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 xxxx 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.
1
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 0 Xxxxxx Xxxx, Xxxxxxxxxxx, X.X. 00000, 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
2
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 Xxxxxxxx
Xxxxxxxx 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.
3
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.
4
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
5
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
6
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
7
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.
8
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:
9
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
10
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
11
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.
(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 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.
12
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.
13
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, 00
Xxxxxx Xxxxxx, Xxxx 000, Xxx Xxxx, Xxx Xxxx 00000 or at such other address as
Franklin shall have furnished to the other parties hereto in writing or (b) if
to USM to X.X. Xxx 000, Xxxxxxxx, Xxx Xxxxxx 00000, 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
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
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: /s/ J. Xxxxx Xxxxxxxx
----------------------------------
J. Xxxxx Xxxxxxxx, President
U.S. MINING, INC.
By: /s/ Xxxxxxx Xxxxxxxx
---------------------------------
Xxxxxxx Xxxxxxxx, President
16
