UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [Fee Required]
For the fiscal year December 31, 1995 or
Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 [No Fee Required]
For the transition period from ______________________ to ______________________
Commission File Number 0-9370
___________________
USMX, INC.
(Exact name of registrant as specified in its charter)
___________________
Delaware 84-1076625
(State or other (I.R.S. Employer Identification No.)
jurisdiction of
incorporation or organization)
141 Union Boulevard,
Suite 100
Lakewood, Colorado 80228
(Address of principal executive (Zip Code)
offices)
(303) 985-4665
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 Par Value
(Title of class)
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
USMX, INC.
(Registrant)
Date:4/29/96 By: /s/Donald E. Nilson
Donald E. Nilson,
Vice President -
Finance
<PAGE>
PART III
Item 10. Directors, Executive Officers, Promoters and
Control Persons.
The following table sets forth information regarding
members of the Company's board of directors:
<TABLE>
<CAPTION>
Current
Director Term
Name and Business Experience Since Expires
- - - - ----------------------------------------- --------- --------
<S> <C> <C>
George J. Allen, age 67, has served as
President of Allen Engineering since 1983.
From 1951 to 1983, he served in various
positions with Kennecott Corporation,
including Vice President and Director of
Tolling. 1990 1998
Phillips S. Baker, age 36, joined Pegasus
Gold in January 1994 as Vice President,
Finance and Chief Financial Officer. Prior
to joining Pegasus, Mr. Baker worked seven
years for Battle Mountain Gold Company,
most recently as Treasurer. He also worked
as an accountant for Arthur Andersen LLP.
Mr. Baker is an Attorney, Certified Public
Accountant and Certified Cash Manager. 1995 1996
Donald P. Bellum, age 63, has over 35 years
of experience in the mining industry and
related fields. Mr. Bellum currently
serves as a consultant to the mining
industry. Effective May 1, 1996, he will
become Chairman of the Board of Directors
and Chief Executive Officer of the Company.
From 1987 to 1991, Mr. Bellum was Executive
Vice President of Cyprus Minerals Company.
He served as President of Cyprus Coal
Company from 1978 to 1987. From 1974 to
1978, Mr. Bellum was Vice President of
Operations for Tesoro Coal Company. Mr.
Bellum served as Project Manager (1965 to
1969) and as Mine Manager (1969 to 1973)
for Kennecott Copper Corporation. 1992 1997
James P. Geyer, age 43, joined Pegasus Gold
in 1987 and was appointed Vice President,
Operations in October 1995. Prior to
joining Pegasus, Mr. Geyer worked 13 years
for ASARCO and AMAX in various operating
and engineering positions. Mr. Geyer is a
mining engineer from the Colorado School of
Mines. Mr. Geyer is a Director of Wheaton
River Minerals Ltd. 1996 1999
James A. Knox, age 62, has served as
President of the Company since June 1991.
He will remain in this position until June
30, 1996. It is anticipated that he will
thereafter concentrate his duties in the
areas of acquiring mineral properties and
mining operations for the Company. From
1969 until June 1991, he was an officer and
director of Knox, Kaufman, Inc. That firm
provided geological consulting services and
managed exploration programs in the United
States and Western Canada. Mr. Knox has
previously been employed as a geologist
with several other companies, including The
Superior Oil Company where he was a
district Exploration Manager, and Kermac
Nuclear Fuels Corporation where he also
managed the exploration efforts. 1985 1996
Terry P. McNulty, age 57, has served as
President of T.P. McNulty & Associates, a
consulting firm, since 1988. From 1983 to
1988, he was President of Hazen Research,
Inc. 1990 1996
Werner G. Nennecker, age 41, joined Pegasus
Gold Inc. in September 1992 as Senior Vice
President and Chief Operating Officer. In
November 1992, Mr. Nennecker assumed the
position of President and Chief Executive
Officer of Pegasus. Prior to joining
Pegasus, Mr. Nennecker worked 15 years in
the mining industry with Ranchers
Exploration and Santa Fe Pacific Gold
Corporation. Most recently, he held the
positions of Executive Vice-President of
Santa Fe Pacific Minerals Corporation and
President of Santa Fe Pacific Gold
Corporation. He has extensive experience
in all aspects of the mining business. Mr.
Nennecker is also a director of Pegasus
Gold Inc., Zapopan NL, the Gold Institute,
and the National Mining Hall of Fame. 1992 1998
Gregory Pusey, age 44, served as the
Company's Chief Financial Officer from May
1989 until January 1990 and he also has
served as Secretary and Treasurer of the
Company. Since 1983, Mr. Pusey has been
engaged in private investment activities.
He has served as President of Livingston
Capital, Ltd. And President of the General
Partner of Graystone Capital, Ltd, a
venture captial firm. He is also President
and a Director of Cambridge Holdings, Ltd.
Mr. Pusey was a founder of the Company. 1979 1997
Robert Scullion, age 56, has been a partner
in Scullion, Strasheim & Company, a firm of
Certified Public Accountants, since 1975.
He is a Certified Public Accountant
licensed in the United States as well as a
Scottish Chartered Accountant. 1987 1998
</TABLE>
<PAGE>
Executive Officers
Set forth below are the names and offices held by each of the executive
officers of the Company:
<TABLE>
<CAPTION>
Name and Business Experience Offices Held
- - - - ---------------------------------------------- ----------------------------
<S> <C>
James A. Knox. Information with respect to
the age and business experience of Mr. Knox is President, Chief Executive
set forth under "Directors" above. Officer, Chairman
Paul L. Blair, age 54, joined the Company in Vice President -- Operations
April 1995. Mr. Blair has 35 years experience for Latin America and the
in the mining industry. He served as Caribbean
President and General Manager of Golden Queen
Mining Co., Inc. from December 1993 to April
1995. For the preceding seven years, Mr.
Blair served as General Manager of Cactus Gold
Mines Co.
Dennis L. Lance, age 51, has served as Vice Vice President -- Exploration
President -- Exploration of the Company since
May 1989. He also served as Secretary of the
Company from January 1990 to December 1990.
He has served as a geologist with the Company
since June 1986. Prior thereto, he was an
independent consulting geologist.
Donald E. Nilson, age 51, has served as Vice Vice President -- Finance and
President--Finance and Secretary of the Secretary
Company since his employment in October 1990.
Mr. Nilson has been a Certified Public
Accountant since 1968 and holds a graduate
degree in Computer Information Systems.
Paul B. Valenti, age 46, joined the Company in Vice President -- Operations
May 1987 and was elected Vice President in
August 1988. From November 1983 to May 1987,
he served as the Metallurgy Manager for Silver
King Mines.
</TABLE>
There are no family relationships among the officers or
directors. Donald P. Bellum has been elected Chairman of
the Board of Directors and Chief Executive Officer of the
Company effective May 1, 1996. Mr. Bellum is currently a
director of the Company. Biographical information
concerning Mr. Bellum is set forth under "Directors" above.
<PAGE>
Item 11. Executive Compensation
Following is information regarding compensation paid
during each of the last three completed fiscal years to the
executive officers of the Company whose salary and bonus
exceeded $100,000 during 1995.
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
----------------------
Long Term
Compensati All Other
Name and Principal on Awards Compen
Position Year Salary($) Bonus ($) (Options #) sation ($)
- - - - ------------------------ ----- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
James A. Knox, President
and CEO 1995 $156,050 $10,000 50,000 $4,620 (1)
1994 $151,500 $20,000 30,000 $4,022 (1)
1993 $142,500 $25,000 30,000 $4,069 (1)
Dennis L. Lance,
V.P. -- Exploration 1995 $107,100 - 25,000 $3,213 (1)
1994 $93,816 $8,000 15,000 $2,814
1993 $89,256 $16,227 15,000 $2,678
Donald E. Nilson,
V.P. -- Finance 1995 $105,100 - 25,000 $3,153 (1)
1994 $95,530 $8,000 15,000 $2,790 (1)
1993 $91,719 $10,000 15,000 $2,741 (1)
Paul B. Valenti,
V.P. -- Operations 1995 $108,150 - 25,000 $3,244 (1)
1994 $98,650 $8,000 15,000 $2,959 (1)
1993 $96,230 $13,050 15,000 $2,887 (1)
<FN>
(1) The amounts shown represent the Company's matching contribution for the
stated individuals to its 401(K) plan.
</FN>
</TABLE>
<PAGE>
The following table sets forth information with respect
to stock options granted during 1995 to each executive named
in the Summary Compensation Table. The assumed annual rates
of stock price appreciation of 5% and 10% are set by a rule
of the Securities and Exchange Commission, and are not
intended as a forecast of possible future appreciation and
stock prices. The potential value of options granted
depends on an increase in the market price of the Company's
common stock. If the stock price does not increase, the
options would be worthless. If the stock price does
increase, this increase would benefit both option holders
and stockholders commensurately.
<TABLE>
Option Grants in 1995
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of Stock
Price Appreciation for
Option Term
------------------------
% of Total
Options
Options Granted to
Granted Employees in Exercise Expiration
Name (#) Fiscal Year Price ($/Sh) Date 5% ($) 10% ($)
- - - - ------------- ------- ------------ ------------ ---------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
James A. Knox
50,000 13.2 % $2.19 3/14/2005 $68,864 $174,515
Dennis L.
Lance 25,000 6.6 % $2.19 3/14/2005 $34,432 $87,257
Donald E.
Nilson 25,000 6.6 % $2.19 3/14/2005 $34,432 $87,257
Paul B.
Valenti 25,000 6.6 % $2.19 3/14/2005 $34,432 $87,257
All Stock-
holders (1) $20,168,000 $51,110,000
Executive
officers' gain
as a % of All
Stock-holders'
gain 0.85% 0.85%
<FN>
(1) The amounts shown for All Stockholders represent the potential realizable
value assuming appreciation at the rates indicated based on the exercise price
per share and the expiration date applicable to grants made in 1995 and the
number of outstanding shares on the date of grant.
</FN>
</TABLE>
<PAGE>
The following table sets forth, in the aggregate, the
number of shares underlying options exercised during 1995 by
each executive named in the Summary Compensation Table, and
states the value at year-end of exercisable and
unexercisable options remaining outstanding.
<TABLE>
Aggregated Option Exercises and Fiscal Year-End Option Values
<CAPTION>
Value of
Number of Unexercised
Shares Unexercised In-the-Money
Acquired Options at FY- Options at FY-
on Value End (#) End ($)
Exercise Realized Exercisable/ Exercisable/
Name (#) ($) Unexercisable Unexercisable
- - - - ------------------ --------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
James A. Knox - - 190,000 / $9,000 /
50,000 -
Dennis L. Lance - - 60,000 / $1,800 /
25,000 -
Donald E. Nilson - - 30,000 -
25,000 -
Paul B. Valenti - - 50,000 / $900 /
25,000 -
</TABLE>
Compensation of Directors
All directors who are not employed either by the
Company or by Pegasus are paid a fee of $350 for each
meeting of the Board attended. In addition, each director
who is not a full-time employee of the Company receives a
fee of $500 per month. These directors also receive
additional compensation plus reasonable expenses for any
additional services performed. Robert Scullion is paid an
additional $4,000 per year as chairman of the Audit
Committee. During 1995, certain directors were paid a total
of $6,344 for consulting fees and out of pocket expenses
pertaining to various Company projects.
Employment Contracts and Termination of Employment and
Change-in-Control Arrangements
James A. Knox is employed by the Company as its
President and Chief Executive officer. Mr. Knox will serve
as Chief Executive Officer until May 1, 1996, and as
President until June 30, 1996. Thereafter, Mr. Knox is
expected to concentrate his duties in the areas of acquiring
mineral properties and mining operations for the Company.
In July 1993, the Company entered into an Employment
Agreement with Mr. Knox for a two-year term which ended June
30, 1995, which provided for a minimum annual salary of
$150,000. Upon Mr. Knox's termination of employment with
the Company, he will receive severance pay at 50% of his
current annual salary and the Company will pay his medical
insurance premiums for six months after the date of
termination. Mr. Knox has agreed not to acquire, for two
years after the termination of the Employment Agreement, an
interest in any mineral properties within two miles of any
properties in which the Company has an interest or is, on
the date of termination, negotiating to acquire an interest.
Effective May 1, 1996, Donald P. Bellum will become
Chairman of the Board of Directors and Chief Executive
Officer of the Company. Mr. Bellum will receive a salary of
$16,800 per month and has been granted an option to purchase
up to 150,000 shares of the Company's common stock at $2.55
per share. The options vest in annual installments of
50,000 shares each commencing on the date of grant. Vesting
would occur in the event of termination of Mr. Bellum's
employment without cause. This would include a change in
control wherein the Company's executive offices were
relocated or his duties were changed in a substantial
manner.
<PAGE>
Compensation Committee Interlocks and Insider Participation
in Compensation Decisions
George J. Allen, Donald P. Bellum and Gregory Pusey
served as members of the Compensation Committee during 1995.
Mr. Pusey is a former officer of the Company. In 1996, Mr.
Bellum resigned as a member of the Compensation Committee
and Werner G. Nennecker was elected to serve as a member of
the Compensation Committee. Effective May 1, 1996, Mr.
Bellum will become Chairman of the Board of Directors and
Chief Executive Officer of the Company.
Board Compensation and Option Committees' Report on
Executive Compensation
The compensation policies of the Compensation Committee
and the Option Committee applicable to the Company's
executive officers are based on the continuing need to
attract and retain a management team capable of guiding the
growth of the Company over the long term. Compensation of
executive officers paid during 1995 is based on the
qualifications and experience of the individual officers,
competitive market conditions for executive talent, and the
contributions of the individuals to the long term growth and
stability of the Company and to maximizing the long term
value of stockholders' investment in the Company. Factors
considered by the Compensation Committee and the Option
Committee to be important in the long term growth and
stability of the Company and to maximizing the long term
value of the stockholders' investment include increasing the
quantity and quality of the Company's portfolio of
exploration properties, development of these properties into
producing mines where justified, acquisition and improvement
of producing properties, increasing the amount and
timeliness of internal and external financial reporting and
building and maintaining a complement of well trained and
highly motivated employees. The Compensation and Option
Committees also compared annual salary and bonuses with
those paid by other gold mining companies.
The Company's Compensation Committee did not make its
determinations based specifically upon objective measures of
corporate performance in 1995 such as revenue or net income,
nor did those Committees set any targets of performance
using such objective measures. The Committee believes that,
for a growing exploration and mining company, primary
emphasis should be placed on the exploration and development
of mining properties with superior potential that will
ultimately result in the achievement of improved financial
results, through mineral production or property sale. The
Committee considered the performance of the Company's CEO
and other executive officers during 1995 as well as other
factors discussed above in making its compensation
decisions.
The salary paid by the Company to James A. Knox for his
services as President and Chief Executive Officer during
1995 was in accordance with the Employment Agreement which
the Company entered into with Mr. Knox in July of 1993.
During 1995 Mr. Knox was granted an option to purchase up to
50,000 shares of the Company's common stock. The number of
options granted to Mr. Knox and the other executive officers
was based on the Compensation Committee's assessment of the
officers' performance and a review of similar benefits
offered by other gold mining companies. The exercise price
for all options granted in 1995 was the fair market value of
the stock on the date of grant.
George J. Allen
Donald P. Bellum
Gregory Pusey
<PAGE>
PERFORMANCE GRAPH
- - - - -----------------
Graph showing permformance of USMX, INC. Stock as compared
to NASDAQ Stock Market and S & P Gold Mining Index.
The above graph assumes an initial investment of $100 as of
the close of trading December 31, 1990. Each of the data
points gives the dollar value of the investment from
December 31, 1990, forward assuming dividends, where paid,
are reinvested monthly plus any price change in the
investment.
Item 12. Security Ownership of Certain Beneficial Owners
and Management
Security Ownership of Certain Beneficial Owners
The following table sets forth information as of March
18, 1996 with respect to any person who is known to the
Company to be the beneficial owner of more than five percent
of any class of the Company's voting securities:
<TABLE>
<CAPTION>
Amount and
Nature of Percent
Title of Name and Address of Beneficial of
Class Beneficial Owner Ownership Class
- - - - ------------- --------------------- ------------- -----------
<S> <C> <C> <C>
Common Pegasus Gold Inc.
601 West First
Avenue, Suite 1500
Spokane, WA 99204 4,826,000 (1) 33.0%
Common Van Eck Associates
Corporation
122 East 42nd Street
New York, New York
10168 1,045,000 (2) 7.1%
<FN>
(1) Represents direct ownership.
(2) Van Eck Associates Corporation has advised the Company that it is a
registered investment adviser, and that such shares are held for funds or trusts
managed by it, including 715,000 shares (4.9%) held for Gold/Resources Fund and
275,000 shares (1.9%) held for International Investors Incorporated and 55,000
shares (0.4%) for a private investor. Gold/Resources Fund and International
Investors Incorporated are open end, diversified investment management companies
which concentrate investments in gold mining shares. The shares of both of such
companies are publicly held and Van Eck Associates Corporation has advised the
Company that to its knowledge no natural person owns beneficially more than 5%
of the outstanding shares of either such company. John C. Van Eck, whose
business address is the same as that of Van Eck Associates Corporation, has
voting control of Van Eck Associates Corporation.
</FN>
</TABLE>
<PAGE>
Security Ownership of Management
Information regarding the Company's equity securities
owned by directors and executive officers is set forth in
the following table:
<TABLE>
<CAPTION>
Shares of $0.001
Par Value Common
Stock
Beneficially Percent
Name Owned of Class
---------------------- ------------------ ----------
<S> <C> <C>
George J. Allen 32,000 (2) *
Phillips S. Baker 4,841,000 (4) (7) 31.9 %
Donald P. Bellum 25,000(1) *
James P. Geyer 4,836,000 (5) (7) 31.9 %
James A. Knox 333,899 (6) 2.2 %
Dennis L. Lance 157,068 (8) 1.0 %
Terry P. McNulty 33,000 (2) *
Werner G. Nennecker 4,851,000 (1) (7) 32.0 %
Donald E. Nilson 60,584 (9) *
Gregory Pusey 297,274 (4) 2.0 %
Robert Scullion 21,750 (3) *
Paul B. Valenti 114,783 (10) *
All directors and
executive officers as
a group 5,951,358 (7)(11) 39.2 %
<FN>
(1) Includes 25,000 shares underlying currently exercisable options granted
pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee
Directors.
(2) Includes 20,000 shares underlying currently exercisable options granted
pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee
Directors.
(3) Includes 21,750 shares underlying currently exercisable options granted
pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee
Directors.
(4) Includes 15,000 shares underlying currently exercisable options granted
pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee
Directors.
(5) Includes 10,000 shares underlying currently exercisable options granted
pursuant to the Company's Non-Discretionary Stock Option Plan For Non-Employee
Directors.
(6) Includes 206,667 shares underlying currently exercisable options granted
pursuant to the Company's 1987 Stock Option Plan.
(7) Messrs. Nennecker , Baker , and Geyer are officers and Mr. Nennecker is a
director of Pegasus. As such, they can be considered to be beneficial owners of
the 4,826,000 shares held of record by Pegasus. Accordingly, the figures
opposite their names reflect the 4,826,000 shares owned by Pegasus.
(8) Includes 68,334 shares underlying currently exercisable options granted
pursuant to the Company's 1987 Stock Option Plan.
(9) Includes 38.334 shares underlying currently exercisable options granted
pursuant to the Company's 1987 Stock Option Plan.
(10) Includes 58,334 shares underlying currently exercisable options granted
pursuant to the Company's 1987 Stock Option Plan.
(11) Includes currently exercisable options to purchase 523,419 shares.
* Represents less than 1%.
</FN>
</TABLE>
Item 13. Certain Relationships and Related Transactions.
Transactions with Management and Others
<PAGE>
As of December 31, 1995, the Company had provided
collateral in the form of Certificates of Deposit totaling
approximately $283,000 to secure repayment of bank loans to
four employees of the Company including two officers (Paul
B. Valenti - $114,408 and Donald E. Nilson - $52,778). The
employees have pledged a total of 134,439 shares of the
Company's common stock to the Company to secure repayment of
these obligations.
In March 1995, the Company acquired all of the
outstanding capital stock of Mega Minerals S.A., an
Ecuadorian company. The Company assumed obligations of
approximately $120,000, and agreed to pay the seller a 10%
net proceeds royalty on any production from the concessions
after recovery of all capital expenditures. Gregory Pusey,
a director and principal shareholder of the seller, is also
a director of the Company. The assets of Mega Minerals S.A.
consist of eight exploration concessions and the rights to
acquire four additional exploration concessions, all located
in the Nambija-Zamora gold belt of southern Ecuador.
<PAGE>
INDEX TO EXHIBITS
NUMBER DESCRIPTION
- - - - --------- ------------------------------------------
Exhibit 3.1 Certificate of Incorporation of the
Company, previously filed as an Exhibit to the
Company's Report on Form 10-K for the year
ended December 31, 1987, is incorporated herein
by this reference.
Exhibit 3.2 Bylaws of the Company, previously filed as
an Exhibit to the Company's Report on Form 10-K
for the year ended December 31, 1987, is
incorporated herein by this reference.
Exhibit 4 Specimen Certificate of the $.001 par value
common stock, previously filed as an Exhibit to
the Company's registration statement on Form S-
3 (No. 33-19699), is incorporated herein by
this reference.
Exhibit 10.2 The Company's 1987 Stock Option Plan, as
amended, previously filed as an Exhibit to the
Company's registration statement on Form S-8
(No. 33-49392), is incorporated herein by this
reference.
Exhibit 10.3 The Company's Savings and Investment Plan,
previously filed as an Exhibit to the Company's
Report on Form 10-K for the year ended December
31, 1987, is incorporated herein by this
reference.
Exhibit 10.7 Agreement, dated January 1, 1986, between
the Company and Centennial Minerals Ltd.,
previously filed as Exhibit 10.17 to the
Company's Report on Form 10-K for the year
ended May 31, 1986, is incorporated herein by
this reference.
Exhibit 10.7A Amendment of Agreement and Deed dated July
15, 1991, by and between Montana Tunnels
Mining, Inc., USMX, INC. and USMX of Montana,
Inc., previously filed as an Exhibit to the
Company's Report on Form 10-K for the year
ended December 31, 1991, is incorporated herein
by this reference.
Exhibit 10.33 Non-Discretionary Stock Option Plan,
previously filed as an Exhibit to the Company's
Report on Form 10-K for the year ended December
31, 1991, is incorporated herein by this
reference.
Exhibit 10.40 Asset Purchase Agreement, dated June 11,
1993, between the Company and Placer Dome U.S.
Inc., as amended, previously filed as an
Exhibit to the Company's Report on Form 10-K
for the year ended December 31, 1993, is
incorporated herein by this reference.
Exhibit 10.42 Employment Agreement, dated July 16, 1993,
between the Company and James A. Knox,
previously filed as an Exhibit to the Company's
Report on Form 10-K for the year ended December
31, 1993, is incorporated herein by this
reference.
<PAGE>
Exhibit 10.44 Exploration and Option to Purchase
Agreement, dated effective July 9, 1993,
between the Company and Dewey Mining Company
and Thunder Mountain Gold, Inc., Ronald C.
Yanke and Donald J. Nelson, previously filed as
an Exhibit to the Company's Report on Form 10-K
for the year ended December 31, 1994, is
incorporated herein by this reference.
Exhibit 10.45 Purchase and Sale Agreement, dated April
14, 1994, among the Company, Cominco American
Resources Incorporated and Alta Gold Co.,
previously filed as an Exhibit to the Company's
Report on Form 10-K for the year ended December
31, 1994, is incorporated herein by this
reference.
Exhibit 10.46 Agreement, dated effective December 16,
1994, between the Company and North Pacific
Mining Corporation, previously filed as an
Exhibit to the Company's Report on Form 10-K
for the year ended December 31, 1994, is
incorporated herein by this reference.
Exhibit 10.46a Letter dated February 5, 1996 amending the
Agreement dated effective December 16, 1994,
between the Company and North Pacific Mining
Corporation.
Exhibit 10.47* Post-Termination Agreement, dated February
16, 1996, between the Company and Bull Valley
L.L.C.
Exhibit 10.48* Exploration Discovery Bonus Plan, dated
effective September 1, 1989.
Exhibit 10.49* Mine Services and Earthworks Contract,
dated January 19, 1996, between the Company and
D.H. Blattner & Sons, Inc.
Exhibit 10.50* Purchase and Sale Agreement, dated March
20, 1995, among the Company, Mega Metals, Inc.;
Mega Minerals S.A.; Greg Pusey; John Dreier and
Gary McAdam.
Exhibit 22* Subsidiaries of the Company
Exhibit 24.1* Consent of KPMG Peat Marwick LLP
* Exhibit filed with original Form 10-K for the year ended
December 31, 1995.
February 5, 1996
Mr. Gerald G. Booth
President
North Pacific Mining Corporation
2525 "C" Street, Suite 500
P.O. Box 93330
Anchorage, AK 99509-3330
Dear Jerry:
As discussed at our October 26th meeting in Denver pertaining to the
status of the Illinois Creek Project, USMX would like to be able to
initiate production at Illinois Creek by the 3rd Quarter of 1996. I
believe this is also the desire of NPMC. However, assuming a
positive Feasibility Report is completed by the end of February 1996,
USMX still cannot make a formal Production Decision until receipt of
all required Approvals, currently expected in April 1996. If USMX
were to make a Production Decision at that time, NPMC would not be
required to make an election to either participate for a 25% working
interest, or to receive a 5% royalty, until mid to late June of 1996.
This uncertainty creates a problem for both companies.
In order for the desired Illinois Creek production schedule to remain
on track, USMX must begin making significant capital expenditures and
contractual commitments in January 1996. As the Agreement is
presently written, in the event NPMC were ultimately to elect to
participate, it would have no liability for its share of such
expenditures made prior to late June.
Assuming that a positive Feasibility Report is completed or
substantially completed in February 1996 which justifies a continued
accelerated property Development schedule, USMX is willing to make
the following proposal:
1. In the event that USMX's Board of Directors elects in the first
half of February 1996, to initiate property Development (which
election by USMX's Board is hereinafter referred to as the
"Development Decision") which will include the making of expenditures
related to engineering of the project, purchasing of equipment,
entering into construction and mining contracts and engaging in
related activities in preparation for the startup of production, and
committing to production upon receipt of all required Approvals,
presently anticipated in April 1996, assuming no material adverse
change in project economic conditions subsequent to the Development
Decision in February 1996, USMX shall make a non-refundable payment
to NPMC of one million dollars in USMX common stock, cash, or a
combination thereof (the "Development Decision Payment") in the same
manner described in Section 4 of the Agreement for making the
Production Decision Payment, excepting that the average closing price
for purposes of payment in USMX shares shall be calculated for the
thirty (30) trading days immediately preceding January 31February 1,
1996; and excepting that the 2.5% limitation in section 4.2(b) (ii)
shall not apply until and unless the $3 million balance of the
<PAGE>
Production Decision Payment becomes due and payable; and provided
further that if USMX elects to make the Development Decision Payment
in Shares, USMX shall thereupon take all of the actions as to said
Shares as are required by Section 4 of the Agreement just as if the
entire Production Decision Payment were then being made, including
but not limited to the specific actions set forth in section 4.3.
Upon receipt of all required Approvals, and assuming that no material
adverse change in project economics has occurred subsequent to the
effective date of the Development Decision, USMX shall make a
Production Decision within 15 days after receiving all Approvals and
shall pay to NPMC the balance of the Production Decision Payment
(three million dollars in USMX common stock, cash, or a combination
thereof as described in Section 4 of the Agreement). If USMX fails
to make a Production Decision by December 31, 1996, and does not pay
the balance of the Production Decision Payment by that date, then any
participation election previously made by NPMC shall be null and void
as of such date and NPMC shall be entitled to again exercise its full
election rights in accordance with Section 5 of the Agreement when
and if USMX does make a Production Decision.
In consideration for the commitments set forth above, NPMC
agrees that within 30 days after (a) the effective date of
Notice of USMX'x Development Decision, and (b) NPMC's receipt of
the Feasibility Report and related information, whichever is
last to occur, NPMC shall make its election as provided by
Section 5 of the Agreement as amended hereunder to either: (i)
receive a 5% Net Returns Royalty, or (ii) participate for a 25%
working interest, in which event, NPMC will, within 30 days
after that election, reimburse USMX for 25% of the project
expenditures (which shall not include the Development Decision
Payment or the Production Decision Payment) incurred subsequent
to the effective date of USMX's Development Decision.
2. It is also agreed between the parties that in the event that
NPMC elects under paragraph 1 above to receive a 5% Net Returns
Royalty rather than to participate for a 25% working interest, and in
the event that USMX at some future date may delineate the existence
of additional ore reserves on the Illinois Creek Upland Mining Lease
which increase the total proven ore reserves to at least one million
ounces of equivalent gold ore reserves beyond the proven equivalent
gold ore reserves stated in the Feasibility Report which forms the
basis for USMX's Development Decision in 1996, NPMC shall have an
additional opportunity to elect (within 60 days after receipt of
USMX's notice of those additional reserves) to participate in
subsequent mining operations with respect to those additional
reserves for a 25% working interest by reimbursing USMX 120% of
NPMC's 25% share of the Exploration, Development and capital costs
(which shall not include the Development Decision Payment or the
Production Decision Payment) incurred by USMX subsequent to the
effective date of its 1996 Development Decision, and which are
directly related to the delineation and/or production of the
additional reserves..
We believe that this proposal is equitable for both parties. USMX is
willing to take the near-term financial risk necessary to seek a late
1996 production date, if NPMC will make an early decision with
respect to participation and reimburse USMX for NPMC's share of the
cost incurred subsequent to the effective date of the 1996
Development Decision by USMX, in the event NPMC decides to make such
participation election. The magnitude of such a financial commitment
by USMX prior to NPMC's election will be substantial. Under this
proposed scenario, both companies' goals should be attainable.
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I also wish to note that under the terms of the Agreement, NPMC, CIRI
and their affiliates have been given the opportunity to bid on the
contracts for work in connection with all Operations for the proposed
Illinois Creek project. It is anticipated that the bids by such
entities will be competitive, and that such bids will be considered
in good faith by USMX.
If the terms of this letter are acceptable to NPMC, please so
indicate by signing a copy and returning it to USMX, and we will
consider the Agreement to be revised as specifically set forth in
this letter. All other terms and conditions of the Agreement shall
remain unchanged and in full force and effect and nothing herein
shall accelerate the Transfer Date or constitute a waiver or
relinquishment of any of such other terms and conditions by either
NPMC or USMX unless specifically set forth in this letter.
Capitalized terms used in this letter have the same definitions as
provided in the Agreement, unless otherwise herein clearly indicated.
Sincerely,
USMX, INC.
/s/ James A. Knox
James A. Knox
President
JAK395/caw
Accepted this 12th day of February, 1996.
/s/ Gerald G. Booth
Gerald G. Booth, President
North Pacific Mining Corporation
