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Date
of Report (Date of earliest event reported)
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May
1, 2009
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ATLAS
MINING COMPANY
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(Exact
name of registrant as specified in its charter)
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Idaho
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000-31380
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82-0096527
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(State
or other jurisdiction of incorporation)
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(Commission
File Number)
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(I.R.S.
Employer Identification No.)
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110
Greene St., Suite 1101, NY, NY
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10012
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(Address
of principal executive offices)
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(Zip
Code)
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(208)
556-1181
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Issuer's
telephone number, including area code
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N/A
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(Former
name or former address, if changed since last
report.)
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[
]
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230-425)
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[
]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240-14a-12)
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[
]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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[
]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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Item 1.01
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Entry
into a Material Definitive Agreement
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On
May 1, 2009, Atlas Mining Company (the “Company”) entered into a
memorandum of understanding (“MOU”) with the lead plaintiffs in the class
action In Re Atlas
Mining Company Securities Litigation (the “Class
Action”). The MOU sets forth the material terms of the parties’
settlement and will be combined with additional provisions in a final
settlement agreement.
Under
the terms of the MOU,
1. The
Company will pay the plaintiffs $1,250,000 (which includes fees to
counsel) in exchange for (i) the definition of the class to ensure
preclusion of future claims against the Company, its former subsidiary,
Nano Clay and Technology, Inc. (Nano”) or any of its current or former
officers, directors or employees or other potential individual defendants
(“Individual Defendants”) (ii) release and dismissal of the Company, Nano
and the Individual Defendants, (iii) court certification of a class for
settlement purposes; (iv) no more than 5% opt outs (the 5% does
not include the persons noted in paragraph 6 below); and (v) final court
approval of the settlement.
2. For
purposes of funding the payment, the Company will take all necessary steps
to cause the payment to be issued by its insurance carrier into escrow
prior to execution of the final settlement agreement, but to the extent
the insurance carrier refuses to fund until some later date, the Company
will not be responsible for any payment prior to funding by the insurance
carrier.
3. The
Company will provide reasonable assistance to plaintiffs in the
plaintiffs’ claim against Chisholm, Bierwolf & Nilson
LLC.
4. The
Company will permit the plaintiffs to take certain confirmatory
discovery.
5. The
Company will provide up to $75,000 to fund expenses in connection with
notification to class members.
6. As
an accommodation to facilitate the settlement, the following persons agree
not to submit claims pursuant to the settlement of shares that they own or
control and that are otherwise eligible to participate in the settlement:
David Taft, a board member and President of IBS Capital LLC, which is
General Partner of The IBS Turnaround Fund (QP) (A Limited Partnership)
and The IBS Turnaround Fund (A Limited Partnership) , Andre Zeitoun (the
Company’s CEO), Chris Carney (the Company’s Interim CFO), and Eric Basroon
(an employee of Material Advisors LLC). The MOU states that the
Company may determine in its business judgment to compensate the persons
for such forbearance
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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
May 1, 2009, the Company entered into agreements to
sell to accredited investors $1,350,000 principal amount of
Series 10% PIK-Election Convertible Notes due 2018 (the “Notes”) and
entered into Registration Rights Agreements in connection with the shares
of common stock to be issued upon conversion of such mandatorily
convertible Notes. The Board of Directors of the Company authorized the
Notes to be included in the Series 10% PIK –Election Convertible Notes due
2018 authorized in December 2008 (the “Series”) as disclosed in
the 8-K of the Company filed on January 6, 2009. 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 issuance of additional in-kind
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
Noteholder at any time there is sufficient authorized unissued common
stock of the Company available for conversion of the Series (including
those notes issued in December 2008 and April 2009). The Notes will be
mandatorily converted when (i) sufficient common stock is available for
conversion of all the notes in the Series, (ii) the average closing bid
price or market price of Company common stock for the preceding 5 trading
days is above 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 Noteholder 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 $0.50 (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 Noteholder may accelerate
the entire amount due under its 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 all the notes in the Series. The
Company may not use the proceeds of the loans represented by the Notes to
pay damages or voluntary settlement proceeds to plaintiffs in the
securities litigation lawsuit against the Company.
This
description of the Notes is qualified in its entirety by reference to the
form of 10% PIK-Election Convertible Note due 2018 which is
filed as Exhibit 99.1 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 the Company are amended so that
there are sufficient shares of common stock so that all of the notes of
the Series may be converted, the Company will notify the holders of such
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
Noteholder requests be registered.
This
description the Registration Rights Agreement is qualified in its entirety
by reference to the form of Registration Rights Agreement which is filed
as Exhibit 99.2 to this Form 8-K and is incorporated herein by
reference.
The
reported closing price of the company’s Common stock on April 30, 2009 was
$.49.
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Item
3.02
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Unregistered
Sales of Equity Securities
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The
information contained in Items 2.03 above and 5.02 below is incorporated
herein by reference in its entirety. Issuance of the Note 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(e)
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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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The
Company entered into a Consulting Agreement (the “Agreement”), a copy of
which is attached as Exhibit 99.4, with Morris Weiss, a director, on
November 1, 2008 pursuant to which Mr., Weiss served as Chief
Restructuring Officer for a period of six months ended May 1,
2009.
The
Agreement provided that Mr. Weiss’ duties included: (i) oversight and
management of (1) pending and anticipated securities, corporate, insurance
and other significant litigation involving the Company or its affiliates,
including the Class Action (2) the disposition of the contract
mining business and such other businesses and entities in which the
Company holds an interest as may be determined by the Board, and (3) such
other matters as agreed upon by Mr. Weiss and the Board; (ii) advising the
Board and senior management of the Company with respect to other
significant restructuring matters, and (iii) such other duties and
responsibilities on which the Board and the Consultant shall mutually
agree.
The
Agreement provided for compensation in the form of stock options and
cash.
The
stock option compensation under the Agreement was 550,000 options to
acquire Company common stock with an exercise price of $.70 per share and
expiring in ten years. 250,000 options vested during the term of the
Agreement and 300,000 options would vest at the end of the Agreement
unless the Board determined that Mr. Weiss’ performance was not
satisfactory, in which case the number of options awarded was in the
discretion of the Board. The reported closing price of the
Company’s stock on October 31, 2008 was $.28.
The
board concluded that Mr. Weiss’ performance was more than satisfactory and
thus 300,000 options vested at the end of the Agreement (for a total of
550,000 options as provided under the agreement)..
The
cash compensation under the Agreement was $100,000 during the term of the
Agreement plus a bonus of up to $100,000, the award of which was dependent
on a Board determination as to whether Mr. Weiss’ performance was
satisfactory and the amount of such bonus was in the discretion of the
Board.
The
board has determined that Mr. Weiss’ performance was more than
satisfactory thus the amount of the cash bonus was $100,000 and the Board
and Mr. Weiss agreed would be payable in six monthly
installments.
In
addition, on May 1, 2009, Mr. Weiss agreed to review the documentation to
be generated in connection with the negotiation of the final settlement
agreements in the Class Action and the insurance coverage litigation
involving the Company . As
compensation for such services, the Board granted Mr. Weiss 100,000
options to acquire Company common stock with an exercise price of $.70 per
share, expiring in ten years, and vesting on completion of the final
settlement agreements The reported closing price of the Company’s stock on
April 30, 2009 was $.49.
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Item
8.01
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Other
Events
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On
May 4, 2009 the Company issued a Press Release relating to the
matters described in Items 1.01 and 2.03. It is attached as
Exhibit 99.3.
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Item
9.01
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Financial Statements and
Exhibits
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Exhibit 99.1 Convertible
Note
Exhibit 99.2
Registration Rights Agreement
Exhibit 99.3 Press
Release issued May 4, 2009 relating to the matters described in Items 1.01
and 2.03
Exhibit 99.4 Consulting
Agreement between Atlas Mining Company and Morris Weiss
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ATLAS
MINING COMPANY
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(Registrant)
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Date:
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May
4, 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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