the Corporation or its stockholders;
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law; (iii) under Section 174 of the DGCL;
or (iv) for any transaction from which the director derived any improper
personal benefit. If the DGCL is hereafter amended to further reduce or to
authorize, with the approval of the Corporation's stockholders, further
reductions in the liability of the Corporation's directors for breach of
fiduciary duty, then a current or former director of the Corporation shall not
be liable for any such breach to the fullest extent permitted by the DGCL as so
amended.
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B. To the extent permitted by applicable law, this Corporation is
also authorized to provide indemnification of, and advancement of expenses to,
its agents (and any other persons to which Delaware law permits this Corporation
to provide indemnification) in excess of the indemnification and advancement
otherwise permitted by Section 145 of the DGCL through bylaw provisions,
agreements with such agents (or other persons), the requisite vote of
stockholders or disinterested directors or otherwise, subject only to limits
created by applicable Delaware law (statutory or non-statutory), with respect to
actions for breach of duty to the Corporation, its stockholders and others.
C. Any repeal or modification of any of the foregoing provisions of
this Article VI shall be prospective and shall not adversely affect any right or
protection of a director, officer, agent or other person existing at the time
of, or increase the liability of any director of the Corporation with respect to
any acts or omissions of such director occurring prior to, such repeal or
modification.
VII.
A. The Corporation reserves the right to amend, alter, change or
repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, except as provided in paragraph B
of this Article VII, and all rights conferred upon the stockholders herein are
granted subject to this reservation.
B. Notwithstanding any other provisions of this Certificate of
Incorporation or any provision of law which might otherwise permit a lesser vote
or no vote, but in addition to any affirmative vote of the holders of any
particular class or series of the Corporation required by law, this Certificate
of Incorporation or any certificate of designation filed with respect to a
series of Preferred Stock, the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the voting power of the
then-outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to alter, amend or repeal Articles V, VI or VII.
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EXHIBIT C
RESTRUCTURING PLAN NEXT STEPS
CAPITAL RAISING TRANSACTION
It is the intention of Xxxx Xxxxxx to cause Franklin to raise between $2,000,000
and up to $20,000,000, in one or more rounds of financing. It is anticipated
that an initial round of financing in the $400,000 to $600,000 range will be
raised in a private placement of equity securities (e.g., Common Stock,
Preferred Stock, warrants or a combination of the foregoing). The price per
share shall be determined by the Board in compliance with its fiduciary duties
to Franklin's stockholders and will be consistent with prevailing market trends.
CREDIT LINE
It is the intention of Xxxx Xxxxxx to establish a revolving line of credit for
Franklin at First Tennessee Bank in Memphis, TN in an amount of not less than
$500,000. Additional amounts of debt financing will be considered, in compliance
with ICA regulations.
RELOCATION OF FRANKLIN'S HEADQUARTERS
Franklin's headquarters will be moved to Santa Monica, CA shortly after
stockholder approval to appoint a new board of diretcors.
NEW STRATEGIC BUSINESS DIRECTION
To capitalize on the combined knowledge and experience of the Board in the
medical and financial xxxxxx, Xxxxxxxx will focus on two to-be-created
divisions:
With the backing of two of the Board's medical experts, a medical products
division will focus on medical companies with pre-existing FDA exemptions and
product lines. Franklin will focus on the discovery and financing of such
companies rather than running operations. Xxxx Xxxxxx expects the medical
products division to be 25-50% of Franklin's business.
The second division's focus will be researching financial services companies to
either turn around with newly installed management or acquire and liquidate
based on internal value basics. We fully intend to fill the neglected niche of
microcap leveraged buyouts. The focus will be on financial services companies,
banks, consumer financial product and insurance companies
