SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 1, 1998
FRONTEER FINANCIAL HOLDINGS, LTD.
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(Exact name of registrant as specified in its charter)
Colorado 0-17637 45-0411501
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(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification No.)
1700 Lincoln Street, 32nd Floor, Denver, Colorado 80203
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (303) 860-1700
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Item 5. OTHER EVENTS.
On May 1, 1998, Fronteer Financial Holdings, Ltd. ("Fronteer") signed a
letter of intent with Freeman Holding Company, Inc. ("Freeman Holding") and its
subsidiary Freeman Securities Company, Inc. ("Freeman Securities"). If an
agreement is consummated in accordance with the letter of intent, Fronteer will
purchase from Freeman a number of the shares ("Shares") of common stock of
Freeman Holding which, after the purchase, will equate to 27 1/2% of the
outstanding shares of common stock of Freeman Holding. The purchase price for
the Shares is 150% of the book value of the Shares or approximately $3.7
million. Also, Fronteer will loan Freeman Securities $5,000,000 in the form of a
five year convertible subordinated debenture with interest payable on the
principal amount of 10% per annum, 11% per annum, and 12% per annum for the
first and second years, the third year, and the fourth and fifth years,
respectively. Upon the approval of the National Association of Securities
Dealers, Inc. ("NASD"), Freeman Securities will have the right to pay any or all
of the outstanding principal and interest due on the debenture at any time prior
to the maturity date of the debenture, but in no event may any prepayment be
made before the expiration of one year from the effective date of the loan.
Subject to the prepayment rights of Freeman Holding, Fronteer, upon six months
prior written notice to Freeman Securities, will have the right to convert the
debenture at any time after the expiration of the second year of the loan into
such number of shares of Freeman Holding common stock as would bring Fronteer's
equity interest in Freeman Holding up to a maximum of 55%. The conversion price
of the debenture will be 150% of the book value of the Freeman Holding
outstanding shares of common stock, subject to certain adjustments.
In addition, if an agreement is consummated, subject to Fronteer's
approval, Fronteer will lend Freeman Securities up to $5,000,000, upon request,
in the form of temporary subordinated loans, for the purpose of Freeman
Securities participating as an underwriter in offerings of securities. These
loans will bear interest at a rate of 1% per month (or less if Fronteer, Heng
Fung Holdings Company Limited or any of their affiliates act as selling agent
for the particular offering).
Finally, Freeman Securities will increase the size of its board of
directors from five to eight persons and Fronteer will have the right to
designate three persons to the board of directors of Freeman Securities.
Further, if Freeman Securities has a net operating loss for the fiscal year 2000
or for any year thereafter or if Freeman Securities fails to pay principal or
interest on the loans from Fronteer, then Fronteer will have the right to
appoint a majority of Freeman Securities' board of directors at its next
meeting. For so long as Fronteer remains a holder of the Shares, certain actions
by the board of directors of Freeman Securities will require a vote of 80% of
the board of directors of Freeman Securities.
The terms of the letter of intent are subject to a due diligence review by
the parties to the letter of intent, the execution of a definitive agreement and
approval by the NASD and other necessary regulatory bodies.
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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.
Date: June 9, 1998
FRONTEER FINANCIAL HOLDINGS, LTD.
By: /s/ Gary L. Cook
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Gary L. Cook,
Secretary and Treasurer
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