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000-31380
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82-0096527
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(Commission
File Number)
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(IRS
Employer Identification No.)
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630
E. Mullan Ave. Suite D , Osburn, Idaho
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83849
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(Address
of Principal Executive Offices)
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(Zip
Code)
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Item
1.01
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Entry
Into a Material Definitive Agreement
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On
December 30, 2008, Atlas Mining Company (“Company”) entered into a
Management Agreement with Material Advisors LLC, a management services
company (“Manager”). The Management Agreement has a term ending
on December 31, 2010 with automatic renewal for successive one year
periods unless either Manager or Company provides 90 days prior notice of
cancellation to the other party or pursuant to the termination provisions
of the Management Agreement. Under the Management Agreement
Manager will perform or engage others, including Andre Zeitoun, a
principal of Manager, Chris Carney and Eric Basroon (“Management
Personnel”) to perform senior management services including
such services as are customarily provided by a chief executive officer but
not (unless otherwise agreed) services customarily provided by a chief
financial officer. Pursuant to the Management Agreement, Andre Zeitoun
will serve as Company’s Chief Executive Officer and will be appointed as a
member of the Company’s Board of Directors. The services
provided by Manager will include, without limitation, consulting with the
Board of Directors of the Company and the Company’s management on business
and financial matters, including matters related to (i) new
business development, creating and implementing the Company’s business
plan and overseeing and supervising the Company’s operations, (ii)
preparation of operating budgets and business plans, (iii) Company’s
corporate and financial structure, (iv) formulation of long term business
strategies, (v) recruiting senior management, (vi) financing
(g) transactions with third parties, including mergers and
acquisitions, (h) evaluating potential sale or exit opportunities,
structuring and negotiating a sale of the Company, or leveraged
recapitalization and (i) resolving investigations and litigation involving
the Company. Manager will be paid an annual fee of $1,000,000 per year,
payable in equal monthly installments of $83,333.34. Manager
will be solely responsible for the compensation of the Management
Personnel, including Mr. Zeitoun and the Management Personnel will not be
entitled to any direct compensation or benefits from the Company
(including in the case of Mr. Zeitoun, for service on the
Board). Additionally, Company will grant Manager non-qualified
stock options to purchase, for $.70 per share (the “$.70
Option”) a number of shares of the Company equal to 10% of the outstanding
common stock of the Company on a fully diluted basis (which shall vest in
equal monthly installments over three years).
Upon
the consummation of a transaction resulting in (A) Company
ceasing to be a SEC reporting company, or having less than 300
shareholders of record and (B) David A. Taft, IBS Capital LLC,
The IBS Turnaround Fund L.P., The IBS Turnaround Fund (QP), The IBS
Opportunity Fund (BVI). Ltd., or any of their affiliates or related
entities own in the aggregate more than 50% of the outstanding equity
capital of the Company immediately following such transaction (a “Going
Private Transaction”), the $.70 option will be cancelled and
replaced by a non-qualified option (the “Going Private
Option”), accompanied by a tandem stock appreciation right (the “SAR”).
The Going Private Option will provide Manager the right to purchase the
same percentage of Company’s(or its successor’s) outstanding shares of
common stock after giving effect to the going private transaction
that were subject to the $.70 Option. The SAR will entitle
Manager to receive either shares of common stock or cash equal in value to
the excess of the fair market value of a share of common stock on the date
of exercise over the base price per share under the SAR. The exercise
price of the Going Private Option and the base price under the SAR will be
the fair market value per share to be paid in the Going Private
Transaction to shareholders who are not investing in the going private
vehicle. The term of the $.70 Option, the Going Private Option and the SAR
will be 10 years. During their terms, the Going Private Option
and the SAR will be fully exercisable. If Company declares a dividend or
distribution at any time while the $.70 option is unvested, Manager will
be entitled to receive an amount equal to the dividend or distribution
that would be paid on the shares underlying the $.70 Option, payable in
the same form as such dividend or distribution, on the same vesting
schedule as the $.70 Option. Manager will have the right to
participate in the Going Private Transaction for up to 20% of the equity
on terms and conditions which are as favorable to Manager as the terms and
conditions available to any other person who invests in the going private
entity. This description of the Management Agreement is qualified in its
entirety by reference to the Management Agreement, which is filed as
Exhibit 99.1.and is incorporated herein by
reference.
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Item
2.03
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Creation
of a Direct Financial Obligation or an Obligation under an Off-Balance
Sheet Arrangement of a Registrant.
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On
December 30, 2008, the Company sold to accredited investors $1,000,000 of
a series 10% PIK Convertible Notes (the “Notes”) and entered into
a Registration Rights Agreement in connection with the shares of
common stock to be issued upon conversion of such Notes.
The
principal under the Notes is due December 15, 2018 subject to earlier
acceleration or conversion of the Notes as described below. The Notes bear
interest at the rate of 10% per annum payable (including by increase of
the balance on the Notes) semi-annually in arrears on June 15 and December
15 of each year commencing June 15, 2009. The Notes may be converted at
the option of the Note holder at any time sufficient common stock is
available for such conversion. The Notes will be mandatorily converted
when (i) sufficient common stock is available for conversion, (ii) the
average closing bid price or market price of Company common stock for the
preceding 5 days is in excess of the Strike Price (as defined below) and
(iii) a registration statement is effective and available for resale of
all of the converted shares or the holder may sell such shares under Rule
144 under the Securities Act. The number of shares issued on
conversion of a Note will be derived by dividing the principal and accrued
interest on the Note by $0.35 (the “Strike Price”). The Strike Price will
be subject to adjustment in the event of a dividend or distribution on
Company’ common stock in shares of common stock, subdivision or
combination of Company outstanding common stock, or reclassification of
Company’s outstanding common stock. A Note holder may
accelerate the entire amount due under the Note upon the occurrence of
certain events of default or, after July 1, 2010, in the event there is
insufficient common stock available for conversion of the Notes. This
description is qualified in its entirety by reference to the form of
Convertible Note which is filed as Exhibit 99.2 to this Form 8-K and is
incorporated herein by reference.
Issuance
of the Notes is made in reliance upon the exemption found in Section 4(2)
of the Securities Act of 1933.
The
Registration Rights Agreement provides that within 10 days after the date
on which the Articles of Incorporation of Company are amended so that
there are sufficient shares of common stock so that all of the Notes may
be converted, Company will notify the holders of the Notes. If a
Noteholder desires to include in a registration statement under
the Securities Act all or part of such Noteholder’s common stock issuable
on such conversion, such Noteholder must within 10 days after receipt of
such notice notify Company of the number of shares of common stock such
holder wishes to include in the registration
statement. Thereafter, subject to certain exceptions, the
Company will file a registration statement with the Securities and
Exchange Commission under the Securities Act of all common stock which the
Note holders request be registered. This
description is qualified in its entirety by reference to the form of
Registration Rights Agreement which is filed as Exhibit 99.3to this Form
8-K and is incorporated herein by
reference.
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Item
3.02
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Unregistered
Sales of Equity Securities
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The
information contained in Item 2.03 above is incorporated herein by
reference in its entirety. Issuance of the Notes is made in
reliance upon the exemption found in Section 4(2) of the Securities Act of
1933.
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Item
5.02
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Departure
of Directors or Certain Officers; Election of Directors; Appointment of
Certain Officers; Compensatory Arrangements of Certain
Officers
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On
December 30, 2008 the term of Michael Lyon as President and Chief
Executive Officer of Company expired and Mr. Lyon stepped down as
President and Chief Executive Officer pursuant to the terms of his
employment agreement, which was described in the Company’s Form 8-K filed
on July 3, 2008 and the description of which is incorporated herein by
reference. The Company has not entered into an agreement with Mr. Lyon
regarding the terms of his departure at this time. On December
30, 2008, the Board of Directors appointed Andre Zeitoun as President and
Chief Executive Officer and as a director of Company effective January 1,
2009. From Feb 2007-Dec 22, 2008, Mr. Zeitoun was a
Portfolio Manager at SAC Capital/ CR Intrinsic Investors, specializing in
Distressed and Special Situations Investments. He led a team of six
professionals, with discretion over a several hundred million dollar
portfolio of investments in companies undergoing some form of distress,
requiring a reorganization, recapitalization and or an operational
turnaround. Many of these investments required Zeitoun to take an active
role in the turnaround process. From 2003 - 2006 Zeitoun formed the
"Special Situations Group" at RBC Dain Rauscher and served as Sr. VP &
Head of the division. In this role, Zeitoun was responsible for oversight
and direction on matters relating to sales, trading, research and
proprietary investing on behalf of the firm's capital. From
1999-2003 Zeitoun was a Senior VP at Salomon Smith Barney. In this role,
Zeitoun led a Special Situations sales trading and research team serving
middle market institutions. Mr. Zeitoun will receive no direct
compensation from the Company for service on the Board of Directors or for
service as President and Chief Executive Officer. Mr. Zeitoun
will be compensated by the Manager in connection with the Management
Agreement described in Item 1.01.
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Item
8.01
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Other
Events
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On
January 6, 2009, the Company issued a press release, which is attached as
Exhibit 99.4
The
Company terminated its contract mining business as of December 31, 2008,
due to the decline in mining activities as a result of economic conditions
and so that the Company can concentrate its efforts and resources on
commercializing the halloysite deposits at the Dragon Mine. The
Company is selling certain of the equipment associated with the contract
mining business.
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Item
9.01
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Financial
Statements and Exhibits
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Exhibit 99.1 Management
Agreement
Exhibit 99.2 Convertible
Note
Exhibit 99.3
Registration Rights Agreement
Exhibit 99.4 January 6,
2009 Press Release
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ATLAS
MINING COMPANY
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(Registrant)
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Date: January
6, 2009
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By:
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/s/
Andre Zeitoun
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Andre
Zeitoun
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Chief
Executive Officer and President
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