SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Rule 13 or 15d of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): March 5, 1997
FRANKLIN CONSOLIDATED MINING CO., INC.
(Exact name of Registrant as specified in charter)
Delaware 0-9416 13-2879202
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
76 Beaver Street, Suite 500, New York, New York 10005
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (212) 344-2828
Not Applicable
(Former name or former address, if changed since last report)
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Item 1. Changes in Control of Registrant
Not applicable.
Item 2. Acquisition or Disposition of Assets
Not applicable.
Item 3. Bankruptcy or Receivership
Not applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not applicable.
Item 5. Other Materially Important Events
On March 5, 1997, the United District Court for the District of Colorado
entered a Judgment against the Company for $90,000 in favor of Charles J.
Friedman, P.C., the Company's former counsel ("Friedman"). This action follows
the dismissal with prejudice on January 10, 1997 by United States District Court
Judge Allan B. Johnson of all the Company's claims against Friedman. Pursuant to
such Judgment, the parties stipulated to a stay of execution of the Judgment for
forty-five (45) days to provide the Company with time to pay Friedman $45,000 in
full and complete satisfaction of the Judgment.
However, pursuant to such Judgment, which is attached hereto as Exhibit A,
the Company was required, on or before March 21, 1997, (1) to issue to Friedman
1,000,000 of the Company's Common Stock having certain piggyback and demand
registration rights and other rights as more specifically set forth in Exhibit A
to the Judgment (the "Settlement Shares"), (2) to execute a Financing Statement
and Security Agreement on the appropriate UCC forms (the "UCC Filings") and
deposit such Settlement Shares and UCC Filings into the Registry of this Court,
and (3) to file with the SEC this Current Report on Form 8-K setting forth in
full and accurate detail the terms of the Judgment against the Company and the
terms of the stay of execution as set forth therein, which disclosure and
language the Company is also required to include in its upcoming Annual Report
on Form 10-K for the fiscal year ended December 31, 1996. Simultaneously,
Friedman will deposit on or before March 21, 1997 into the Registry of this
Court its Share Purchase Warrant dated July 1, 1995 with certain piggyback and
demand registration rights attached thereto (the "Share Purchase Warrant").
Finally, the Company was required, as soon as possible after the completion
of its audit for the fiscal year ended December 31, 1996 and the filing of its
Annual Report on Form 10-K, but no later than April 30, 1997, and in addition to
the registration rights provided for in Exhibit A hereto, to file with the U.S.
Securities and Exchange Commission (the "SEC") a Registration Statement on such
form as may be required by the SEC, covering the Settlement Shares so that such
shares will thereafter be fully registered upon the effective date of such
Registration Statement. In the event that the Company makes the $45,000 payment
on or before April 21, 1997, then Friedman will release its lien on the
Company's files and return such files to the Company on or before May 2, 1997.
In the event that the Company fails to pay Friedman $45,000 in cash on or before
April 21, 1997, then the Court shall release from its Registry the Settlement
Shares and the UCC Filings, and Friedman shall maintain possession, custody and
control of the Company's records until the Judgment is satisfied in full.
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Item 6. Resignations of the Registrant's Directors
Not applicable.
Item 7. Financial Statements and Exhibits
(a) Form of Judgment, dated March 5, 1997.
Item 8. Change in Fiscal Year
Not applicable.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FRANKLIN CONSOLIDATED MINING CO., INC.
DATE: March ___, 1997 By: J. Terry Anderson, President
---------------------------------
J. Terry Anderson, President
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IN THE UNITED STATES DISTRICT COURT FOR THE
DISTRICT OF COLORADO
Civil Action No. 96 WY 506 AJ
CHARLES J. FRIEDMAN, P.C., a Colorado corporation,
Plaintiff,
vs.
FRANKLIN CONSOLIDATED MINING CO., INC., a Delaware corporation,
Defendant
ORDER OF JUDGMENT
JUDGMENT hereby enters in favor of PLAINTIFF, CHARLES J. FRIEDMAN, P.C., a
Colorado corporation, against the DEFENDANT, FRANKLIN CONSOLIDATED MINING CO.,
INC., a Delaware corporation (the "Company"), in the principal sum of Ninety
Thousand Dollars ($90,000.00) as of the date of March 5, 1997, with annual
interest at the legal rate of 8%.
Pursuant to the Stipulation of the parties before United States District
Court Magistrate Judge Donald E. Abram, execution of said Judgment shall be
stayed for forty-five (45) days provided that on or before March 21, 1997, (1)
Defendant Company shall deposit into the Registry of this Court a newly-issued
share certificate registered in the name of Charles J. Friedman, P.C. for
1,000,000 of the Company's Common Stock having certain piggyback and demand
registration rights and other rights as more specifically set forth in Exhibit A
hereto (the "Settlement Shares"), (2) Defendant Company shall execute a
Financing Statement and Security Agreement on the appropriate UCC forms as more
specifically set forth in Exhibit B hereto (the "UCC Filings") and deposit such
UCC Filings into the Registry of this Court, (3) Defendant Company shall file
with the SEC, and provide to this Court and to Plaintiff, a Current Report on
Form 8-K in substantially the form attached hereto as Exhibit C, disclosing the
dismissal by the United States Federal District Court for the District of
Colorado by Judge Allan B. Johnson of all of the Company's claims against
Plaintiff Charles J. Friedman, P.C. in their entirety on January 10, 1997, and
setting forth in full and accurate detail the terms of this Judgment against the
Company, and the terms of the stay of execution as set forth herein, which
disclosure and language the Company shall also be required to include in its
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 in a
position in the Annual Report of equal prominence to the disclosure contained in
the Company's previous year's Annual Report on Form 10-K (namely, a heading as
follows in the Litigation section of the 10-K: "Friedman Litigation:
Counterclaims Dismissed; Judgment Entered Against Company"), and (4) Plaintiff
Charles J. Friedman, P.C. shall deposit into the Registry of this Court its
Share Purchase Warrant dated July 1, 1995 with
<PAGE>
certain piggyback and demand registration rights attached thereto (the "Share
Purchase Warrant"), and further provided that within 20 days of the completion
of its audit for the fiscal year ended December 31, 1996, but no later than
April 30, 1997, and in addition to the registration rights provided for in
Exhibit A hereto, Defendant Company shall file with the U.S. Securities and
Exchange Commission (the "SEC"), and provide the Registry of this Court and the
Plaintiff with copies verifying such filing, a Registration Statement on such
form as may be required by the SEC, covering the Settlement Shares so that such
shares will thereafter be fully registered upon the effective date of such
Registration Statement.
Execution of this Judgment by Plaintiff Charles J. Friedman, P.C. shall be
stayed up to and including the date of April 21, 1997 pending payment by or on
behalf of the Company to Plaintiff of Forty Five Thousand Dollars ($45,000.00)
in cash, or by clear funds by wire transfer to Plaintiff's Account. Upon
Plaintiff's receipt of such funds on or before April 21, 1997, the Settlement
Shares, the UCC Filings, and the Share Purchase Warrant held in the Registry of
the Court shall be released to the Company or to its designee and the Judgment
shall be deemed satisfied in full.
In the event that payment to Plaintiff is not made as aforesaid, then the
certificate representing the Settlement Shares and the UCC Filings representing
the Company's tangible and intangible assets shall be released from the Registry
of the Court to Plaintiff on April 22, 1997, and the Judgment shall continue to
accrue interest at the legal rate until collected or paid. Moreover, in the
subsequent event that Defendant Company fails to complete its audit in and file
its Annual Report on Form 10-K by April 15, 1997 and fails to file the
Registration Statement with the SEC by April 30, 1997 fully registering the
Settlement Shares, Plaintiff may require the Company to make such filing at the
Company's expense.
In the event Plaintiff chooses to liquidate any portion or all of the shares
represented by the Settlement Shares, the cash proceeds from such liquidation or
sale shall be applied against the Judgment and against interest thereon and
appropriate Satisfactions of judgment shall be filed with the Court. In the
event that Plaintiff is forced to execute on its Judgment, it may elect to
proceed against the Settlement Shares, or such other property or rights of the
Company as it may elect, or both until the Judgment is satisfied.
Finally, in the event that Plaintiff receives the $45,000 payment on before
April 21, 1997, Plaintiff shall release its lien on the Company's files and
return such files to the Company on or before May 2, 1997. However, in the event
that Defendant fails to make the required payment on or before April 21, 1997,
Plaintiff shall maintain the Company's records in its possession, custody or
control unless and until this Judgment is satisfied in full.
SO ORDERED this ___ day of March, 1997, nunc pro tunc March 5, 1997.
BY THE COURT
-----------------------------
Judge
<PAGE>
EXHIBIT A TO JUDGMENT
(1) THE NEW SHARE CERTIFICATE FOR 1,000,000 COMMON SHARES TO BE ISSUED TO
CHARLES J. FRIEDMAN, P.C. BY FRANKLIN CONSOLIDATED MINING CO., INC.
PURSUANT TO THE MARCH 5, 1997 JUDGMENT (THE "SETTLEMENT SHARES") SHALL
CONTAIN THE FOLLOWING NOTATION ON THE FRONT OF SUCH CERTIFICATE:
"SEE ATTACHED PIGGYBACK AND DEMAND REGISTRATION AND OTHER RIGHTS OF
SHAREHOLDER CHARLES J. FRIEDMAN, P.C."
(2) THE FOLLOWING STATEMENT OF RIGHTS OR LEGEND SHALL BE ATTACHED TO AND MADE A
PART OF SUCH SHARE CERTIFICATE FOR SUCH SETTLEMENT SHARES:
STATEMENT OF RIGHTS OF SHAREHOLDER CHARLES J. FRIEDMAN, P.C.
The Holder of This Share Certificate, Charles J. Friedman, P.C. or its Assignee,
Shall Possess Unlimited Incidental ("Piggyback") Registration Rights and One (1)
Demand Registration Right, at the Company's Cost and Expense, and Other Rights
All As More Fully Set Forth Below:
1. Piggyback Registration Rights. As soon as possible after the Company
concludes its audit for the fiscal year ended December 31, 1996 and files its
Annual Report on Form 10-K, but in any event no later than April 30, 1997, the
Company shall file a Registration Statement on such form as may be required by
the U.S. Securities and Exchange Commission ("SEC") covering the 1,000,000
Settlement Shares so that such shares will thereafter be fully registered and
freely tradeable upon the effective date of such Registration Statement. The
Company may not require that such Settlement Shares to be registered on behalf
of the Holder be pari passu to the number of shares that may be registered by
all other parties. If for any reason the Company does not file a Registration
Statement as required on or before April 30, 1997 and Holder's shares do not
become fully registered and freely tradeable, then each and every time the
Company shall determine to file a registration statement in connection with the
proposed offer and sale for money of any of its securities either by it or any
of its security holders (except solely to implement an employee benefit plan),
the Company shall cause all of Holder's shares or remaining shares to be
included in such registration statement for current sale. The Company may not
require that the number of shares to be registered on behalf of Holder shall be
pari passu to the number of shares to be registered by all parties, including
the Company, distributing securities in such underwriting. Holder's piggyback
rights shall continue with respect to any of Holder's shares which fail to be
registered or fail to become freely tradable as previously noted. The costs and
expenses of any registration hereunder shall be borne by the Company, including
legal fees of Holder, except that the Company shall not be required to bear any
underwriting discounts or commissions of Holder.
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STATEMENT OF RIGHTS of SHAREHOLDER CHARLES J. FRIEDMAN, P.C. (PAGE 2)
2. Demand Registration Rights. By written notice to the Company, Holder
shall have the right to demand one registration of any or all of Holder's
shares, at the expense of the Company as provided below. The Company shall not
be obligated to effect a registration statement during the period starting with
the date sixty (60) days prior to the Company's estimated date of filing of, and
ending on a date six (6) months following the effective date of, a registration
statement pertaining to an underwritten public offering or securities for the
account of the Company, provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective and that the Company's estimate of the date of filing such
registration statement is made in good faith.
If the Company shall furnish to Holder a certificate signed by the President of
the Company and the Company's underwriter and authorized by the Company's Board
of Directors stating that in the good faith judgment of the Board of Directors
and the underwriter it would be materially detrimental to the Company or its
shareholders for a demand registration to be undertaken in the near future, then
the Company's obligation to use its best efforts to file a registration
statement shall be deferred for a period not to exceed three (3) months. Such
certificate must set forth in detail the basis for any determination that a
demand registration would be materially detrimental to the Company or its
shareholders and the basis of any such detriment.
3. Other Rights.
a. Notice. The Company shall notify Holder within 24 hours of the date upon
which the Company's accountants issue their letter certifying the audit and the
financial statements and within 24 hours of the date upon which the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 has been
filed with the SEC. The Company shall provide similar 24-hour notice for any
other filing with the SEC, whether on EDGAR or otherwise, and shall further
provide Holder with a copy via express mail of all such SEC filings within 24
hours. The Company shall also provide Holder prior notice of at least five (5)
business days of any material significant transaction, including mergers,
acquisitions, consolidations, sale of assets, bankruptcy, insolvency, de-listing
from NASDAQ, or similar actions that may affect the value or liquidity of
Holder's stock. If these Settlement Shares are still owned by Holder after May
1, 1997, then the Company shall also provide Holder with prior notice regarding
any proposed sale, transfer, pledge or encumbrance of all or substantially all
of the Company's assets, merger, acquisition or any other significant or
material transaction affecting any of the assets of the Company.
b. Recapitalization, etc. If, at any time the Common Shares represented by
this Certificate are not yet fully registered and freely tradeable, the Company
is recapitalized by reclassifying its outstanding Common Shares into shares with
a different par value, or by changing its outstanding Common Shares to shares
without par value, or if the Company or a successor corporation consolidates or
merges with or conveys all or substantially all of its, or of any
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<PAGE>
STATEMENT OF RIGHTS of SHAREHOLDER CHARLES J. FRIEDMAN, P.C. (PAGE 3)
successor corporation's, property and assets to any other corporation or
corporations (any such other corporation being included within the meaning of
the term "successor corporation" hereinbefore used in the context of any
consolidation or merger of any other corporation with, or the sale of all or
substantially all of the property of any such other corporation to, another
corporation or corporations), or in the event of any other material change of
the Company's capital structure or of any successor corporation by reason of any
reclassification, reorganization, recapitalization, consolidation, merger,
conveyance or otherwise, then, as a condition of any such reclassification,
reorganization, recapitalization, consolidation, merger or conveyance, a prompt,
proportionate, equitable, lawful and adequate provision shall be made whereby
any additional shares, securities or assets that may be issued to Holder with
respect to such reclassification, reorganization, recapitalization,
consolidation, merger or conveyance shall be covered by this Statement of
Rights.
c. Merger, dissolution, etc. If, at any time the Common Shares represented
by this Certificated are not yet fully registered or freely tradeable and after
prior notice has been provided to Holder as set forth above, the Company sells
all or substantially all of its property, or dissolves, liquidates, or winds up
its affairs, prompt, proportionate equitable, lawful and adequate provision
shall be made as part of the terms of any such sale, dissolution, liquidation,
or winding up such that Holder of this Certificate may thereafter receive, in
lieu of each fully registered and freely tradeable Common Share of the Company
which he would have been entitled to receive, the same kind and amount of any
stock, securities or assets as may be issuable, distributable or payable upon
any such sale, dissolution, liquidation or winding up with respect to each
Common Share of the Company.
d. Owner; Dividend; Rule 144. The Holder of this Certificate at all times
shall be treated by the Company as the absolute owner hereof for all purposes,
regardless of any notice to the contrary from any person. This Certificate shall
entitle Holder to all of the rights of shareholders or to any dividend declared
upon the Common Shares of the Company. At any time after the Settlement Shares
have not yet become fully registered and freely tradeable, if sufficient time
has passed such that Rule 144 becomes available to Holder AND the Company and
the Company's transfer agent lifts all trading restrictions on such shares so
that they become freely tradeable, with an accompanying opinion of counsel
acceptable to Holder, then the Registration rights contained herein shall
terminate, but only with the written approval of Holder. However, in the event
at any time thereafter should Rule 144 no longer be available to holder, then
these rights will be automatically reinstated and continue until such time as
Rule 144 will become available to Holder, and such automatic reinstatement shall
continue in force until all such shares are sold by Holder or its assignee.
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<PAGE>
STATEMENT OF RIGHTS of SHAREHOLDER CHARLES J. FRIEDMAN, P.C. (PAGE 4)
IN WITNESS WHEREOF, the Company has caused this Share Certificate and this
accompanying Statement of Rights and Legend to be executed by its duly
authorized officers, to be affixed to the Share Certificate for the 1,000,000
Settlement Shares of the Company issued as of March 5, 1997 pursuant to the
Judgment of the United States District Court in the District of Colorado dated
as of March 5, 1997, and to be sealed with the seal of the Company as of the 5th
day of March, 1997.
FRANKLIN CONSOLIDATED MINING CO., INC.
[SEAL] By:_______________________________
J. Terry Anderson, President
Attest:
- ----------------------------------------
Robert Waligunda, Secretary
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<PAGE>
STATEMENT OF RIGHTS of SHAREHOLDER CHARLES J. FRIEDMAN, P.C. (PAGE 5)
IN WITNESS WHEREOF, the Company has caused this Share Certificate and this
accompanying Statement of Rights and Legend to be executed by its duly
authorized officers, to be affixed to the Share Certificate for the 1,000,000
Settlement Shares of the Company issued as of March 5, 1997 pursuant to the
Judgment of the United States District Court in the District of Colorado dated
as of March 5, 1997, and to be sealed with the seal of the Company as of the 5th
day of March, 1997.
FRANKLIN CONSOLIDATED MINING CO., INC.
[SEAL] By: J. Terry Anderson
J. Terry Anderson, President
Attest: Robert Waligunda
Robert Waligunda, Secretary
5
