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U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(b) or (g) of the Securities Exchange Act of 1934
MINES MANAGEMENT, INC..
(Name of Small Business Issuer in its charter)
State of Idaho 91-0538859
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
905 W. Riverside Avenue, Suite 311
Spokane, WA 99201
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number, including area code) (509) 838-6050
Securities to be registered under Section 12(b) of the Act: None
Title of each class Name of each exchange on which each
to be so registered class is to be registered
None None
Securities registered under Section 12(g) of the Act:
Common Stock, $0.01 Par Value
(Title of class)
This space intentionally left blank.
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Submission page 1 of 85
<PAGE>
MINES MANAGEMENT, INC.
FORM 10SB
TABLE OF CONTENTS
DESCRIPTION SUBMISSION PAGE
PART I
ITEM 1 DESCRIPTION OF BUSINESS 3
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR
PLAN OF OPERATION 4
ITEM 3 DESCRIPTION OF PROPERTY 4
ITEM 4 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT 10
ITEM 5 DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS
AND CONTROL PERSONS 11
ITEM 6 EXECUTIVE COMPENSATION 12
ITEM 7 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 13
ITEM 8 DESCRIPTION OF SECURITIES 13
PART II
ITEM 1 MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS 13
ITEM 2 LEGAL PROCEEDINGS 14
ITEM 3 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS 14
ITEM 4 RECENT SALES OF UNREGISTERED SECURITIES 14
ITEM 5 INDEMNIFICATION OF DIRECTORS AND OFFICERS 14
PART F/S 16
PART III
ITEM 1 INDEX TO EXHIBITS 37
ITEM 2 DESCRIPTION OF EXHIBITS 37
SIGNATURES 37
EXHIBIT EX-3.(i) 38
EXHIBIT EX-3.(ii) 49
EXHIBIT EX-10.(a) 56
EXHIBIT EX-10.(b) 67
EXHIBIT EX-21 81
EXHIBIT EX-27 86
Submission page 2 of 85
<PAGE>
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Mines Management, Inc. (together with its subsidiaries, "MMI" or the
"Company"), is engaged in the business of acquiring, exploring and
developing mineral properties, primarily those containing silver and
associated base and precious metals. The Company was incorporated under the
laws of the State of Idaho on February 20, 1947. The Company's wholly owned
subsidiary, Newhi, Inc., was incorporated under the laws of the State of
Washington on November 3, 1987. The Company's executive offices are located
at 905 W. Riverside, Suite 311, Spokane, WA 99201.
All of the Company's properties are currently in the exploration stage except
for the Montanore property, which is in the stage of determining feasibility
for development. No property is currently in production.
The Company conducts exploration and development on projects containing
silver and associated base and precious metal values. The company primarily
seeks to obtain royalty and other carried ownership interests in these
properties through the subsequent transfer of operating interests to other
mining companies. Although the Company may engage in mining operations at
some future time, substantially all of the Company's revenue is and can be
expected to be derived from royalty interests for the foreseeable future.
The Company's principal mineral property interest is held by its wholly owned
subsidiary, Newhi, Inc., and consists of a net profits royalty interest in a
portion of the claims making up the Montanore project. The Montanore project
is located in northwestern Montana, USA. And is operated by Noranda Minerals.
The project has an approved Environmental Impact Statement, has received all
of its primary permits, and has been the subject of a variety of pre-
feasibility technical analyses. Noranda Minerals has reported a geologic
resource of 142 million tons containing 0.76% copper and 2.1 ounces of
silver per ton. The Company is also conducting exploration on its
Chanarcillo silver property in Chile and its Iroquois and Advance zinc-lead
properties in Washington, USA. The Company is also evaluating opportunities
in Mexico and the United States.
The Company also has a small royalty income from a working interest royalty,
acquired more than 40 years ago, for several producing oil wells located in
Kansas, USA.
Competition
There is aggressive competition within the minerals industry to discover and
acquire properties considered to have commercial potential. The Company
competes for the opportunity to participate in promising exploration projects
with other entities, many of which have greater resources than the Company.
In addition, the Company competes with others in efforts to obtain financing
to explore and develop mineral properties.
Employees
At December 31, 1997, the Company had one full-time employee located in
Spokane, Washington. During the first half of 1998 the Company had one
full-time employee and one part-time employee. The Company's employees are
not subject to a union labor contract or collective bargaining agreement.
Submission page 3 of 85
<PAGE>
Regulation
The Company's activities in the United States are subject to various federal,
state, and local laws and regulations governing prospecting, development,
production, labor standards, occupational health and mine safety, control of
toxic substances, and other matters involving environmental protection and
taxation. It is possible that future changes in these laws or regulations
could have a significant impact on the Company's business, causing those
activities to be economically reevaluated at that time.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
Plan of Operation
The Company has no revenues from operations. Its only income is derived from
an annual $25,000 advance minimum royalty payable to its subsidiary Newhi, Inc.
and nominal royalty income from a working interest in 4 wells acquired more
than 30 years ago.
The Company's plan of operation for the next twelve months will consist of
exploration work on its Chanarcillo silver property in northern Chile. Under
the terms of its option agreement the Company is required to expend a minimum
of $50,000 on the property prior to June, 1999. This exploration work will
consist of detailed mapping of the stratigraphy and structure of the silver
vein area, review of drill data from drilling in other parts of the property
and a detailed sampling program and geophysical surveys. The Company does not
intend to hire a significant number of employees to carry out its exploration
activities. It is anticipated that all exploration work on the property will
be carried out through the services of consultants. The Company currently has
sufficient resources to meet its work obligations on the property and satisfy
its cash requirements for the next twelve months.
Additionally, the Company intends to aggressively seek to acquire silver
exploration properties of merit. At the present time the Company is on
acquisition prospects in Mexico in the states of Zacatecas and Durango.
ITEM 3. DESCRIPTION OF PROPERTY.
The significant properties in which the Company has an interest are described
below. Reference is made to footnotes in the financial statements for more
information on the properties. The Company has relied on public disclosure
made by its lessee Noranda Minerals, relative to its assessment of the
Montanore deposit.
Montanore Property - The Montanore property consists of 16 mining claims
covering approximately 300 acres and a 4 acre patented mill site located in
Sanders County, northwestern Montana. The mining claims are owned outright
by the Company and are held subject to a $100 per claim annual payment to the
Federal government. Eleven of the claims are leased to Noranda Minerals Corp,
who is responsible for annual claim upkeep. The claims can be reached from
Noxon, the nearest town, by taking State Highway 200 about 2 miles to the
east and thence north about 5 miles on a secondary graveled road to the
junction of the west and east forks of Rock Creek. From this point it is
about a 4 mile hike up a Jeep trail behind a locked U.S. Forest Service
gate to the claims. More than half the claims are located within the
Cabinet Wilderness Area.
Submission page 4 of 85
<PAGE>
Eleven of the Company's claims cover a portion of the Montanore silver/copper
deposit. The deposit occurs within rocks of the Belt Super Group,
Precambrian metasediments that crop out over much of western Montana,
northern Idaho, and parts of adjacent British Columbia. The Montanore is
one of 3 similar deposits to have been found within Revett Formation
quartzite of the Belt Supergroup. These include the Troy deposit which was
mined between 1981 and 1992, and the Rock Creek deposit currently under
environmental assessment.
Mineralization within the Revett Formation is disseminated, and confined to
specific quartzite strata. The deposits are characterized by great lateral
extent, relatively uniform grades, and thicknesses that range up to 100 feet.
Often the deposits are bounded by a paleo growth fault, considered to have
been active during rock sedimentation and mineral deposition. Mineralization
consists in varying parts of bornite, primary chalcocite, and chalcopyrite.
The Montanore deposit has been defined as being at least 12,000 feet long and
varies between 500 and 5000 feet in width. The long axis of the deposit
trends in a northwesterly direction parallel with a regional fault that
bounds the mineralization of the southwest. The deposit dips approximately
12 degrees to the northwest, parallel with its long axis. Mineralization
occurs within two mineralized beds over much of the deposit's length, but
seems to coalesce up dip. Overall the upper zone averages 29.9 feet in
thickness and the lower zone 34.8 feet. Unmineralized strata between beds
varies between 20 and 200 feet thick. On the basis of 27 surface drill holes
Noranda has reported a deposit containing and estimated 142 million tons and
averaging 0.78% copper and 2.1 ounces of silver to the ton.
The Company's claims are located along the fault which bounds the
southwestern margin of the deposit, and were staked to cover minor silver
occurrences within the fault or in sympathetic parallel fractures. The
claims represent mineral rights to a strip of land several hundred feet wide
and about 11,500 feet long that cover the projected position of the deposit
adjoining the fault. A total of 7 widely spaced surface drill holes have
intersected the deposit beneath the Company's claims or in close proximity to
them.
In 1988, Newhi, Inc., a Washington corporation and wholly-owned subsidiary of
Mines Management, Inc. acquired the assets of Heidelberg Silver Mining Co.,
Inc. through a corporate merger. The assets acquired by the Company
consisted primarily of 34 unpatented mining claims and a 4 acre patented mill
site. In 1993 the Company determined that 18 of the mining claims were
immaterial to the maintenance of its interest in the Montanore project and
these claims were dropped. Of the remaining 16 claims owned by the Company,
11 claims are leased to Noranda Minerals Corp. who is responsible for their
yearly upkeep. Under terms of the lease agreement, the Company is paid
annual advance minimum royalty payments of $25,000. In addition, the Company
will be paid a production royalty of 5% of the net profits until capital
investment recovery and 20% thereafter on all material taken from the claims.
A significant portion of the Company's claims are situated within the Cabinet
Wilderness Area and may be subject to dissolution for lack of adequate
discovery. However, Noranda's mineral rights are also based upon other
claims with approved discoveries, and the agreement between Noranda and
the Company is specifically not affected by the status of the Company's
claims.
In 1983, U.S. Borax and Chemical Corporation discovered a major silver/copper
deposit, later to be named the Montanore deposit, which extended in part
Submission page 5 of 85
<PAGE>
beneath what is now the Company's property. In 1984 a lease agreement,
relative to 11 claims, was entered into between U.S. Borax and the Company's
predecessor, Heidelberg. Subsequently U.S. Borax conducted more than 70,000
feet of core drilling from the surface which outlined the bedded
silver/copper mineralization.
In 1988, U.S. Borax and partners sold their interest in the project to a
Joint Venture made up of Noranda Minerals Corp. and Montana Reserves Co.
Noranda became the project operator, and the project name was changed to
Montanore. In 1993 the Joint Venture was dissolved with Noranda retaining
rights to the project.
In late 1989, Noranda began a major tunneling program from a point east of
the Cabinet Wilderness Area. The purpose of the program was to more
accurately define and develop a portion of the deposit containing
approximately 30 million tons. The proposed work was to include a 3-mile
long decline and approximately 2,000 feet of lateral development in the
vicinity of the deposit. Several lateral headings were planned to intersect
the portion of the deposit owned by the Company. Close spaced drilling was
planned from these workings and bulk metallurgical samples were to be taken
during this phase. In December, 1991 tunneling was stopped at approximately
14,000 feet, or about 2,000 feet short of the deposit, pending the
completion of the project's Environmental Impact Statement (EIS). Also
during the year Noranda completed the process to acquire patents to several
of its key claims. However, the Secretary of Interior has continued to
refuse to approve any US patent applications made under the terms of the
Mining Law of 1872.
During 1993 the project Environmental Impact Statement (EIS) was approved
and all of the important permits for the mine were granted. As part of
the EIS process, this approval was subject to appeal, and several appeals
were made. In 1994, after due consideration, the US Forest Service
denied all appeals.
In 1991 an environmental group had brought suit against Noranda and the
US Forest Service concerning the validation of certain mining claims
covering the Montanore deposit. In 1993 the US Secretary of Agriculture
found that Noranda's key mining claims were valid, and in 1997 the
Federal District Court hearing the case also ruled that Noranda's claims
were valid. The court decision has been appealed and a final ruling
expected in 1999.
Chanarcillo Property - The Chanarcillo property consists of 14 exploration
concessions that cover an area of about 38 sq. km. (9,500 acres) within
the Chanarcillo mining district. The district is located in northern
Chile's Third Region about 55 km south of the mining center of Copiapo
and about 350 km north of Santiago. The property is reached by secondary
roads from the Pan American Highway which passes about 10 km to the west.
The Chanarcillo district is situated in the western foothills of the Andes
Mountains, with elevations that range between 900 and 1200 m above sea
level. The Company's concessions contain a number of small overlapped
concessions representing preexisting mineral rights which partially cover
some of the old mines of the district. A total of about 34 sq. km (8,500
acres) of the Company's concessions are unobstructed, with clear
exploration rights.
Submission page 6 of 85
<PAGE>
The Company has an option to purchase the concessions from their owner,
Minera Calcia Ltda. of Santiago, Chile, on the basis of the amount
expended on the project. The Company has a work commitment of $50,000 in
year 1, and $100,000 in year 2 of the agreement. After the Company has
expended a total of $200,000 on the project it has the right to acquire
title to the concessions, subject to:
- - A 2% Net Smelter Return Royalty one-half of which may be purchased during
the first 4 years of commercial production.
- - An annual fee of $25,000 to be paid prior to the start of commercial
production.
- - An annual payment equal to 5% of the preproduction exploration expenses of
the project that are incurred in Chile, the total of which is capped at $2
million.
The Chanarcillo district, was Chile's foremost silver producing area during
the 19th century, when it reportedly produced an estimated 100 million ounces
of silver between 1832 and 1885. Only minor work occurred after that time
until the 1980's when the area became the focus of exploration for large,
low-grade copper deposits similar to the La Candelaria deposit located about
22 miles to the north. At various times to the present, several major mining
companies have drilled specific copper targets in the district, but no work
has involved exploration for silver.
The Chanarcillo district lies within northern Chile's coastal belt of
Cretaceous age sediments and intercalated volcanics. These rocks are intruded
throughout the length of the belt by Cretaceous age plutons which range in
composition from quartz monzonite to diorite. The sediments consist
primarily of siltstone and carbonates which may contain in varying degree
silt or chert. Interbedded in the sediments are a series of thick to thin
tuffs, pyroclastics, aggolmerates, and volcanic units. The intruded rocks
are thermally metamorphosed for a substantial distance from the intrusive
contacts creating extensive skarn zones.
In the Chanarcillo district the host rocks are relatively flat lying, but
are gently folded into a northeast-trending double plunging anticline or
dome. The district is cut by two prominent sets of high-angle structures,
which generally show small displacements. One set trends to the
north-northeast, parallel with the fold axis, while the other trends to the
northwest. The north-northeast set contains most of the known silver veins,
while faults of the northwest trending set commonly contain andesite dikes
and only locally some silver mineralization.
Silver values exploited in the 19th century occur mostly in veins but also
in mantos and brecciated zones. Exposures in mine workings extended to
depths of as much as 400 m. The character of the veins was strongly affected
by the type of host rock they cut. There was a definite correlation between
increases in vein width and grade and carbonate wall rocks. Ore shoots
within the veins are reported to have ranged from 200 to 400 m in length, had
vertical dimensions of 30 to 50 m, and varied from 1 to 10 m in width.
Hypogene vein minerals included silver sulfides and sulfosalts associated
with minor amounts of copper, lead, and zinc minerals. Vein mineralization
was greatly affected by supergene processes to depths of as much as 200 m.
Mineralization within the supergene zone was altered to native silver, and
silver halides and bromides.
Submission page 7 of 85
<PAGE>
In addition to the concentration of old silver mines on the property,
exploration by several major companies in recent years has identified
significant showings of zinc and copper. A bedded, semi-massive sulfide
occurrence about 1 m thick and running 7% zinc is reported to cut underground
workings in the old silver mines. A number of drill holes in and around the
Company's concessions are reported to have cut zinc values ranging from 13%
over 1 m to 1% over 120 m.
All exploitation of silver mineralization at Chanarcillo ceased by the early
1900's, and no systematic mapping and other exploration is known to have
taken place since that time. Despite the lack of modern day exploration it
is thought that near surface, very high grade silver vein deposits have
probably all been discovered. However, several types of targets have not
been investigated. These include: deeper hypogene mineralization, vein
extensions, and bulk tonnage targets. The Company intends to investigate all
three target models in its planned exploration, with emphasis placed upon the
examination of bulk tonnage targets.
Initially, a two phase exploration is planned for the Chanarcillo property.
This work will be designed to gain a better understanding of the geology and
to identify specific targets in the silver area of the property. Phase 1
exploration will consist of preparing detailed maps of the stratigraphy and
structure of the silver vein area. The mapping will be followed by a
detailed sampling program as well as geophysical surveys in areas of
interest. Phase 2 exploration will be focused on drill testing at least two
targets that have already been identified by the Company's preliminary
sampling.
Advance and Iroquois Properties - The Company owns the Advance and Iroquois
zinc-lead properties located in northeastern Washington state, approximately
6 miles south of the Canadian border. The properties are situated 5 miles
apart along a belt of Cambrian carbonate sediments that have acted as host
rocks for several former mines. Both properties are easily accessible on
secondary graveled roads by two wheel drive vehicles. A large zinc smelter
and refinery is located at Trail, British Columbia, Canada, approximately 17
miles distant over excellent roads.
The Company was originally formed in 1947 to explore the Advance and Iroquois
properties. Since that time, Mines Management has leased its holdings to
major companies including: Rare Metals, Inc. (El Paso Natural Gas) 1959-65,
The Bunker Hill Company 1962-65, Cominco American, Inc. 1966-67 and 1974-75,
Brinco, Ltd. (RTZ Group) 1977-78, and Equinox Resources Ltd. 1989-91.
Total expenditures on the properties to date are estimated to be at least
$1,500,000.
The Advance and Iroquois properties are located along the Deep Lake Trend, a
northeast striking belt of Cambrian carbonate rocks collectively designated
as the Metaline Limestone. Rocks of the Deep Lake Trend have been strongly
folded and faulted by numerous high-angle as well as thrust faults. As a
result the Metaline Limestone has a complex outcrop pattern, with steeply
overturned bedding.
Zones of brecciation are found throughout the Metaline Limestone and are
often, but not always, the location of zinc and lead sulfide mineralization.
These features are predominantly stratabound and have gradational, often
irregular borders. Individual breccia bodies are crudely lensoid in cross
section and have third dimensions that attain considerable length. The zones
Submission page 8 of 85
<PAGE>
often occur in an en echelon, and sometimes interconnected pattern. A
variety of evidence suggests that the breccia bodies are solution collapse
features controlled by favorable stratigraphy or lithologic facies.
Mineralization consists of irregular bands, lenses, and fine disseminations
of sphalerite and galena accompanied by varying amounts of pyrite. The
mineralization is considered to have been localized by permeable zones within
and peripheral to breccia bodies created by solution collapse. The sulfide
minerals are found in white dolomite that makes up the breccia matrix and
fills other voids, and also as selective replacements of the host carbonate
rocks. Individual deposits have irregular gradational borders and are
crudely lensoidal to oval in outline. Their elongated third dimension
parallels the regional strike of the host rocks, and often plunge at low
angles. Cross sectional widths up to 80 feet and heights of as much as 150
feet have been noted in the more prominent zones. Lengths of mineralization
vary up to 650 feet. The deposits have a tendency to occur together in an en
echelon pattern over a stratigraphic interval of as much as 300 feet. Such
groupings of deposits may be more or less interconnected and have composite
lengths of as much as 5000 feet. Metal values generally decease outward thus
necessitating a border to be established by economic consideration. Although
individual sample values within a deposit may be as high as 20% zinc, average
values for a deposit will usually range up to 7% zinc and 1% lead depending
upon the "assay border" selected.
The Advance property consists of 720 acres of patented mineral rights,
located approximately 5 miles east of the town of Northport. The property is
reached from Northport, the nearest town, by taking the paved Deep Lake south
for 4 miles to the graveled Black Canyon road and thence north for 3 miles.
The Metaline Formation is the principal rock unit to crop out on the Advance
property. Exploration consisting of soil sampling, drilling, trenching, and
tunneling has shown that several zones of low-grade, disseminated zinc
mineralization occur on the property. The Advance property is considered to
be of an exploratory nature, and is held by the Company on a maintenance
basis.
The Iroquois property consists of 62 acres of patented mineral and surface
rights, and 18 unpatented mining claims containing about 360 acres. The
property is reached from Northport, the nearest town, by taking the paved
Deep Lake road south and east for 19 miles to the graveled road marked
Iroquois Mine Road, and thence northeast for three miles. The unpatented
mining claims are held subject to a $100 per claim annual payment to the
Federal government. More than 25,000 feet of drilling and approximately
2,600 feet of tunneling have shown low-grade mineralization to occur in
multiple zones, extending for the entire 5,000 foot length of the property.
Most of the exploration has been concentrated in one area where a mineralized
zone of disseminated zinc with associated lead values has been outlined over
approximately 900 feet in length and within 300 feet of the surface. The
property is considered to be of an exploratory nature and is held by the
Company on a maintenance basis.
OIL INTERESTS
The Company receives income from a 12.5% working interest in 4 oil wells on
the Clark lease in Sumner County, Kansas. Although the lease has now
produced for more than 30 years, independent consultants calculated the
Company's 1981 share of the remaining reserves available through primary and
secondary recovery to be at least 20,000 barrels. Production since 1981 has
totaled approximately 7,954 barrels to the Company's account. In 1997, the
Submission page 9 of 85
<PAGE>
Company produced 316 barrels of oil at an average price of $19.92 per barrel
versus 250 barrels at $19.94 per barrel in 1996. During the first half of
1988 the Company produced 147 barrels of oil at an average price of $15.03
per barrel.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Security Ownership of certain beneficial owners
The following table sets forth information regarding any person known to
the Company to be the beneficial owner of more than five percent of any
class of the Company's voting securities.
<TABLE>
(1) (2) (3) (4)
Name and Address Amount and Nature of Percent
Title of Class of Beneficial Owner Beneficial Ownership of Class
- -------------- -------------------- ---------------------- ---------
<C> <C> <S> <S>
Common William R. Green 612,500 13.0%
</TABLE>
(a) Security ownership of management
The following table sets forth certain information as of October 15,
1998 regarding the number and percentage of shares of common Stock of the
Company or any of its parents or subsidiaries beneficially owned (as such
term is defined in Rule 13d-3 under the Exchange Act) by each director, each
of the named executive officers and directors and officers as a group
<TABLE>
(1) (2) (3) (4)
Title of Class Name and Address Amount and Nature of Percent
of Beneficial Owner Beneficial Ownership of Class
- -------------- ------------------- -------------------- ---------
<C> <C> <S> <S>
Common William R. Green 612,500 13.00%
Common Jack W. Gustavel 89,500 1.90%
Common Roy G. Franklin 76,229 1.43%
Common J. Phillip Piffer` 57,500 1.24%
Common Total of all officers 993,229 20.72%
and directors
(7 individuals):
</TABLE>>
(c) Changes in Control
There are no arrangements known to the Registrant the operation of which
may at a subsequent time result in the change of control of the Registrant.
Submission page 10 of 85
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
<TABLE>
Name Age Office with the Company Appointed to Office
- ------------------ ---- ------------------------- -------------------
<C> <S> <C> <S>
William R. Green 59 Chairman of the Board 1965
President
Chief Executive
Officer
Chris Broili 50 Vice President -
Exploration 1998
Don Griffiths Vice President -
Corporate Development 1998
Gregory B. Lipsker 47 Vice President - Legal 1991
Roy G. Franklin 62 Director 1988
Jack W. Gustavel 58 Director 1974
J. Phillip Piffer 52 Director 1991
</TABLE>
The directors are elected for a one-year term and until their successors
have been elected and qualified. Executive Officers are appointed to serve
until the meeting of the Board of Directors following the next annual meeting
of shareholders and until their successors have been elected and qualified.
There are no arrangements or understandings between any of the directors,
executive officers, and other persons pursuant to which any of the foregoing
persons were named as Directors or executive officers. There is no family
relationship between any Director, Executive Officer, or person nominated or
chosen by the Registrant to become a Director or Executive Officer.
William R. Green is a mining engineer and geologist, and was a professor of
mining engineering at the University of Idaho from 1965 to 1983. He has been
actively involved in the mining business since 1965 and is a former officer
and director of Yamana Resources and currently an officer and director of
Canadian public companies: Maya Gold Limited and Petromin Resources Ltd., and
US companies Cimarron-Grandview Group, Inc. and Metaline Mining and Leasing
Co.
Chris Broili holds an MSc degree in exploration geology and has more than 25
years experience in mineral exploration worldwide. He was an Exploration
Manager for Atlas Precious Metals, Inc., and was involved in the discovery of
the Grassy Mountain gold deposit. He has also served as Vice President of
Exploration for Yamana Resources, Inc.
Don Griffiths holds an MSc degree in Materials Science and has over 25 years
experience in project development, engineering, construction and mining
operations. He was Principal Engineer and Director of Metallurgy for
Morrison Knudsen Corp. and Chief Metallurgist for Atlas Corp., during which
time he worked on a number of engineering and feasibility studies on mineral
deposits worldwide.
Submission page 11 of 85
<PAGE>
Gregory Lipsker is a practicing attorney with 17 years experience in mining
and corporate law. He was formerly the president and director of Antioch
Resources, a mineral exploration company. He is currently an officer and
director of Cimarron-Grandview Group, Inc. and Metaline Mining and Leasing
Co.
Roy G. Franklin is a certified public accountant with 29 years experience in
small company administration and finance. He was formerly a director of
Heidelberg Silver Mining Company and is a principal in the accounting firm of
Oswalt, Teel, and Franklin, P.S.
Jack W. Gustavel has more than 30 years experience in the banking industry
and is a former member of the Board, and Director of, the Portland branch of
the Federal Reserve Bank of San Francisco. He is currently a Director and
Chairman and CEO of Idaho Independent Bank.
J. Phillip Piffer holds an MBA degree from the University of Calgary, and has
worked as a management consultant and corporate executive primarily in the
Canadian oil business. He is the President and Director of Brigdon Resources
Inc., a Calgary-based oil and gas production company that is listed on the
Toronto Stock Exchange.
None of the Directors is also a director of any company with a class of
securities registered pursuant to Section 12 of the Exchange Act or subject
to Section 15(d) of the Act, or of any company registered under the
Investment Company Act of 1940 except William R. Green, Jack W. Gustavel, and
Gregory B. Lipsker as noted above.
No Director, or person nominated to become a Director or Executive Officer,
has been involved in any legal action involving the Company during the past
five years.
Promoters and Control Person: Not Applicable
ITEM 6. EXECUTIVE COMPENSATION.
A summary of cash and other compensation for the Company's President and
Chief Executive Officer for the three most recent years is as follows:
<TABLE>
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Principal Fiscal All other
Position Year Salary Compensation
- --------------------- ------ -------- -------------
<C> <S> <S> <S>
William R. Green, 1997 $15,600 $ 0
President and Chief 1996 $15,600 $ 150
Executive Officer 1995 $15,600 $ 90
</TABLE>
No other executive officer was compensated more than $150 per year during
the period 1995 through 1997.
Submission page 12 of 85
<PAGE>
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
There have been no transactions or series of transactions, or proposed
transactions during the lasttwo years to which the registrant is a
party in which any director, nominee for election as a director,
executive officer or beneficial owner of five percent or more of the
registrants common stock, or any member of the immediate family of
the foregoing had or is to have a direct or indirect material interest
exceeding $60,000.
ITEM 8. DESCRIPTION OF SECURITIES.
The Company is currently authorized to issue 20,000,000 shares of $.01
par value Common Stock, of which 4,626,956 shares were issued and
outstanding and held of record at the date hereof. At present, the
Company has no commitment for the issuance of additional shares.
All shares of Common Stock are equal to each other with respect to
voting, liquidation, dividend and other rights. Owners of shares
of Common Stock are entitled to one vote for each share of Common
Stock owned at any Shareholders' meeting. Holders of shares of
Common Stock are entitled to receive such dividends as may be
declared by the Board of Directors out of funds legally available
therefor; and upon liquidation, are entitled to participate pro
rata in a distribution of assets available for such a distribution
to Shareholders. There are no conversion, preemptive, or other
subscription rights or privileges with respect to any shares. The
Common Stock of the Company does not cumulative voting rights which
means that the holders of more than fifty percent (50%) of the shares
voting in an election of directors may elect all of the directors if
they choose to do so. In such event, the holders of the remaining
shares aggregating less than fifty percent (50%) would not be able
to elect any directors.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY
AND OTHER SHAREHOLDER MATTERS.
The Common Stock of the Company is traded in the over the counter market by
the National Association of Securities Dealers under the symbol "MNMM". The
following table shows the high and low closing sales prices for the Common
Stock for each quarter since June 30, 1994. The quotations reflect inter-
dealer prices, without retail mark-up, mark-down or commission and may not
represent actual transactions.
Submission page 13 of 85
<PAGE>
<TABLE>
Fiscal Year High Closing Low Closing
- -------------------------------- ------------ ------------
<C> <S> <S>
1996:
First Quarter (Jan. 1- March 31) . 17 .13
Second Quarter .16 .13
Third Quarter .16 .13
Fourth Quarter .13 .09
1997:
First Quarter .19 .09
Second Quarter .25 .13
Third Quarter .20 .16
Fourth Quarter .22 .16
1998:
First Quarter .44 .25
Second Quarter .50 .31
Third Quarter .56 .25
Through 11-05-98 .43 .25
</TABLE>
As of October 30, 1998 there were 1,127 shareholders of record of
the Company's common stock..
The Company has never paid any dividends and does not anticipate the
payment of dividends in the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS.
None
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
None
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
In March and April of 1998 the Registrant sold a total of 640,000 shares of
its common stock at a price of $.20 per share for an aggregate of $128,000. A
5% commission of $3,650, paid in the form of 18,250 shares of Common stock
was paid to selected dealers. The shares were sold pursuant to a Rule 506 of
Regulation D.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Pursuant to the Idaho Business Corporations Act, both permissible and
mandatory indemnification is provided for officers and directors of the
Company.
Submission page 14 of 85
<PAGE>
Permissive Indemnification
Except as otherwise provided by law, a corporation may indemnify an
individual who is a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative, arbitrative or
investigative and whether formal or informal (a "Proceeding") because he is a
director against liability incurred in the proceeding if:
(a) (i) He conducted himself in good faith; and
(ii) He reasonably believed:
(A) In the case of conduct in his official capacity, that his
conduct was in the best interest of the corporation, and
(B) In all cases, that his conduct was at least not opposed to
the best interests of the corporation; and
(iii) In the case of any criminal proceeding, he had no reasonable cause
to believe his conduct was unlawful; or
(b) He engaged in conduct for which broader indemnification has been
made permissible or obligatory under a provision of the articles of
incorporation, as authorized by section 30-1-202(2)(e), Idaho Code.
(2) A director's conduct with respect to an employee plan for a purpose he
reasonable believed to be in the best interests of the participants in, and
the beneficiaries of, the plan is conduct that satisfies the requirement of
subsection (1)(a)(ii)(B) of this section.
(3) The termination of a proceeding by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, is not, of
itself, determinative that the director did not meet the relevant standard of
conduct described in this section.
(4) Unless ordered by a court under section 30-1-854(1)(c), Idaho Code, a
corporation may not indemnify a director:
(a) In connection with a proceeding by or in the right of the corporation,
except for reasonable expenses incurred in connection with the
proceeding if it is determined that the director has met the relevant
standard of conduct under subsection (1) of this section; or
(b) In connection with any proceeding with respect to conduct for which he
was adjudged liable on the basis that he received a financial benefit
to which he was not entitled, whether or not involving action in his
official capacity.
Mandatory Indemnification.
A corporation shall indemnify a director who was wholly successful, on the
merits or otherwise, in the defense of any proceeding to which he was a party
because he was a director of the corporation against reasonable expenses
incurred by him in connection with the proceeding.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Act") may be permitted to directors, officers and controlling
persons of the small business issuer pursuant to the foregoing provisions, or
otherwise, the small business issuer has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
Submission page 15 of 85
<PAGE>
PART F/S
MINES MANAGEMENT, INC.
Spokane, Washington
FINANCIAL STATEMENTS
For the years ended
December 31, 1997 and 1996
Williams & Webster, P.S.
Certified Public Accountants
Seafirst Financial Center
601 W. Riverside, Suite 1970
Spokane, WA 99201
<TABLE>
MINES MANAGEMENT, INC.
TABLE OF CONTENTS
<C> <S>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Income 4
Consolidated Statement of Changes in Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
NOTES TO FINANCIAL STATEMENTS 7
</TABLE>
This space intentionally left blank.
Submission page 16 of 85
<PAGE>
(WILLIAMS & WEBSTER, P.S. LETTERHEAD)
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Mines Management, Inc.
Spokane, Washington
We have audited the consolidated balance sheets of Mines Management, Inc.
(an Idaho corporation) as of December 31, 1997 and 1996, and the related
consolidated statements of income, stockholders' equity, and cash flows for
the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, based on our audit, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Mines Management, Inc. as of December 31, 1997 and 1996 and the
results of its operations and cash flows for the years then ended, in
conformity with generally accepted accounting principles.
Williams & Webster, P.S.
April 23, 1998
1
Submission page 17 of 85
<PAGE>
MINES MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
1997 1996
_______________ _______________
<C> <S> <S>
ASSETS
Current Assets
Cash $ 48,796 $ 52,406
Accounts receivable 558 652
Prepaid expenses 2,300 2,300
_______________ _______________
Total Current Assets 51,654 55,358
_______________ _______________
Mineral Properties 360,180 360,180
Property and Equipment
Mine buildings 11,031 11,031
Equipment 43,777 43,777
Office equipment 7,686 7,507
_______________ _______________
Total Property and Equipment 62,494 62,315
Less accumulated depreciation 58,829 58,204
_______________ _______________
Net Property and Equipment 3,665 4,111
_______________ _______________
Investments
Bitterroot Resources, Ltd. 10,800 61,600
_______________ _______________
Total Investments 10,800 61,600
TOTAL ASSETS $ 426,299 $ 481,249
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
Submission page 18 of 85
<PAGE>
MINES MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1997 AND 1996
<TABLE>
1997 1996
_______________ _______________
<C> <S> <S>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current Liabilities
Accounts payable $ 2,205 $ 2,298
State income taxes payable 109 113
Payroll taxes payable 699 599
_______________ _______________
Total Current Liabilities 3,013 3,010
_______________ _______________
Stockholders' Equity
Common stock, $.01 par value:
20,000,000 shares authorized,
3,873,706 and 3,844,465 shares
issued and outstanding
respectively 38,737 38,445
Additional paid-in capital 1,139,698 1,139,990
Retained earnings (deficit) (765,949) (761,796)
Net unrealized gains on marketable
securities 10,800 61,600
_______________ _______________
Total Stockholders' Equity 423,286 487,239
_______________ _______________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 423,299 $ 481,249
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
Submission page 19 of 85
<PAGE>
MINES MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
1997 1996
_______________ _______________
<C> <S> <S>
REVENUES
Royalties $ 25,000 $ 25,000
Oil and gas 6,242 5,094
_______________ _______________
Total Revenues 31,242 30,094
_______________ _______________
EXPENSES
Operating Expenses
Depreciation 625 625
Legal and accounting 3,500 1,600
Miscellaneous 3,904 3,887
Oil and gas operating expense 2,653 2,597
Professional fees - 2,025
Rent and office expense 7,680 7,958
Salaries - officer and staff 15,600 15,600
Taxes and licenses 1,710 2,065
Telephone 1,570 2,124
_______________ _______________
Total Operating Expenses 37,242 38,481
Operating income (loss) (6,000) (8,387)
_______________ _______________
Other income
Interest 1,956 1,408
Gain on sale of investments - 24,128
_______________ _______________
Total Other Income 1,956 25,536
_______________ _______________
Net Income (Loss) Before Taxes (4,044) 17,149
Provision for Income Taxes 109 221
_______________ _______________
Net Income (Loss) $ (4,153) $ 16,928
=============== ===============
Net Income (Loss) Per Share (0.001) 0.004
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
Submission page 20 of 85
<PAGE>
MINES MANAGEMENT, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1997 AND 1996
<TABLE>
Net
Unrealized
Additional Retained Gains on
Common Stock Paid-in Earnings Marketable
Shares Amount Capital (Deficit) Securities Total
_________ _________ ___________ ___________ __________ _________
<C> <S> <S> <S> <S> <S> <S>
Balance, December
31, 1997 3,848,511 $ 38,485 $1,137,925 $ (778,714) $ - $ 397,686
Common stock
issued for
services 90,000 900 1,125 - - 2,025
Misc. common
stock
adjustments (94,046) (940) 940 - - -
Net unrealized
gain on
marketable
securities - - - - 61,600 61,600
Net Income - - - 16,928 - 16,928
_________ _________ ___________ ___________ __________ _________
Balance, December
31, 1996 3,844,465 38,445 1,139,990 (761,796) 61,600 478,239
Common stock
issued upon
conversion of
shares of
Heidelberg
Silver Mining
Company, Inc
Stock 29,241 292 (292) - - -
Adjustment to
net unrealized
gain on
marketable
securities - - - - (50,800) (50,800)
Net Income (Loss) - - - (4,153) - (4,153)
_________ _________ ___________ ___________ __________ _________
Balance, December
31, 1997 3,873,706 $ 38,737 $ 1,139,698 $ (765,949) $ 10,800 $ 423,286
========= ========= =========== =========== ========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
Submission page 21 of 85
<PAGE>
MINES MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 21, 1997 AND 1996
<TABLE>
1997 1996
_______________ _______________
<C> <S> <S>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ ( 4,153) $ 16,928
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation 625 625
Common stock issued for services - 1,125
Accounts receivable 94 (86)
Taxes payable 96 13
Accounts payable (93) 568
Gain from sale of investment - (24,128)
_______________ _______________
Net cash provided (used) by
operating activities (3,431) (4,955)
_______________ _______________
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of investments - 24,128
Acquisition of office equipment (179) (150)
_______________ _______________
Net cash provided by investing
Activities (179) 23,978
_______________ _______________
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock - 900
_______________ _______________
Net cash provided by financing
Activities - 900
_______________ _______________
Net increase in cash (3,610) 19,923
Cash and cash equivalents at
beginning of year 52,406 32,483
_______________ _______________
Cash and cash equivalents at end of year $ 48,796 $ 52,406
=============== ===============
Supplemental Disclosures:
Interest paid $ - $ -
=============== ===============
Income taxes paid $ 113 $ 108
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
Submission page 22 of 85
<PAGE>
MINES MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Mines Management, Inc. (hereinafter the "Company") is a publicly held Idaho
corporation incorporated in 1947. The Company acquires, explores, develops
and operates mineral and oil properties in North America.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Mines Management, Inc. and its wholly owned subsidiary, Newhi, Inc.
Intercompany items and transactions have been eliminated.
Newhi, Inc. was formed by the Company for the purpose of merger with
Heidelberg Silver Mining Company, Inc. In the merger completed on April 15,
1988, Heidelberg Silver Mining Company, Inc. was merged into Newhi, Inc. To
effect the merger, the Company issued 367,844 shares of its previously
unissued common stock. Also in connection with this merger, the Company
issued 11,117 shares of common stock and paid $4,446 as a finders' fee. As of
December 31, 1997 and 1996, a portion of the shares to be distributed to
the Heidelberg Silver Mining Company, Inc. shareholders have yet to be issued.
Concentration of Revenue
The Company receives a majority of its income from a single royalty source.
It is the belief of management that this source of income will continue in
the foreseeable future due to the large investment of capital by the lessor
in this project.
Mineral Properties and Deferred Mining Exploration and Development Costs
Costs of acquiring, exploring and developing mineral properties are
capitalized by project area. Costs to maintain the mineral rights and leases
are expensed as incurred. When a property reaches the production stage, the
related capitalized costs will be amortized, using the units of production
method on the basis of periodic estimates of ore or oil reserves. Mineral
properties are periodically assessed for impairment of value and any losses
are charged to operations at the time of impairment.
Should a property be abandoned, its capitalized costs are charged to
operations.
Property and Equipment
Property and equipment are stated at cost. Buildings were depreciated on the
straight line basis and were fully depreciated at December 31, 1997 and 1996.
Machinery and furniture are generally being depreciated using accelerated
methods over lives ranging from five to seven years.
7
Submission page 23 of 85
<PAGE>
MINES MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income (Loss) Per Common Share
Income or loss per common share is computed by dividing the net income or
loss by the weighted average number of shares outstanding during the year
(3,859,086 in 1997, and 3,846,488 in 1996).
Net Operating Loss
At December 31, 1997 the Company and its subsidiary, Newhi, Inc., had
available for future use, net operating loss carry-forwards of approximately
$876,000, that may be offset against future taxable income through 2012. A
portion of the net operating loss carryforward expires each year. No tax
benefit has been reported in the financial statements as the Company believes
there is a 50% or greater chance the net operating loss carryforwards will
expire unused. Accordingly, the potential tax benefits of the net operating
loss carryforwards are offset by a valuation allowance of the same amount.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
Estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from estimates.
NOTE 2 - MINERAL PROPERTIES
Mineral properties are comprised of acquisition, exploration and development
costs related to the Advance and Iroquois properties in the Northport region
of northeastern Washington State and the Montanore property in northwestern
Montana, as shown below:
<TABLE>
1997 1996
------------- -------------
<C> <S> <S>
Advance $ 2,139 $ 2,139
Montanore 134,207 134,207
Iroquois 223,834 223,834
------------- -------------
$ 360,180 $ 360,180
============= =============
</TABLE>
8
Submission page 24 of 85
<PAGE>
MINES MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1997 and 1996
NOTE 2 - MINERAL PROPERTIES (Continued)
The Advance property consists of 720 acres of patented mineral rights.
Although the Company does not own the overlying surface rights to its
patented mineral rights it does have rights of access to explore and mine.
The Montanore property (formerly the Noxon property) located in northwestern
Montana includes 16 mining claims covering 320 acres and a 5-acre patented
mill site.
The Iroquois property consists of 64 acres of patented mineral and surface
rights, and 17 unpatented mining claims containing 340 acres.
NOTE 3 - INVESTMENTS
Bitterroot Resources, Ltd.
At December 31, 1997 and 1996, the Company owned 45,000 free trading shares
of Bitterroot Resources, Ltd. (BTT), a public Canadian corporation traded on
the Vancouver Stock Exchange. These shares represent 1.4% of the outstanding
shares of Bitterroot Resources, Ltd. at December 31, 1997 and 1996. The
investment was accounted for on the equity method prior to 1996, and previous
losses reported by BTT have caused this asset to be carried at a value of
zero. In 1996 the Company adopted FAS 115 and determined the aforementioned
shares were held as "available for sale." This investment is being recorded
at fair market value with a corresponding adjustment to stockholders' equity.
The 45,000 free trading shares at December 31, 1997 and 1996 have an
approximate market value of $10,800 and $61,600 U.S. funds, respectively.
This space intentionally left blank.
9
Submission page 25 of 85
<PAGE>
MINES MANAGEMENT, INC.
Spokane, Washington
FINANCIAL STATEMENTS
For the six months ended
June 30, 1998
Williams & Webster, P.S.
Certified Public Accountants
Seafirst Financial Center
601 W. Riverside, Suite 1970
Spokane, WA 99201
<TABLE>
MINES MANAGEMENT, INC.
TABLE OF CONTENTS
<C> <S>
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Consolidated Balance Sheets 2
Consolidated Statements of Operations and Comprehensive Income 4
Consolidated Statement of Changes in Stockholders' Equity 5
Consolidated Statements of Cash Flows 6
NOTES TO FINANCIAL STATEMENTS 7
</TABLE>
This space intentionally left blank.
Submission page 26 of 85
<PAGE>
(WILLIAMS & WEBSTER, P.S. LETERHEAD)
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Mines Management, Inc.
Spokane, Washington
We have audited the consolidated balance sheet of Mines Management, Inc. (an
Idaho corporation) as of June 30, 1998, and the related consolidated
statements of operations and comprehensive income, stockholders' equity, and
cash flows for the six months then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, based on our audit, the consolidated financial statements
referred to above present fairly, in all material respects, the financial
position of Mines Management, Inc. as of June 30, 1998 and the results of
its operations and cash flows for the years then ended, in conformity with
generally accepted accounting principles.
The financial statements of Mines Management, Inc. for the year ended
December 31, 1997 were audited by us. Our report dated April 23, 1998
expressed an unqualified opinion on those statements.
Williams & Webster, P.S.
August 27, 1998
1
Submission page 27 of 85
<PAGE>
MINES MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
Year Ended
Six Months Ended December 31,
June 30, 1998 1997
________________ _______________
<C> <S> <S>
ASSETS
Current Assets
Cash $ 121,915 $ 48,796
Accounts receivable - 558
Prepaid expenses 26,217 2,300
________________ _______________
Total Current Assets 148,132 51,654
________________ _______________
Mineral Properties 360,180 360,180
Property and Equipment
Mine buildings 11,031 11,031
Equipment 44,098 43,777
Office equipment 10,196 7,686
________________ _______________
Total Property and Equipment 65,325 62,494
Less accumulated depreciation 59,865 58,829
________________ _______________
Net Property and Equipment 5,460 3,665
________________ _______________
Investments
Bitterroot Resources, Ltd. 3,975 10,800
________________ _______________
Total Investments 3,975 10,800
TOTAL ASSETS $ 517,747 $ 426,299
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
Submission page 28 of 85
<PAGE>
MINES MANAGEMENT, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
Year Ended
Six Months Ended December 31,
June 30, 1998 1997
________________ _______________
<C> <S> <S>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Current Liabilities
Accounts payable $ 26,634 $ 2,205
Payroll payable 1,300 -
State income taxes payable 109 109
Payroll taxes payable 699 699
________________ _______________
Total Current Liabilities 28,742 3,013
________________ _______________
Stockholders' Equity
Common stock, $.01 par value:
20,000,000 shares authorized,
4,608,706 and 3,873,706 shares
issued and outstanding
respectively 46,087 38,737
Additional paid-in capital 1,268,848 1,139,698
Retained earnings (deficit) (829,905) (765,949)
Net unrealized gains on marketable
securities 3,975 10,800
________________ _______________
Total Stockholders' Equity 489,005 423,286
________________ _______________
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 517,747 $ 426,299
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
Submission page 29 of 85
<PAGE>
MINES MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
<TABLE>
Year Ended
Six Months Ended December 31,
June 30, 1998 1997
________________ _______________
<C> <S> <S>
REVENUES
Royalties $ - $ 25,000
Oil and gas 2,179 6,242
________________ _______________
Total Revenues 2,179 31,242
________________ _______________
EXPENSES
Operating Expenses
Depreciation 1,036 625
Legal and accounting 5,817 3,500
Miscellaneous 6,358 3,904
Oil and gas operating expense 1,195 2,653
Professional fees 12,127 -
Rent and office expense 6,970 7,680
Salaries - officer and staff 7,800 15,600
Taxes and licenses 1,438 1,710
Telephone 2,203 1,570
Travel expense 3,939 -
Exploration expense 14,432 -
Fees - filing, licenses 168 -
Directors fees 4,500 -
________________ _______________
Total Operating Expenses 67,983 37,242
Operating income (loss) (65,804) (6,000)
________________ _______________
Other income
Interest 1,848 1,956
________________ _______________
Total Other Income 1,848 1,956
________________ _______________
Net Income (Loss) Before Taxes (63,956) (4,044)
Provision for Income Taxes - 109
________________ _______________
Net Income (Loss) $ (63,956) $ (4,153)
================ ===============
Other Comprehensive Income, net of tax
Unrealized Loss on Securities
Available for Sale (6,825) (58,800)
________________ _______________
Comprehensive Income (Loss) (70,781) (54,953)
================ ===============
Net Income (Loss) Per Share (0.015) (0.001)
================ ===============
Weighted Average Common Shares Outstanding 4,175,382 3,859,086
================ ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
Submission page 30 of 85
<PAGE>
MINES MANAGEMENT, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
Accumulated
Additional Retained Other
Common Stock Paid-in Earnings Comprehensive
Shares Amount Capital (Deficit) Income Total
_________ _________ ___________ ___________ ___________ _________
<C> <S> <S> <S> <S> <S> <S>
Balance, December
31, 1996 3,844,465 38,445 1,139,990 (761,796) 61,600 478,239
Common stock
issued upon
conversion of
shares of
Heidelberg
Silver Mining
Company, Inc
Stock 29,241 292 (292) - - -
Adjustment to
net unrealized
gain on
marketable
securities - - - - (50,800) (50,800)
Net Income (Loss) - - - (4,153) - (4,153)
_________ _________ ___________ ___________ ___________ _________
Balance, December
31, 1997 3,873,706 $ 38,737 $ 1,139,698 $ (765,949) $ 10,800 $ 423,286
Common stock
issued for
services 95,000 950 7,550 - - 8,500
Stock sold during
the period for
$0.20 per share 640,000 6,400 121,600 - - 128,000
Adjustment to
net unrealized
gain on
marketable
securities - - - - (6,825) (6,825)
Net Income (Loss) - - - (63,956) - (63,956)
_________ _________ ___________ ___________ ___________ _________
Balance, June
30, 1998 4,608,706 $ 46,087 $1,268,848 $ (829,905) $ 3,975 $489,005
========= ========= =========== =========== =========== =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
Submission page 31 of 85
<PAGE>
MINES MANAGEMENT, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
Year Ended
Six Months Ended December 31,
June 30, 1998 1997
________________ _______________
<C> <S> <S>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (63,956) $ (4,153)
Adjustments to reconcile net income
(loss) to net cash provided (used)
by operating activities:
Depreciation 1,036 625
Common stock issued for services 8,500 -
Changes in assets and liabilities:
Accounts receivable 558 94
Prepaid expenses (23,917) -
Taxes payable - 96
Accounts payable 25,729 (93)
_________________ _______________
Net cash provided (used) by
operating activities (52,050) (3,431)
________________ _______________
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of fixed assets (2,831) (179)
________________ _______________
Net cash provided by investing
activities (2,831) (179)
________________ _______________
CASH FLOWS FROM FINANCING ACTIVITIES
Issuance of common stock 128,000 -
________________ _______________
Net cash provided by financing
activities 128,000 -
________________ _______________
Net increase in cash 73,119 (3,610)
Cash and cash equivalents at
beginning of year 48,796 52,406
________________ _______________
Cash and cash equivalents at end of year $ 121,915 $ 48,796
================ ===============
Supplemental Disclosures:
Interest paid - -
=============== ===============
Income taxes paid - 113
=============== ===============
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
Submission page 32 of 85
<PAGE>
MINES MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activity
Mines Management, Inc. (hereinafter the "Company") is a publicly held Idaho
corporation incorporated in 1947. The Company acquires, explores, develops
and operates mineral and oil properties principally in North America.
Currently the Company is beginning exploration activities in South America.
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Mines Management, Inc. and its wholly owned subsidiary, Newhi, Inc.
Intercompany items and transactions have been eliminated.
Newhi, Inc. was formed by the Company for the purpose of merger with
Heidelberg Silver Mining Company, Inc. In the merger, completed on April 15,
1988, Heidelberg Silver Mining Company, Inc. was merged into Newhi, Inc. To
effect the merger, the Company issued 367,844 shares of its previously
unissued common stock. Also in connection with this merger, the Company
issued 11,117 shares of common stock and paid $4,446 as a finders' fee. As
of June 30, 1998, a portion of the shares to be distributed to the Heidelberg
Silver Mining Company, Inc. shareholders have yet to be issued.
Concentration of Risk
The Company receives a majority of its income from a single royalty source.
It is the belief of management that this source of income will continue in
the foreseeable future due to the large investment of capital by the lessor
in this project.
The Company maintains its cash accounts primarily in one commercial bank in
Washington and a securities firm also located in Washington. The accounts at
the commercial bank are guaranteed by the Federal Deposit Insurance
Corporation (FDIC) up to $100,000. At June 30, 1998, the Company's cash
balance in the commercial bank did not exceed the insured amount. The
accounts at the securities firm consist of an insured government money market
account and an uninsured securities money market account.
Mineral Properties and Deferred Mining Exploration and Development Costs
Costs of acquiring, exploring and developing mineral properties are
capitalized by project area. Costs to maintain the mineral rights and leases
are expensed as incurred. When a property reaches the production stage, the
related capitalized costs will be amortized, using the units of production
method on the basis of periodic estimates of ore or oil reserves. Mineral
properties are periodically assessed for impairment of value and any losses
are charged to operations at the time of impairment.
Should a property be abandoned, its capitalized costs are charged to
operations.
7
Submission page 33 of 85
<PAGE>
MINES MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Related Accounting Standards
In March 1995, the Financial Accounting Standards Board issued a statement
titled "Accounting for Impairment of Long-Lived Assets." This new standard
is effective for years beginning after December 15, 1995. In complying with
this standard, the Company reviews its long-lived assets quarterly to
determine if any events or changes in circumstances have transpired which
indicate that the carrying value of its assets may not be recoverable. The
Company does not believe that any adjustment is needed to the carrying value
of its assets at June 30, 1998.
Property and Equipment
Property and equipment are stated at cost. Buildings were depreciated on the
straight line basis and were fully depreciated at June 30, 1998. Machinery
and furniture are generally being depreciated using accelerated methods over
lives ranging from five to ten years.
Income (Loss) Per Common Share
Income or loss per common share is computed by dividing the net income or
loss by the weighted average number of shares outstanding during the year
(3,859,086 at December 31, 1997 and 4,175,382 at June 30, 1998).
Net Operating Loss
At December 31, 1997 the Company and its subsidiary, Newhi, Inc., have
available for future use, net operating loss carry-forwards of approximately
$876,000, that may be offset against future taxable income through 2012. A
portion of the net operating loss carryforward expires each year. No tax
benefit has been reported in the financial statements as the Company believes
there is a 50% or greater chance the net operating loss carryforwards will
expire unused. Accordingly, the potential tax benefits of the net operating
loss carryforwards are offset by a valuation allowance of the same amount.
At June 30, 1998, the Company's net operating loss carryforward increased by
approximately $64,000 to $940,000.
Cash Equivalents
For purposes of the statement of cash flows, the Company considers all highly
liquid debt instruments purchased with a maturity of three months or less to
be cash equivalents.
8
Submission page 34 of 85
<PAGE>
MINES MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Estimates
The preparation of financial statements, in conformity with generally
accepted accounting principles, requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results may differ from estimates.
Comprehensive Income
For the period ended June 30, 1998 the Company adopted the reporting
requirements of the Statement of Financial Accounting Standards No. 130
requiring the disclosure of comprehensive income. The Company has
reclassified the information presented on unrealized gains and losses from
securities available for sale as other comprehensive income or losses, as
required.
NOTE 2 - MINERAL PROPERTIES
Mineral properties are comprised of acquisition, exploration and development
costs related to the Advance and Iroquois properties in the Northport region
of northeastern Washington State and the Montanore property in northwestern
Montana, as shown below:
<TABLE>
December 31, 1997 June 30, 1998
----------------- ----------------
<C> <S> <S>
Advance $ 2,139 $ 2,139
Montanore 134,207 134,207
Iroquois 223,834 223,834
----------------- ----------------
$ 360,180 $ 360,180
================= ================
</table
The Advance property consists of 720 acres of patented mineral rights.
Although the Company does not own the overlying surface rights to its
patented mineral rights it does have rights of access to explore and mine.
The Montanore property (formerly the Noxon property) located in northwestern
Montana includes 16 mining claims covering 320 acres and a 5-acre patented
mill site.
The Iroquois property consists of 64 acres of patented mineral and surface
rights, and 18 unpatented mining claims containing 360 acres.
9
Submission page 35 of 85
<PAGE>
MINES MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
NOTE 2 - MINERAL PROPERTIES (Continued)
On June 29, 1998, the Company signed an agreement, effective June 1, 1998, to
explore and develop certain lands located in the country of Chile along with
an option to purchase the property. The agreement called for an initial
deposit of $25,000 as a holding fee, and annual holding fees in the amount of
$25,000 until such time as the property is placed in commercial production.
The initial $25,000 holding fee has been placed in prepaid expenses to be
written off ratably over the one-year period to which it pertains. The
agreement also calls for certain qualified expenditures as work requirements.
NOTE 3 - INVESTMENTS
Bitterroot Resources, Ltd.
At December 31, 1997 and June 30, 1998, the Company owned 45,000 free
trading shares of Bitterroot Resources, Ltd. (BTT), a public Canadian
corporation traded on the Vancouver Stock Exchange. These shares represent
1.4% of the outstanding shares of Bitterroot Resources, Ltd. at December 31,
1997 and June 30, 1998. The investment was accounted for on the equity
method prior to 1996, and previous losses reported by BTT have caused this
asset to be carried at a value of zero. In 1996 the Company adopted FAS 115
and determined the aforementioned shares were held as "available for sale."
This investment is being recorded at fair market value with a corresponding
adjustment to stockholders' equity. The 45,000 free trading shares at
December 31, 1997 and June 30, 1998 have an approximate market value of
$10,800 and $3,975 U.S. funds, respectively.
This space intentionally left blank.
10
Submission page 36 of 85
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS.
(1) Underwriting agreement N/A
(2) Plan of acquisition, reorganization arrangement, liquid, or
succession. N/A
(3) (i) ARTICLES OF INCORPORATION
(ii) BY-LAWS
(4) Instruments defining the rights of holders, including indentures N/A
(5) Opinion re: legality N/A
(6) No exhibit required N/A
(7) [Removed and reserved] N/A
(8) Opinion re: tax matters N/A
(9) Voting trust agreement N/A
(10) MATERIAL CONTRACTS
(a) LEASE AGREEMENT
(b) MERGER
(11) Statement re: computation of per share earnings N/A
(12) No exhibit required N/A
(13) Annual or quarterly reports, Form 10-Q N/A
(14) [Removed and reserved] N/A
(15) Letter on unaudited interim financial information N/A
(16) Letter on change in certifying accountant N/A
(17) Letter on director resignation N/A
(18) Letter on change in accounting principles N/A
(19) Reports furnished to security holders N/A
(20) Other documents or statements to security holders N/A
(21) SUBSIDIARIES OF THE REGISTRANT
(22) Published report regarding matters submitted to vote N/A
(23) Consent of experts and counsel N/A
(24) Power of attorney N/A
(25) Statement of eligibility of trustee N/A
(26) Invitations for competitive bids N/A
(27) FINANCIAL DATA SCHEDULE
(28) [Removed and reserved]
[Reserved (29) through (98)]
(99) Additional Exhibits N/A
ITEM 2. DESCRIPTION OF EXHIBITS.
Not Applicable
*****************************************************************************
SIGNATURES
*****************************************************************************
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by
the undersigned, thereunto duly authorized.
Dated this 9th day of November, 1998
MINES MANAGEMENT, INC.
/s/ William R. Green
By: _______________________________
William R. Green, President
Submission page 37 of 85
<PAGE>
</TABLE>
ARTICLES OF INCORPORATION AND AMENDMENTS TO ARTICLES OF INCORPORATION OF
MINES MANAGEMENT, INC.
ARTICLES OF INCORPORATION
of the
MINES MANAGEMENT, INC.
KNOW ALL MEN BY THESE PRESENTS:
That A. W. Wayne, E. S. Ware and J. A. Wayne, each of whom is a natural
person, of full age, a citizen of the United States and of the State of
Idaho, and residents of said State of Idaho, do hereby associate themselves
together for the purpose of forming a corporation under the laws of the State
of Idaho, and do certify as follows:
ARTICLE I. NAME
The name of this corporation shall be MINES MANAGEMENT, INC.
ARTICLE II. PURPOSES
The purpose for which this corporation is formed are: To locate,
purchase, patent, acquire, lease, rent, option, bond, own, hold, occupy, use,
mortgage, pledge or otherwise hypothecate, rent or lease, sell and convey
property, of any and every character whatsoever, real, personal, and/or
mixed, including mills, concentrators, reduction works, smelters, water and
water rights, stocks and bonds of this or any other corporation; to engage in
, conduct, manage, and/or operate a general mining, milling, smelting, real
estate, and merchandising business; to do and perform all acts and things
necessary, proper or expedient in promoting any of the objects and purposes
herein expressed; and for the purpose of attaining or furthering any of its
objects or purposes, to do any and all other acts or things, and to exercise
any and all other powers which a corporation could do in furthering the
accomplishment of the purposes herein expressed.
ARTICLE III. DURATION
The duration of this corporation shall be perpetual.
ARTICLE IV. REGISTERED OFFICE
The location and post office address of this corporation's registered
office in the State of Idaho shall be and is: Wallace, Shoshone County,
Idaho. But said corporation shall have plenary power to maintain branch
offices outside the State of Idaho.
ARTICLE V. CAPITAL STOCK
The amount of capital stock of this corporation shall be $100,000.00,
divided into 1,000,000 shares of the par value of Ten (10) Cents per share;
all of said stock shall be common stock, and shall be assessable to the full
extent provided by the laws of the State of Idaho.
Submission page 38 of 85
<PAGE>
ARTICLE VI. DIRECTORS
The number of directors of this corporation shall be three (3).
ARTICLE VII. INCORPORATORS
Following is the name and post office address of each of the
Incorporators of this corporation, and a statement of the number of shares
Of stock subscribed by each:
A. W. Wayne, 115 Cedar St., Wallace, Idaho;
1,000 shares, par value $100
E. S. Ware, 635 East Jefferson, Boise, Idaho;
1,000 shares, par value $100
J. A. Wayne, 215 Gyde-Taylor Bldg., Wallace, Idaho;
1,000 shares, par value $100
IN WITNESS WHEREOF, we have hereunto subscribed our names the 15th
day of February, A.D. 1947.
A. W. Wayne
E. S. Ware
J. A. Wayne
STATE OF IDAHO )
)ss.
COUNTY OF SHOSHONE )
On this 15th day of February, 1947, before me, the undersigned, a Notary
Public for the State of Idaho, personally appeared A. W. Wayne and J. A.
Wayne, known to me to be the persons whose names are subscribed to the within
instrument, and acknowledged to me that they executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at Wallace, Idaho, the day and year in this certificate first above
written.
Notary Public for Idaho
Residing at Wallace, Idaho
STATE OF IDAHO )
)ss.
COUNTY OF ADA )
On this 19th day of February, 1947, before me, the undersigned, a Notary
Public for the State of Idaho, personally appeared E. S. Ware, known to me to
be the person whose name is subscribed to the within instrument, and
acknowledged to me that he executed the same.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal at Boise, Idaho, the day and year in this certificate first above
written.
Notary Public for Idaho
Residing at Wallace, Idaho
Submission page 39 of 85
<PAGE>
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF
MINES MANAGEMENT, INC.
STATE OF WASHINGTON )
) ss
County of Spokane )
THIS IS TO CERTIFY that a special meeting of the stockholders of Mines
Management, Inc., a corporation organized and existing under the laws of the
State of Idaho, was held by unanimous consent of all shareholders at 612
Chronicle Building, in the City of Spokane, State of Washington, on the 19th
day of September, 1949 in accordance with the by-laws of said company and the
statutes of the State of Idaho, and in compliance with a previous resolution
of the Board of Directors of said corporation duly adopted at a meeting held
on the 1st day of September, 1949, at which a full quorum of all Directors
was present; and the original signed waiver of notice signed by all
stockholders, being on file with the Secretary of said company; that C.O.
Dunlop, President of the corporation, acted as Chairman of the stockholders'
meeting; and W. T. Anderson, Secretary, acted as the Secretary thereof; upon
a canvass of those present it appeared that stockholders of the corporation
representing 573,000 shares were present in person, being the total number of
shares outstanding of the authorized capital of 1,000,000 shares; that
thereupon the following resolution was introduced:
BE IT RESOLVED that the capital stock of the corporation be
increased from $100,000.00 divided into 1,000,000 shares, par
value 10 cents, to $625,000.00 divided into 2,500,000 shares, par
value 25 cents; and that Article V of the Articles of Incorporation
be amended accordingly to read as follows:
ARTICLE V. CAPITAL STOCK
The amount of capital stock of this corporation shall be
$625,000.00 divided into 2,500,000 shares of the par value
of 25 cents per share; and that the stock of the company
shall be COMMON and NON-ASSESSABLE.
BE IT FURTHER RESOLVED that the power to repeal and amend the
by-laws of the corporation and to adopt new by-laws be conferred
upon the Directors of this corporation; and that for said purpose
there be inserted in the original Articles of Incorporation of this
corporation immediately following Article VII of the incorporation
a new and additional provision to be designated as follows:
ARTICLE VIII
The Board of Directors of this corporation shall have poser
and authority to repeal and amend the by-laws of this
corporation and to adopt new by-laws; provided, however, that
said Board of Directors shall not make or alter any by-law
fixing their qualifications, classification, term of office or
compensation.
BE IT FURTHER RESOLVED that authority to sell the assets of the
corporation be provided by adding the following amendment:
Submission page 40 of 85
<PAGE>
ARTICLE IX
The corporation may make a voluntary sale, lease or exchange
of all of its assets upon such terms and conditions as may
be deemed expedient, including exchange for shares of another
corporation, domestic or foreign; and such sale may be
authorized and approved by shareholders representing 51% of the
issued and outstanding capital stock of the corporation as shown
by its books, at a meeting duly called for that purpose on thirty
days' written notice to all shareholders. Such written notice
shall be placed in the United States mail, postage prepaid, and
addressed to each shareholder at his last known post office
address.
BE IT FURTHER RESOLVED that the officers of this corporation be and
they are hereby authorized and directed to make, execute and file
the necessary Articles of Amendment to the Articles of Incorporation
of this corporation as are required by the statutes of the State of
Idaho to make said amendments effective.
Upon motion to adopt said resolution, stockholders holding 573,000
shares in said corporation, being all of the voting power of all the
shareholders of the corporation, there being only 573,000 shares of the
authorized capital stock of the company issued and outstanding, voted in
favor of said motion and resolution; and no votes were cast against the same;
and the Chairman declared that said motion had unanimously carried, and said
resolution amending the Articles of Incorporation was duly adopted.
IN WITNESS WHEREOF we have hereunto set our hands and affixed the seal
of said corporation in triplicate this 26th day of September, 1949.
President
Attest: Secretary
Mines Management, Inc.
STATE OF IDAHO )
)ss.
County of Spokane )
C. O. DUNLOP and W. T. ANDERSON, being duly sworn on oath, depose and
say: That they are the President and Secretary respectively of Mines
Management, Inc.; that they have read the foregoing Articles of Amendment to
the Articles of Incorporation of said corporation and know the contents
thereof, and that the facts therein stated are true of their own knowledge.
President
Secretary
Subscribed and sworn to before me this 26th day of September, 1949.
Notary Public in and for the State of
Washington, Residing at Spokane
My commission expires 1953
Submission page 41 of 85
<PAGE>
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF
MINES MANAGEMENT, INC,
WHEREAS Mines Management., Inc, was incorporated under the laws of the
State of Idaho on the 20th day of February, 1947, with its principal place of
business at Wallace, Shoshone County, Idaho; and
WHEREAS by proceedings duly had Article V of its Articles was amended in
eptember., 1949 by increasing the capital stock of the corporation to
2,500,000 shares with a par value of 250 per share, and providing that such
stock be common and non-assessable; and
WHEREAS the stockholders at the annual meeting on June 12, 1951, duly
called upon notice of the specific purpose, by vote of more than two-thirds
of all the issued and outstanding capital stock of the corporation
represented at said meeting, voted in favor of amending Article VI of the
Articles of Incorporation to provide that the number of directors be
increased to five, which Article is amended to read as follows:
ARTICLE VI. DIRECTORS
The number of directors of this corporation shall be Five (5).
NOW THEREFORE we, the President and Secretary of said corporation., do
hereby certify that the following is a full, true and correct copy of the
Articles of Incorporation of Mines Management, Inc. as now amended.
AMENDED ARTICLES OF INCORPORATION
OF MINES MANAGEMENT., INC.
KNOW ALL MEN BY THESE PRESENTS:
That K. W. Wayne, E. S. Ware and J. A. Wayne, each of whom is a natural
person, of full age, a citizen of the United States and of the State of
Idaho, and residents of said State of Idaho, do hereby associate themselves
together for the purpose of forming a corporation under the laws of the State
of Idaho, and do certify as follows:
ARTICLE I. NAME.
The name of this corporation shall be MINES MANAGEMENT, INC.
ARTICLE II. PURPOSES.
The purposes for which this corporation is formed are: To locate,
purchase, patent, acquire, lease, rent, option, bond, own, hold, occupy, use,
mortgage, pledge or otherwise hypothecate, rent or lease, sell and convey
property, of any and every character whatsoever, real, personal, and/or
mixed., including mills, concentrators, reduction works, smelters, water and
water rights, stocks and bonds of this or any other corporation; to engage
in, conduct, manage, and/or operate a general mining, milling, smelting, real
estate, and merchandising business; to do and perform all acts and things
necessary, proper or expedient in promoting any of the objects and purposes
herein expressed; and for the purpose of attaining or furthering any of its
objects or purposes, to do any and all other acts or things, and to exercise
any and all other powers which a corporation could do in furthering the
accomplishment of the purposes herein expressed.
Submission page 42 of 85
<PAGE>
ARTICLE III. DURATION.
The duration of this corporation shall be perpetual.
ARTICLE IV. REGISTERED OFFICE.
The location and post office address of this corporation's registered
office in the State of Idaho shall be and is: Wallace, Shoshone County, Idaho.
But said corporation shall have plenary power to maintain branch offices
outside the State of Idaho.
ARTICLE V. CAPITAL STOCK.
The amount of capital stock of this corporation shall be $625,000.00
divided into 2,500,000 shares of the par value of 250 per share; and that
the stock of the company shall be common and non-assessable.
ARTICLE VI. DIRECTORS.
The number of directors of this corporation shall be Five (5).
ARTICLE, VII. INCORPORATORS.
Following is the name and post office address of each of the
incorporators of this corporation, and a statement of the number of shares
of stock subscribed by each:
A. W. Wayne, 115 Cedar St., Wallace, Idaho;
1,OOO shares, par value $100.
E. S. Ware, 635 East Jefferson, Boise, Idaho;
1,000 shares, par value $100.
J. A. Wayne, 215 Gyde-Taylor Bldg., Wallace, Idaho;
1,000 shares, par value $100.
ARTICLE VIII
The Board of Directors of this corporation shall have power and
authority to repeal and amend the by-laws of this corporation and to adopt
new by-laws; provided, however, that said Board of Directors shall not make
or alter any by-law fixing their qualifications, classification, term of
office or compensation.
ARTICLE IX.
The corporation may make a voluntary sale, lease or exchange of all of
its assets upon such terms and conditions as may be deemed expedient,
including exchange for shares of another corporation, domestic or foreign;
and such sale may be authorized and approved by shareholders representing 51%
of the issued and outstanding capital stock of the corporation as shown by
its books, at a meeting duly called for that purpose on thirty days' written
notice to all shareholders. Such written notice shall be placed in the
United States mail, postage prepaid, and addressed to each shareholder at his
last known post office address.
Submission page 43 of 85
<PAGE>
IN WITNESS WHEREOF we have hereunto set our hands and affixed the seal of
said corporation before a Notary Public as provided by law this _______ day
of June, 1951.
President; Mines Management
Secretary, Mines Management, Inc.
Attest by, Corporate
Seal Affixed.
STATE OF WASHINGTON )
)ss
County of Spokane )
W. R. GREEN and LAURENCE HOWE., being first duly sworn on oath depose
and say: They are the President and Secretary respectively of Mines
Management, Inc. a corporation organized under the laws of the State of
Idaho; that they have read the foregoing Articles of Amendment to the
original Articles of Incorporation of the said Mines Management, Inc. and
know the contents thereof., and that the facts therein stated are true of
their personal knowledge.
President, Mines Management, Inc.
Secretary, Mines Management, Inc.
SUBSCRIBED AND SWORN TO before me this _______ day of June, 1951.
Notary Public in and for the State of
Washington, residing at Spokane.
My commission expires Dec. 11, 1954.
This space intentionally left blank.
Submission page 44 of 85
<PAGE>
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION OF
MINES MANAGEMENT, INC.
State of Washington )
) Ss.
County of Spokane )
THIS IS TO CERTIFY that a special meeting of the stockholders of Mines
Management, Inc., a corporation organized and existing under the laws of the
State of Idaho, was held at the registered office of said corporation at 509
Bank Street, Wallace, Idaho, on the 27th day of January, 1953, commencing at
the hour of 2:00 o'clock P.M. (MST), duly called upon notice of the specific
purpose thereof given by the secretary to all stockholders of the corporation
entitled to vote at said Meeting, at least thirty (30) days prior to the date
of said meeting, in accordance with the statutes of the State of Idaho, and
pursuant to a resolution of the Board of Directors of said corporation duly
adopted at a meeting held on the 12th day of December, 1952, at which a
majority of the directors of said corporation were present; that W. R. Green
as president of said corporation acted as Chairman of said stockholders
meeting and W. T. Anderson acted as secretary thereof; that upon a canvas of
the stockholders present in person or by proxy, it appeared that stockholders
of the corporation representing 1,918,335 shares were present in person and
by proxy out of shares issued and outstanding of the total authorized stock
of the corporation of 2,500,000 shares; that thereupon the following
resolution was introduced:
BE IT RESOLVED: That the capital stock of this corporation be increased
from $625,000.00 divided into 2,500,000 shares of the par value of 25 cents
per share to $875,000.00 divided into 3,500,000 shares of the par value of 25
cents per share, and that all stock be equal, common, and nonassessable;
BE IT FURTHER RESOLVED: That Article V of the Articles of Incorporation of
Mines Management Inc., be amended to read as follows) to wit:
ARTICLE V. CAPITAL STOCK
The amount of capital stock of this corporation shall be $875,000.00 divided
into 3,500,000 shares of the par value of 25 cents per share, all of said
stock to be equal, common, and nonassessable.
BE IT FURTHER RESOLVED: That the proper officers of this corporation be and
they are hereby authorized and directed to make, execute and file the
Articles of Amendment to the Articles of Incorporation of this corporation as
are required by the statutes of the State of Idaho in order to make said
amendment effective.
That thereupon, upon motion to adopt said resolution, stockholders holding
1,918,335 shares in said corporation, being more than two-thirds (2/3) of the
voting power of all the stockholders of said corporation, there being
2,450,847 shares of the authorized capital stock of said corporation issued
and outstanding, voted in favor of said motion and said resolution; that no
votes were cast against the same; and the Chairman declared that said motion
had unanimously carried and said resolution and said amendment were duly
adopted.
Submission page 45 of 85
<PAGE>
IN WITNESS WHEREOF we have hereunto set our hands and affixed the seal of
said corporation, in triplicate, this 28th day of January, 1953.
President
Attest: Secretary
Mines Management, Inc.
State of Washington )
) ss.
County of Spokane )
W. R. Green and L. Howe, being duly sworn, on oath depose and say:
That they are the President and Secretary respectively of MINES MANAGEMENT,
INC., a corporation; that they have read the foregoing Articles of Amendment
to the Articles of Incorporation of said corporation and know the contents
thereof, and that the facts therein stated are true of their own knowledge.
Subscribed and sworn to before me this 28th day of January, 1953.
Notary Public in and for the
State of Washington, residing
at Spokane, Wash.
My commission expires:
January 10, 1957
This space intentionally left blank.
Submission page 46 of 85
<PAGE>
AMENDMENT TO THE ARTICLES OF INCORPORATION
OF
MINES MANAGEMENT, INC.
Articles of Amendment of the Articles of Incorporation of MINES MANAGEMENT,
INC., an Idaho Corporation, are herein executed by said Company as follows:
1. The name of the Corporation is MINES MANAGEMENT, INC.
2. The amendment to Article of the Articles of Incorporation of said
Company is as follows:
"The capitalization of the Company shall be $200,000.00 divided into
20,000,000 shares of $0.01 par value common nonassessable stock. None of
these shares shall have pre-emptive rights. Each and every share of stock
shall have the same rights and privileges as those enjoyed by each and every
other share."
3. The date of the adoption of said amendment by the stockholders of the
Company was March 29, 1984.
4. The number of shares outstanding of said Company is 2,871,410 of the
authorized 3,500,000 shares.
The number of shares entitled to vote on said amendment was 2,697,410
5. The number of shares voted for and against said amendment respectively
were as follows:
FOR: 1,885,652 AGAINST: 67,166
6. That the number of shares voting for the amendment constituted 70% of
the shares entitled to vote on said amendment.
DATED at Spokane, Washington, this 6h day of April, 1984.
MINES MANAGEMENT, INC.
By: President
By: Assistant Secretary
This space intentionally left blank.
Submission page 47 of 85
<PAGE>
State of Washington )
) ss.
County of Spokane )
On this 6h day of April, 1984, before me, the undersigned, a Notary Public in
and for the State of Washington duly commissioned and sworn, personally
appeared WILLIAM R. GREEN and MAUREEN F. GREEN, to me known to be the
President and Assistant Secretary, respectively, of MINES MANAGEMENT, INC.,
the corporation that executed the foregoing instrument and acknowledged the
said instrument to be the free and voluntary act and deed of said
corporation, for the uses and purposes therein mentioned, and on oath stated
that they are authorized to execute the said instrument.
WITNESS my hand and official seal hereto affixed that day and year first
above written.
NOTARY PUBLIC in and for the State
of Washington, residing at Spokane
This space intentionally left blank.
Submission page 48 of 85
<PAGE>
B Y - L A W S
of the
MINES MANAGEMENT INC.
ARTICLE I. NAME, SEAL, OFFICES, ETC.
Section 1. Name: The name of the Corporation is Mines Management Inc.
Section 2. Seal: The seal of the Corporation shall be in such form as the
Board of Directors shall from time to time prescribe.
Section 3. Offices: The registered office of the Corporation shall be in the
city of Wallace State of Idaho. The Corporation may also have offices at
such other places within or without the State of Idaho as the Board of
Directors may from time to time establish.
Section 4. Book of By-Laws: These By-Laws shall be recorded in a book kept
in the registered office of the Corporation, to be known as the Book of By-
Laws, and no By-Laws, or repeal or amendment thereof, shall take effect until
so recorded. Said book may be inspected at said office by the public during
office hours of each day except holidays.
ARTICLE II. SHAREHOLDERS
Section 1. Annual Meetings of Shareholders: The annual meeting of the
Shareholders for the election or Directors and for such other business as may
be laid before such meeting shall be held in the registered office of the
Corporation. or at such other place within or without the State of Idaho as
the Board of Directors may from time to time appoint. at 11 o'clock A.M. on
the Second Tuesday of June each year unless said day shall be a legal
holiday. In which event it shall be held on the next following day which
shall not be a legal holiday whether or not mentioned in the notice. Any
corporate business may be transacted at such meeting.
Section 2. Special Meetings of Shareholders: Special meetings of the
Shareholders may be called at any time by the Board of Directors, and the
Shareholders may meet at any convenient place, within or without the State of
Idaho, designated in the call for such meeting. If more than eighteen months
are allowed to elapse without the annual Shareholders, Meetings being held,
any Shareholder may call such meeting to be held at the registered office of
the Corporation. At any time, upon written request of any, Director, or any
Shareholder or Shareholders, holding in the aggregate one-fifth of the voting
power of all Shareholders, it shall be the duty of the Secretary to call a
special meeting of Shareholders to be held at the registered office at such
tine as the Secretary may fix, not less than fifteen nor more than thirty-
five days after the receipt of said request, and if the Secretary shall
neglect or refuse to issue such call the Director or Shareholders or
Shareholders making the request may do so.
Section 3. Adjourned Meetings: An adjournment or adjournments of any annual
or special meeting may be taken without a new notice being given.
Submission page 49 of 85
<PAGE>
Section 4. Notice of Meetings: A written notice of the time, place, and
purposes of meetings, including annual meetings, shall be given be, the
Secretary or other person authorized so to do, to all Shareholders entitled
to vote at such meeting, at least ten days prior to the day named for the
meetings. If such written notice is placed in the United States mail,
postage prepaid, addressed to a Shareholder at his last known post office
address, notice shall be deemed to have been given him.
Section 5. Waiver of Notice: Notice of time place and purposes of any
meeting of Shareholders may be waived by the written assent of a Shareholder
entitled to notice, filed with or entered upon the records of the meeting
before or after the holding thereof.
Section 6. Action Without Formal Meeting: Any action which, under any
provision of the laws of Idaho, or the Articles or By-Laws, may be taken at a
meeting of Shareholders, may be take; without a meeting if authorized by a
writing signed by all of' the holders of shares who would be entitled to
notice of a meeting for such purpose. Whenever a certificate in respect to
any such action is required by the laws of Idaho to be filed in the office of
the County Recorder or in the office of the Secretary of State, the officers
signing the same shall therein state that the action was authorized in the
manner aforesaid.
Section 7. Waiver of Invalid Call or Notice: When all the Shareholders
of this corporation are present at any meeting, however called or notified,
and sign a written consent thereto on the record of such meeting, the doings
of such meeting are as valid as if had at a meeting legally called and
notified.
Section 8. Voting: Every Shareholder shall have the right at every
Shareholders meeting to one vote for every share of stock standing in his or
her name on the books of the Corporation on the record date fixed as
hereinafter provided, or, if no such date has been fixed, ten days prior to
the time of the meeting, and in voting for Directors, but not otherwise, he
may cumulate his votes in the manner and to the extent permitted by the laws
of the State of Idaho.
The Board of Directors may fix a time not more than forty days prior to the
date of any meeting of shareholders as the record date as of which
shareholders entitled to notice of and to vote at such meeting shall be
determined.
At each meeting of the shareholders a full, true and complete list, in
alphabetical order, of all the shareholders entitled to vote at such
meetings, and indicating the number of shares held by each, certified by the
Secretary or transfer agent, shall be furnished which list shall be open to
the inspection of the shareholders.
Shareholders may vote at all meetings either in person or by proxy appointed
by instrument in writing , subscribed by the Shareholder or by his duly
authorized attorney in fact, executed and filed with the Secretary.
All powers of attorney or proxies shall be submitted to the secretary for
examination. The certificate of the Secretary as to the regularity of such
powers of attorney or proxies and as to the number of shares held by the
persons who severally and respectively executed such powers of attorney or
proxies shall be received as prima facie evidence of the number of shares
Submission page 50 of 85
<PAGE>
held by the holder of such powers of attorney or proxies for the purpose of
establishing the presence of a quorum at such meeting and for organizing the
same, and for other purposes.
Section 9. Quorum: Except as otherwise provided in Articles of
Incorporation, at any meeting of the Shareholders, the presence, in person or
by proxy, of the holders of a majority of the voting power of all
Shareholders shall constitute a quorum. The shareholders present at a duly
organized meeting can continue to do business until adjournment
notwithstanding the withdrawal of enough Shareholders to leave less than a
quorum. If a Shareholders, meeting cannot be organized because a quorum has
not attended, those Shareholders present may adjourn the meeting to such time
and place as they may determine, but in case of any meeting called for the
election of Directors those who attend the second of such adjourned meetings,
although less than a majority of the voting power of all Shareholders shall,
never the less, constitute a quorum for the purpose of electing Directors.
Whenever all Shareholders entitled to vote at any meeting. consent, either by
writing on the records of the meeting, or filed with the Secretary of the
Corporation, or by presence at such meeting, an oral consent entered on the
minutes, or by taking part in the deliberations at such meeting without
objection, the doings of such meeting shall be as valid as if had at a
meeting regularly called and noticed, and at such meeting any business may be
transacted which is not excepted from the written consent or to the
consideration of which no objection from want of notice is made at the time,
and if any meeting be irregular for want of notice or of such consent
provided a quorum was present at such meeting, the proceedings of said
meeting may be ratified and approved and rendered likewise valid and the
irregularity or defect therein waived by a writing signed by all the
Shareholders having the right to vote at such meeting and such consent or
approval of Shareholders may be by proxy or power of attorney in writing.
ARTICLE III. DIRECTORS
Section 1. Number and Election: The business of the Corporation shall be
managed by a Board of at least three Directors or of such other number (which
shall not be less than three nor more than seven) as may be determined from
time to time by the Board of Directors. Directors need not be stockholders.
A Director shall hold office for the term for which he was named or elected
and until his successor is elected and qualified, except as hereinafter
otherwise provided. Director shall be chosen by ballot.
Section 2. Annual Meetings: The Board of Directors may hold its first annual
meeting and all subsequent annual meetings after its election by the
Shareholders, without notice and at such place within or without the State of
Idaho as the Board of Directors may from time to time appoint, for the
purpose of organization, the election of officers, and the transaction of
other business. At such meetings the Board shall elect a President, a
Secretary and a Treasurer, and may elect one or more Vice-Presidents, an
Assistant Secretary, and an Assistant Treasurer.
Section 3. Special Meetings: Special meetings of the Board of Directors may
be called by the President or any Vice President or by any two members of the
Board of Directors.
Section 4. Notice of Meetings: Notice of all Directors, meetings, except as
herein otherwise provided, shall be given either by mail, telegraph or
personal service of notice, oral or written., at such time or times as the
Submission page 51 of 85
<PAGE>
person or persons calling the meeting may deem reasonable, but in no event
less than one day's notice. Special meetings of the Board may be held at
such place within or without the State of Idaho as the Board of Directors may
from time to time appoint. Notice of any meeting may be waived by any
Director entitled to notice before or after the holding thereof by his
written or oral assent and the presence of any Director at any meeting even
though without any notice. shall constitute a waiver of notice . Unless
otherwise indicated in the notice thereof any and all business may be
transacted at any Directors' meeting.
Section 5. Quorum: At all meetings of the Board a majority of the Directors
shall be necessary and sufficient to constitute a quorum for the transaction
of business, and the acts of a majority of the Directors present at any
meeting, at which a quorum is present shall be the acts of the Board of
Directors except as may be otherwise specifically provided for herein or by
law.
If at any meeting there is less than a quorum present, a majority of those
present may adjourn the meeting from time to time without further notice to
any absent Director.
Section 6. Removal: A Director may be removed either or without cause, by
two-thirds of the vote of the Shareholders at a special meetings, called for
that purpose.
Section 7. Vacancies: Any vacancy in the Board of Directors occurring during
e year may be filled for the unexpired portion of the term and until a
successor is elected and qualified, either
(a) at the next annual meeting of Shareholders or at any special meeting
of Shareholders duly called for that purpose and held prior thereto,
or
(b) by a majority of the remaining members of the Board.
Section 8. Powers: All the corporate powers, except such as are otherwise
provided for in the Articles of Incorporation, in these By-Laws and by the
laws of the State of Idaho, shall be and are hereby vested in and shall be
exercised by the Board of Directors.
Section 9. Executive Committee: The Board of Directors may, by resolution
passed by a majority of the whole Board, designate two or more of their
number to constitute an Executive Committee to serve during the pleasure of
the Board, which committee shall have and exercise the authority of the
'Board in the management of the business of the Corporation to the extent
authorized by said resolution. All action taken by the Executive Committee
shall be reported to the Board of Directors at its meeting next succeeding
such action, and shall be subject to revision or alteration by the Board;
providing, however, that no rights or acts of third parties shall be affected
by any such revision or alteration.
A majority of the Executive Committee present at a meeting thereof shall
constitute a quorum. Vacancies in the Executive Committee shall be filled by
the Board Directors. The Executive Committee shall fix its own of procedure,
including the time and place of send and method or manner of calling meetings
thereof.
Submission page 52 of 85
<PAGE>
ARTICLE IV. OFFICERS
Section 1. Officers: The officers of the Corporation shall be a President,
Secretary and Treasurer, and, in the discretion of the Board of Directors
one or more Vice-Presidents, an Assistant Secretary, and an Assistant
Treasurer, each of whom shall be elected at a meeting of and by the Board of
Directors.
Any officer may resign by mailing a notice of resignation to the registered
office of the Corporation or such other office as may be designated by the
Board of Directors. To the extent permitted by law, the resignation shall
become effective at the time designated in the notice of resignation, beat in
no event earlier than its receipt by the Secretary or Assistant Secretary of
the Corporation.
In case of vacancy of any of said offices for any reason, the Board of
Directors shall at any regular or special meetings, elect a successor who
shall hold office for the unexpired tern of his predecessor. An y two of the
officers of Vice President, Secretary, Treasurer, Assistant Secretary of
Assistant Treasurer may be combined in one person.
The Board of Directors may appoint such other officers and agents as may be
necessary for the business of the corporation.
Any officer or agent may be removed by the Board of Directors whenever in
their judgment the interest of the Corporation may be served thereby; such
removal, however, shall be without prejudice to the contract rights of the
person so removed.
Section 2. President: The President shall preside at all meetings of the
Shareholders and Directors. He shall see that all orders and resolutions of
the Board are carried into effect, shall execute all deeds, mortgages, bonds
or documents authorized by the Board of Directors, and shall sign as
President all certificates of stock, all contracts, and other instruments, in
writing, excepting only those which are specifically provided to be signed
by others. He shall from time to time as requested, report to the Board all
of the matters within his knowledge of interest to the Corporation, and shall
also perform such duties as may be required by the State of Idaho, these By-
Laws, and by order of the Board of Directors.
Section 3. Vice-President: The Vice-President shall be vested with all the
powers and shall perform all the duties of the President in the absence or
disability of the latter.
Section 4. Treasurer: The Treasurer shall be custodian of the Corporation's
moneys and securities, and shall deposit and withdraw the same in the
Corporation's name as directed by the Board of Directors; he shall keep a
record of his accounts and report to the Board of Directors as requested.
Section 5. Secretary: The Secretary shall keep a record of the meetings of
the Shareholders and Board of Directors. He shall keep the books of
certificates of stock, fill out and sign all certificates of stock issued,
and make corresponding entries on the margin or stub of such book. He shall
keep a debit and credit form, showing the number of shares issued to and
transferred by the Shareholders, and the dates thereof. He shall keep the
corporate seal and shall affix same to certificates of stock and other
corporate instruments, and shall make such acknowledgments as may be required
Submission page 53 of 85
<PAGE>
on behalf of the Corporation. He shall perform duties as may be prescribed
by the Board of Directors. The secretary shall give, or cause to be given,
notice of all meetings of Shareholders and Board of Directors, and all other
notices required by the laws of the State of Idaho, or by these By-Laws.
Section 6. Salary: The salaries of all officers shall be fixed by the Board
of Directors and the fact that any officer is a Director shall not preclude
him from receiving a salary or from voting on the resolutions provided for
the same.
ARTICLE V. STOCK
Section 1. Certificates of Stock: Each shareholder shall be entitled to one
certificate of stock, signed by the President and the Secretary, or by such
other officers as are authorized by these By-Laws or by the Board of
Directors. When any certificate of stock is signed by a transfer agent or
registrar, the signature of any such corporate officer and the corporate seal
upon such certificates may be facsimiles, engraved or printed.
Certificates of stock shall be numbered in the order of issuance thereof and,
except insofar as prescribed by law, shall be in such form as the Board of
Directors may determine.
Section 2. Transfer of Shares: Transfer of shares of stock shall be made on
the books of the Corporation only by the holder in person or by written power
of attorney duly executed and witnessed and upon surrender of the certificate
or certificates of such shares.
Section 3. Transfer Agent and Registrar: The Board of Directors may appoint
either a transfer agent or registrar or both of them.
Section 4. Stock Transfer Books: Stock transfer books may be closed for not
exceeding forty days next preceding the meeting of shareholders and for the
payment of dividends during such periods as may be fixed from time to time by
the Board of Directors. During such periods no stock shall be transferable.
Section 5. Lost or Destroyed Certificates: In case of loss or destruction
of a certificate of stock of this Corporation, another certificate may be
issue, in its place upon proof of such loss or destruction and the giving of
a bond of indemnity or other security satisfactory to the Board of Directors.
ARTICLE VI. REPEAL OF AMENDMENT OF BY-LAWS.
Section 1. By the Shareholders: The power to make, amend, or repeal By-Laws
shall be in the Shareholders, and By-Laws may be repealed or amended or new
By-Laws may be adopted at any annual Shareholders' meeting, or at any special
meeting of the Shareholders called for that purpose, by a vote representing a
majority of the allotted shares, or by the written consent duly acknowledged
in the sane manner as conveyances of real estate required by law to be
acknowledged of the holders of a majority of the allotted shares, which
written consent may be in one or more instruments.
Section 2. By the Directors: Subject to the power of the Shareholders to
make, amend or repeal any By-Laws made by the Board of Directors, a majority
of the whole Board of Directors at any meeting thereof shall have the power
to repeal and amend these By-Laws and to adopt new By-Laws.
Submission page 54 of 85
<PAGE>
The foregoing By-Laws were regularly adopted at the first meeting of the
Shareholders of the corporation held on this ________ day of ___________,
19_______ at Wallace, Idaho, by a majority of the allotted capital stock.
James Wayne
________________________________
Chairman of Meeting of Shareholders
________________________________
Secretary of Meeting of Shareholders
We, the Shareholders of the above named Corporation, representing and holding
more than a majority of the allotted shares.
This space intentionally left blank.
Submission page 55 of 85
<PAGE>
LEASE AGREEMENT AND AMENDMENT TO LEASE AGREEMENT
LEASE AND OPTION TO PURCHASE AGREEMENT
THIS AGREEMENT made and entered into as of this _____day of ____________,
1984 by and between HEIDELBERG SILVER MINING COMPANY, INC., an Idaho
corporation, hereinafter called "Owner", and PACIFIC COAST MINES, INC., a
Delaware corporation, hereinafter called "Lessee ", as follows:
1. Demise
Owner, in consideration of the sun of Ten 'Thousand Dollars ($10,000.00) paid
to Owner by Lessee, receipt of which is hereby acknowledged, and of the
rents, covenants and conditions herein agreed to be paid, kept and performed
by Lessee, does hereby lease to Lessee those certain unpatented mining claim
(the "claims") situated in the County of Sanders, State of Montana, located
in Township 27 North, Range 31 West, M.P.M. and more particularly described
in Exhibit "A" attached hereto.
To have and to hold the said claims for the sole purpose of exploring, mining
and removing all of the minerals, mineral substances, metals, ore bearing
materials and rocks of every kind, except oil and gas, within the claims.
2. Duration
The term of this Agreement shall be a period of ten (10) years from
the date hereof, or for as long as Lessee explores or mines the claims for
minerals or ore deposits, whichever is longer unless sooner terminated or
cancelled as hereinafter provided.
3. Net Profits Interest, Recovery of Investment, and Minimum Payments
(a) Net Profits Interest
From and after such time as Lessee shall have recovered its Investment, as
hereinafter defined, Owner shall have thirty percent (30'/.) Net Profits
Interest in the claims, which shall be calculated and paid by Lessee in the
manner set forth in Exhibit "B" attached hereto.
In the event that Owner's claims are lost or invalidated through any gave
governmental action, or in the event that Lessee asserts extralateral rights
to mine areas appurtenant to Lessee's IIR claims, Lessee agrees to pay owner
ten percent (10'/.) of the Net Profits, calculated and paid by Lessee in the
manner set forth in Exhibit "B" attached hereto, for any minerals removed and
sold by Lessee from beneath the vertical boundaries of the claims listed in
Exhibit "A" as they existed of record on the date of this Agreement; said
claim are depicted an the map attached hereto as Exhibit "C". 'The
provisions of this Section 3(a) shall survive the termination of this
Agreement.
Submission page 56 of 85
<PAGE>
(b) Recovery of Investment
For purposes of this Section, the term "Investment" shall be deemed to mean
all costs and expenses, as defined in Section 3 of Exhibit "B" expended by
Lessee prior to the "Occurrence of Production" as hereinafter defined.
"Occurrence of Production" shall be deemed to occur upon the first day of the
calendar month first following three (3) months of operation at sixty percent
(60'/.) capacity of Lessee's mill, plant, or heap leach recovery system, in
connection with mineral product from the claims.
All "Gross Revenues" as defined in Section 2 of Exhibit "B!' except for five
percent (5%) of the "Net Profits" as defined in Section 1 of Exhibit "B",
shall be paid to or retained by Lessee until such time as Lessee shall have
recovered its investment, plus interest an all portions of said investment
made by Lessee with non-borrowed monies at the weighted average of prime
rates throughout each such year as established by the Bank of America. Said
five percent (5%) of the Net Profits shall be paid to Owner until such time
as Lessee has fully recovered its Investment as defined in Section 3(b)
hereof.
(c) Minimum Payments
During the continuance of this Agreement, and subject to the provisions of
this Agreement, Lessee shall make minimum payments to Owner in the following
amounts for each lease-year after the first, payable at the commencement of
each such year:
<TABLE>
<C> <S>
Second lease-year $ 10,000.00
Third lease-year $ 15,000.00
Fourth lease-year $ 20,000.00
Fifth lease-year and
Annually thereafter $ 25,000.00
</TABLE>
All minimum payments made pursuant to this Section 3(c) shall be credited in
full on, and deducted from, any net profits payments hereunder, or shall be
credited toward the total purchase option price of the claims specified in
Section 5. Should Lessee elect to exercise its option to purchase the
claims, Owner's Net Profits Interest shall terminate.
4. Work Commitment
Without limiting its obligation to perform assessment work pursuant to
Section 13 hereof, and subject to the provisions of this Agreement, Lessee
shall make expenditures or costs and expenses as defined in Exhibit "B" on or
for the benefit of the claims in accordance with the following schedule:
<TABLE>
<C> <S>
First lease-year $ 25,000.00
Second lease-year $ 35,000.00
Third lease-year $ 50,000.00
Fourth lease-year $ 75,000.00
Fifth lease-year $ 100,000.00
Sixth lease-year $ 100,000.00
</TABLE>
Submission page 57 of 85
<PAGE>
Any expenditure in any year in excess of the above indicated amount will be
credited towards the required expenditures in subsequent years.
Lessee may tender to Owner during any lease-year a cash payment equal to one-
half (1/2) of the unfulfilled work expenditure required in that lease-year
through the third lease-year and one-third (1/3) of the unfulfilled work
expenditure thereafter, provided that Lessee has first performed the required
annual assessment work. Such cash payment shall satisfy all unfulfilled work
expenditures for that year.
The parties understand that the commencement, conduct and completion of the
wok commitment for each lease-year is contingent upon adequate and timely
approval by the U. S. Forest Service or any federal or state agency having
regulatory authority. If such approval cannot be obtained without
unreasonable delay, then Lessee shall not be required to carry out the work
commitment for that lease-year. If work is deferred due to lack of
reasonable access, the expenditures required pursuant to this Section 4 will
be undertaken sequentially from the work commitment schedule, one year at a
time, without aggregation, regardless of the lease-year.
"Lease-year" shall any full year in which this Agreement remains in full
force and effect commencing on the date hereof or any anniversary date
hereof. For the purposes of the work commitment specified in this Section 4,
"Lease-year" shall one year from the date that satisfactory approval is
obtained to conduct work an the claims.
5. Option to Purchase
Owner hereby grants to Lessee the exclusive option, exercisable at any time
during the period three (3) years from the date hereof, to purchase the
claims for a total cash consideration of Two Million Five Hundred Thousand
Dollars ($2,500,000.00). Within ten (10) days of receipt of such notice, an
escrow shall be opened with a mutually agreeable escrow holder. The closing
of the escrow shall take place no sooner than January 15, 1988. The escrow
shall be upon the following conditions:
(a) Lessee shall deposit, in cash, the purchase price specified herein,
which cash the escrow holder shall hold for the account of Owner when Owner
shall convey all the right, title and interest of in the claims to Lessee
free and clear of all liens and encumbrances except those of record and such
others as Lessee may accept in writing.
(b) Owner shall pay for the revenue stamps, if any, and Lessee shall pay
all recording costs. The costs of escrow shall be evenly divided between
Owner and Lessee. Proration of taxes shall be on the basis of thirty (30)
day month. Where not otherwise provided for, the escrow holder's standard
escrow terms and conditions shall apply.
(c) Time shall be of the essence for the sale and purchase.
6. Title Representation and Warranties
(a) Representations of Owner
Owner represents that it owns the full and undivided interest in and to the
claims; that it has not assigned or encumbered its interest in the claims;
that all of the claims are good and valid, not in conflict with any other
Submission page 58 of 85
<PAGE>
mining claims except those of Lessee, and located, staked, filed and recorded
on available public domain land in compliance with all applicable state and
federal laws and constitute a compact group of contiguous and adjoining
claims without interior gaps; that all necessary assessment work for all
assessment years up to and including the assessment year ending on September
1, 1984, was timely and properly performed and that appropriate affidavits
evidencing such work have been timely and properly recorded; that all filings
with the Bureau of Land Management with respect to the claim which are
required by the Federal Land Policy and Management Act of 1976 have been
timely and properly made; that there are no actions, or administrative or
other proceedings pending or threatened against or affecting the claims; and
that it has the full and unrestricted right to enter into and perform this
Agreement without obtaining the consent or participation of any other party.
Owner further warrants and will forever defend the title of Lessee, its
successors and assigns, in the claims.
7. Use of Claims
Lessee shall have the exclusive right and privilege to prospect for, explore
and examine, mine, mill, prepare for market, store, market and remove from
the claims all minerals, mineral substances, metals, ores, ore bearing
materials and rocks of every kind, including the right of ingress and egress
for personnel, machinery, equipment, supplies and product through and upon
the claims, the right to use so much of the surface as may be needed for such
purposes, and the right to use water from the claim.
8. Environmental Protection
Lessee agrees to maintain all activities on the claim in strict accordance
with all laws, ordinances and regulations relating to the protection of the
environment and to make reasonable efforts to minimize the impact of its
operations upon the existing ecology.
9. Protection of Owner
Lessee agrees to take precautions while conducting hazardous operations to
avoid injury to persons or property rightfully on the claims, and to protect
and hold the Owner harmless from actions, claims, damages or loss arising
from any activities conducted, or conditions created by Lessee under this
Agreement.
10. Access to Claims and Inspection of Records
In the event mining is conducted under this Agreement, all such work shall be
open to representatives of Owner for inspection at all reasonable times,
which representatives shall have the right, at the risk of Owner and such
representatives, to go upon the claims for this purpose, and Lessee shall
render all necessary assistance to such representatives in connection
therewith. Owner shall have such representatives comply with all applicable
rules and regulations of Lessee affecting its operations upon the claims.
During the term of this Agreement, the duly authorized representatives of
shall have the right at reasonable times to inspect the books and engineering
and other records of Lessee relating to this Agreement for the purpose of
verifying the computations of net profits payments and work commitment
expenditures. Owner agrees to treat all information acquired hereunder as
confidential.
Submission page 59 of 85
<PAGE>
11. Remedies for Defects in Title
In the event of Owner's failure to promptly remedy any defect in title or to
pay, when due, taxes, mortgages or other liens against the claims, Lessee
shall have the right, but shall not be obligated to remedy such defects or to
pay such past due amounts, and, if it does so, Lessee shall be subrogated to
all the rights of the holder thereof, and Owner shall reimburse Lessee within
twelve (12) months from the time of performing such acts of making such
payments for all costs and expenses of Lessee. Any royalties due or accruing
to Owner during said twelve (12) months' period may be credited against the
sum to be reimbursed. The provisions of this Section shall survive any
termination of this Agreement.
If Owner owns less than the entire undivided interest in all of the claims,
all payments to be made by Lessee hereunder shall be reduced by the sane
proportion thereof as the interest of Owner in the claims bears to the entire
ownership interest in the claims.
12. Relocation of Claims; Patent Applications
Lessee may cure defects in the location, recordation or filing of the claims
comprising a part or all of the claims. Lessee, at its discretion, may
relocate, amend, restake, refile, and rerecord any claim or claims, or
documents associated therewith.
This Agreement shall constitute full and irrevocable power and authority
during the term hereof for Lessee to apply for a United States mineral patent
in the name of Owner to any or all of the claims, and Owner agrees to assist
in such application in a manner requested by Lessee. Where required for
restating or relocation, Owner agrees to execute notices of abandonment of
mining claim or apply for a United States mineral patent to any or all of
such mining claims as my be requested by Lessee, but if action is
unsuccessful or the application is rejected in whole or in part, Lessee shall
not be liable to for such loss in any manner whatsoever, provided Lessee has
proceeded in good faith in taking such action or making such application or
requesting the same of Owner. The rights of Lessee and Owner under this
Agreement shall extend to any and all such amended, relocated, and patented
mining claim.
13. Annual Assessment Work
During the term of this Agreement, Lessee shall make all expenditures for
labor and Improvements requisite to hold and protect the possessory rights
and titles or interest of Owner in and to the unpatented mining claims
described in Section 1, and shall make and file the necessary affidavits
attesting thereto pursuant to the Statutes of the United States and the State
of Montana.
14. Taxes
Lessee shall pay all taxes assessed against any improvements which
it may place on the claims and shall also pay any increase in taxes on the
claims due to its operations thereon. Lessee may take action as it deems
proper to obtain a reduction in or refund of taxes paid or payable by it and
in connection therewith my defer the payment of taxes. Owner shall cooperate
with Lessee in connection with the foregoing. Owner shall pay all taxes
levied upon the rental or royalty payments due or paid under the terms of
this Lease or an the right to receive the same.
Submission page 60 of 85
<PAGE>
15. Cancellation by Owner
In case of failure of Lessee to keep and perform its obligations under this
Lease, Owner may give to Lessee written notice of default, specifying the
details of the same. If such default is not remedied within thirty (30) days
after the receipt of said notice, provided the same can reasonably be done
within that time, or if not, if Lessee has not within that time commenced
action to cure the same and does not thereafter diligently prosecute such
action to completion, then this Agreement my be cancelled at the option of
Owner by written notice to Lessee which remedy shall be exclusive. No
forfeiture, however, shall be based an a default hereunder or an a failure to
remedy the sane, when resulting from any cause beyond the control of Lessee
including, without limitation, the Force Majeure provisions of Section 17.
16. Termination by Lessee
Lessee may at any time terminate this Agreement by tendering to Owner a
written release thereof and a quitclaim deed to that portion of Lessee's
mining claims that are overlapping the Owners claims, in proper form for
recording, and thereupon Lessee shall be released from all further
obligations and liabilities hereunder, except to account for and make
payments accrued during the life hereof. Tender of the release may be made
by mailing same to Owner at the address then in effect under Section 18
hereof. Lessee my record a duplicate of said release and quitclaim deed in
the same office as the short form lease agreement, hereinafter mentioned, was
recorded.
17. Force Majeure
The obligations of Lessee herein, express or implied, other than the
obligation to pay money, shall be suspended during such time and to the
extent that it is prevented from or substantially hindered in performing any
such obligation by war or war conditions, fire or acts of nature, strikes or
other labor controversies, accident, riots, or civil commotion, casualty,
government regulation or interference, inability to obtain labor, material or
equipment an the open market, or delay of carrier, or other cause, similar or
dissimilar, whether or not the same could have been foreseen or prevented.
18. Notices
All written notices hereunder shall, unless otherwise provided, be mailed by
registered mail to the addresses following, until some other address is
designated in a notice so given.
If to Owner: Heidelberg Silver Mining Company
Attention: Charles W. Anthony
613 Road 37
Pasco, Washington 99301
If to Lessee: Pacific Coast Mines, Inc.
3075 Wilshire Boulevard
Los Angeles, California 90010
Attention: Land Department
19. Whole Agreement
Submission page 61 of 85
<PAGE>
The parties hereto agree that the whole agreement between them is
written herein and in a short form lease agreement of even date which is
intended to be recorded and that agreement together with this agreement shall
constitute the entire contract between the parties.
20. Assignment
This Lease shall be binding upon and inure to the benefit of the respective
parties hereto, and their personal representatives, successors and assigns.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
OWNER: LESSEE:
HEIDELBERG SILVER MINING COMPANY, INC. PACIFIC COAST MINES, INC.
By:____________________________________ By:_________________________________
R.C. Munro, Vice President, Exploration
Attest: _______________________________ Attest:_____________________________
W.A. Ackerman, Secretary
STATE OF WASHINGTON )
)ss.
County of Benton )
On this ______ day of ____________________, 19___, before me the
undersigned, a notary public for the County aforesaid, appeared
________________________________________, whose name is signed to the writing
above, and acknowledged to me that he executed the same.
Witness my hand and official seal hereto affixed the day and year first
above written.
My commission expires: _________________________.
____________________________________
NOTARY PUBLIC in and for the State of
Washington, County of Benton.
STATE OF CALIFORNIA )
)ss.
County of Los Angeles )
On this _______ day of November in the year 1984, before me, Jane D.
Henry personally appeared R. C. Munro and W. A. Ackerman, personally known to
me to be the persons who executed the within instrument as Vice President,
Exploration, and Secretary or on behalf of the corporation therein named and
acknowledged to me that the corporation executed it.
__________________________________________
NOTARY PUBLIC n and for the State
of California, County of Los Angeles
Submission page 62 of 85
<PAGE>
EXHIBIT "A"
UNPATENTED MINING CLAIMS
SANDERS COUNTY, MONTANA
<TABLE>
Claim Name BLM Serial Number
----------------- ---------------------
<C> <C>
Rock Lake #1 M MC 63949
Rock Lake #2 M MC 63950
Grizzly Gold M MC 63955
Council Gap M MC 63957
Dorthy M MC 63959
Silver Dream M MC 63958
Rock Lake M MC 63948
Duke M MC 63944
Hyjacker M MC 63956
Tom M MC 63960
Jim M MC 63961
</TABLE>
EXHIBIT "B"
1. Net Profits
Net profits shall be determined by deducting from gross revenues all costs
and expensed, as defined in Paragraph 3 below, incurred by Lessee in
connection with or directly attributable to the exploration, development,
construction, exploitation, and marketing of Product from the claims.
2. Gross Revenues
Gross revenues shall man the aggregate &Hunts received by Lessee from the
sale of Mineral Product from the claims.
3. Costs and Expenses
Costs and expenses in connection with or directly attributable to the
exploration, development, construction, exploitation, processing, and
marketing of Product from the claims shall be all those costs and expenses,
both capital and non-capital, including Lessee's original capital investment
in developing a Mine an the claims paid or incurred by Lessee in the
exploration, development, construction, exploitation, processing, and
marketing of Product from the claims from the effective date of the
Agreement. If Owner's claims contain reserves of Mineral Product which are
less than the total reserves identified for development of a Mine, then costs
and expenses will be allocated to Owner's claims in the proportion that the
reserves present an Owner's claims bear to the total reserves of Mineral
Product. "Reserves" shall tons of proven ore as identified through drilling
or mining operations. Costs and expenses shall include, but not be limited
to:
Submission page 63 of 85
<PAGE>
(a) Salaries and wages of employees of Lessee who are engaged in the
performance of work related to and who are employed at the claims and the pro
rata portion of salaries and wages of employees of Lessee who are temporality
assigned to perform work for the direct benefit of the claims, including
technical, clerical, secretarial or supervisory personnel.
(b) The costs to Lessee of all employee benefit plans, policies and
services provided by Lessee to its employees that are applicable to the
salaries and wages under (a) above.
(d) The cost of personnel travel and moving costs.
(e) The cost of any mill or plant, irrespective of location, acquired or
constructed to process ores from the claims.
(f) The cost of all materials, equipment and supplies.
(g) The cost of environmental control as my be required.
(h) All costs of services of third parties procured by Lessee including
costs of contract billing, contract shaft sinking, and contract development;
outside consultants and auditors and related expenses; and other third party
costs.
(i) All costs of use (i.e., rental or royalty costs) of devices,
equipment, automobiles, aircraft, instruments and other personalty; and of
offices and other realty.
(j) All taxes, assessments, fees, duties, or other charge (including
royalties) levied by any governmental authority having jurisdiction and
authority, and including all costs of maintaining the claims in good
standing, excluding only taxes on income.
(k) All costs of utilities (electric power, heat, water, and telephone),
administration and insurance.
(1) All costs of refining and melting or other treatment costs, including
the cost of transportation, if any, of the Product to the purchaser.
(m) All costs and expenses incurred in selling the Product to the
purchaser.
(n) All uninsured losses.
(o) Financing and interest charges incurred in respect of borrowed moneys
for developing the claims and any mill or plant irrespective of location
acquired or constructed to process ores from the claims.
(p) Any net loss incurred during an accounting period shall be carried
forward and applied to reduce Net Profits, if any, realized during ensuing
accounting periods.
(q) A reasonable allocation of administration and overhead expenses.
(r) All salaries, remuneration and fringe benefits, shipping
expenses, legal expenses, incorporation expenses, costs associated with
shutdown once production ceases.
Submission page 64 of 85
<PAGE>
(s) All other charges and expenses usually made or incurred to
a like operation and accounted for in accordance with generally accepted
accounting principles.
4. Accounting Procedure
Lessee shall maintain separate books and accounts relating to the mining
and sale of Product and to operations on or for the benefit of the claims,
and Owner shall have the right to examine, copy and audit such books and
accounts at any reasonable time during normal business hours. Except as
otherwise provided herein, the accounting procedures, policies and
conventions to be applied and followed in computing Net Profits shall be in
accordance with generally accepted accounting principles consistently
applied.
5. Distribution of Net Profits
Owner's share of Net Profits realized during any calendar quarter shall
be distributed to Owner within forty-five (45) days following the end of such
calendar quarter. Such distributions of Net Profits shall be accompanied by
a statement showing in reasonable detail the derivation of Net Profits.
Statements for the first, second, and third quarters of each calendar year
and the accompanying distributions to Owner shall be provisional pending
final determination of Net Profits for the entire calendar year.
AMENDMENT
In consideration of the mutual covenants and promises herein contained, and
as an amendment to that certain Lease and Option to Purchase Agreement
between the undersigned parties dated November 8, 1984, the parties hereto
agree as follows:
Section 3 entitled "Net Profits Interest, Recovery of Investment, and Minimum
Payments", and more specifically Subsection (a) thereof entitled "Net Profits
Interest", is hereby amended to read as follows:
3. Net Profits Interest, Recovery of Investment, and
Minimum Payments.
(a) Net Profits Interest. From and after such time as Lessee shall have
recovered its Investment, as hereinafter defined, Owner shall have twenty
percent (20%) Net Profits Interest in the claims, said twenty percent (20%)
Net Profits Interest shall continue to be due under all circumstances even if
Owner's claims are lost or invalidated through any governmental action, or
Lessee asserts extralateral rights to mine areas appurtenant to Lessee's HR
claims. The said Net Profits Interest shall be calculated and paid by Lessee
in the manner set forth in Exhibit "B" attached hereto, for any minerals
removed and sold by Lessee from beneath the vertical boundaries of the claims
listed in Exhibit "A", attached hereto, as they existed of record on the date
of this Agreement. The claims to which this subsection refers are depicted
on the map attached hereto as Exhibit "C". The provisions of this Section
3(a) shall survive the termination of this Agreement.
It is agreed by the parties hereto that this Amendment effects only Section
3(a) of said Lease and Option to Purchase Agreement and all other provisions
of the Agreement shall remain unaffected by this Amendment and shall continue
to be binding obligations of the parties.
Submission page 65 of 85
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed on this 7th day of 1986.
OWNER: HEIDELBERG MINING COMPANY, INC.
By:___________________________________
CHARLES ANTHONY
ATTEST:
LESSEE: PACIFIC COAST MINES, INC.
By: __________________________________
ATTEST:
This space intentionally left blank.
Submission page 66 of 85
<PAGE>
NEWHI, INC.
ARTICLES
OF
MERGER
Heidelberg Silver Mining Company, Inc., an Idaho corporation, with and into
Newhi, Inc. , a Washington corporation
Pursuant to
RCW 23A.20.040 and RCW 23A.20.070 of the laws of the State of Washington and
I.C. 30-1-74 and I.C. 30-1-77 of the laws of State of Idaho.
Heidelberg Silver Mining Company, Inc. , an Idaho corporation ("Heidelberg")
and Newhi, Inc., a Washington corporation Newhi do hereby certify that:
1. Heidelberg and Newhi have entered into a Plan and Agreement of Merger,
dated November 10, 1987, which provides for the merger of Heidelberg with and
into Newhi. Newhi is the surviving corporation in this merger and its
Articles of Incorporation shall continue in effect without change for the
surviving corporation. The Plan and Agreement of Merger sets forth, among
other things, the terms and conditions of the merger and the manner and basis
of converting the shares of common stock of Heidelberg into shares of common
stock of Mines Management, Inc., the parent corporation of Newhi. A copy of
the Plan and Agreement of Merger, excluding its exhibits, is attached to these
Articles of Merger as Exhibit A.
2. There are 2,223,304 shares of common stock of Heidelberg, having a par
value of Ten Cents ($.10) per share, presently issued and outstanding, all of
which are entitled to vote upon the merger. There are 100,000 shares of
common stock of Newhi presently issued and outstanding, without par value.
3 Mines Management, Inc. , the sole shareholder of Newhi, unanimously
approved the Plan and Agreement of Merger on April 5, 1988, by unanimous
shareholder consent.
4. At a special meeting of shareholders of Heidelberg, duly held on April
6, 1988, the shareholders of Heidelberg approved the Plan and Agreement of
Merger by the requisite affirmative vote. The number of shares voting for,
against, or abstaining were as follows:
For the Plan and Agreement of Merger: 1,332,183
Against the Plan and Agreement of Merger: 368,556
Abstained: -0-
Submission page 67 of 85
<PAGE>
IN WITNESS WHEREOF, Heidelberg and Newhi have caused these Articles of Merger
to be executed in duplicate pursuant to RCW 23A.20.040 and RCW 23A.20.070 of
laws of the State of Washington and I.C. 30-1-74 and I.C. 30-1-77 of the laws
of the State of Idaho.
HEIDELBERG SILVER MINING COMPANY, INC.
By:
President
By:
Secretary
NEWHI, INC.
By:
William R. Green, Sole Officer
STATE OF WASHINGTON )
:SS.
County of Franklin )
CHARLES W. ANTHONY being first duly sworn upon oath, deposes and says:
That he is the President of HEIDELBERG SILVER MINING COMPANY, INC. , and one
of the persons who executed the foregoing Articles of Merger, that he has
read the same and know the contents thereof, that the statements contained
therein are true, and that he is authorized to execute the foregoing Articles
of Merger on behalf of HEIDELBERG SILVER-MINING COMPANY,
SIGNED AND SWORN to before me on this 6th day of April, 1988, by CHARLES W.
ANTHONY
NOTARY PUBLIC in and for the State
of Washington, residing at Spokane.
My commission expires: 9-26-91.
STATE OF WASHINGTON )
:SS.
County of Franklin )
WILLIAM R. GREEN, being first duly sworn upon oath, deposes and says:
That he is the President and Sole Officer of NEWHI, INC. one of the persons
who executed the foregoing Articles of Merger, that he has read the same and
knows the contents thereof, that the statements contained therein are true,
and that he is authorized to execute the foregoing Articles of Merger on
behalf of NEWHI, INC.
WILLIAM R. GREEN
SIGNED AND SWORN to before me on this 6tli day of April, 1988, by WILLIAM R.
GREEN.
NOTARY PUBLIC in and for the State
of Washington, residing at Spokane.
My commission expires: 9-26-91
Submission page 68 of 85
<PAGE>
PLAN AND AGREEMENT OF MERGER
November 10, 1987
This Plan and Agreement of Merger dated this 10th day of November, 1987, by
and among MINES MANAGEMENT INC., an Idaho corporation, HEIDELBERG SILVER
MINING COMPANY, INC., an Idaho corporation, and NEWHI, INC., a Washington
corporation.
WITNESSETH:
WHEREAS, Newhi, Inc. ("Newhi") is a corporation incorporated and existing
under the laws of the State of Washington, as a wholly-owned subsidiary of
Mines Management, Inc., ("Mines Management") a corporation incorporated and
existing under the laws of the State of Idaho, having been incorporated on
February 20, 1947;
WHEREAS, Heidelberg Silver Mining Company, Inc. ("Heidelberg") is a
corporation incorporated and existing under the laws of the State of Idaho
having been incorporated on September 20, 1923, as the R. J. Price Mining
Company;
WHEREAS, the boards of directors of the parties deem it advisable for the
general welfare and advantage of the parties and their respective
shareholders that Heidelberg merge with and into Newhi upon the terms and
conditions set forth herein and in accordance with the laws of the States of-
Idaho and Washington and that the outstanding shares of common stock of
Heidelberg be converted upon such merger (the "Merger") into, shares of
common stock of Mines Management at a ratio of six (6) shares of Heidelberg
for each share of Mines Management;
WHEREAS, the Boards of Directors of Mines Management, Heidelberg, and Newhi,
respectively, have approved and adopted this agreement as a plan of
reorganization within the provisions of Section 368(a)(1)(A) and 368(a)(2)(D)
of the Internal Revenue Code of 1986;
NOW, THEREFORE, in consideration of the promises and mutual agreements,
provisions and covenants contained in this Plan and
EXHIBIT A
Agreement and in order to set forth the terms and conditions of the Merger
and the mode of carrying it into effect, the parties agree as follows:
ARTICLE I.
MERGER
1.1 The Merger. At the effective date of the Merger, Heidelberg shall be
merged with and into Newhi on the terms and conditions hereinafter set forth
as permitted by and in accordance with the laws of the States of Idaho and
Washington and pursuant to this Plan and Agreement. Thereupon, the separate
corporate existence of Heidelberg shall cease and Newhi as the surviving
corporation shall continue to exist under and be governed by the laws of the
State of Washington, with its Articles of Incorporation and its Bylaws as in
effect immediately prior to the effective date of the Merger becoming the
Articles of Incorporation of the surviving corporation and to remain
unchanged until amended in accordance with the provisions thereof and
applicable law.
Submission page 69 of 85
<PAGE>
1.2 Filing Articles of Merger. As soon as practicable following
fulfillment or waiver of the conditions specified in Article X and provided
that this Agreement has not been terminated and abandoned pursuant to Article
VIII, Heidelberg and Newhi will cause Articles of Merger to be executed,
acknowledged and filed with the Secretary of State of the States of Idaho and
Washington as provided in RCW 23A.20.040 and IC 30-1-74 and IC 30-1-77.
1.3 Effective Date of The Merger. The Merger shall become effective
immediately upon the filing of the Articles of Merger with the Secretary of
State of the States of Idaho and Washington.. The time of such filing is
sometimes referred to herein as the effective date of the Merger.
ARTICLE II.
DIRECTORS AND OFFICERS
2.1 Directors. From and after the effective date of the Merger, the
members of the board of directors of the surviving corporation (Newhi) shall
consist of persons who are members of the board of directors of Newhi
immediately prior to the effective date of the Merger. Each of the members
of the board of directors of Newhi shall serve until his or her successor is
elected and qualified or until his or her earlier death, resignation or
removal. If on or prior to the effective date of the Merger, a vacancy shall
exist on the board of directors of Newhi, such vacancy may be filled in the
manner provided by the Bylaws of Newhi.
2.2 Officers. From and after the effective date of the Merger, the
following persons, subject to the provisions of the Bylaws of Newhi and the
laws of the State of Washington, shall hold office until the first board of
directors meeting following the first annual meeting of the shareholders of
Newhi held subsequent to the effective date of the Merger and until their
successors have been duly elected and shall have qualified, or until sooner
terminated by the board of directors: William A. Green, President, Roy G.
Franklin, Vice-President, Daniel J. Mertens, Secretary/Treasurer. Subject to
the Bylaws of Newhi, the board of directors of Newhi may elect or appoint
such additional officers as it may determine from time to time. If on or
prior to the effective date of the Merger a vacancy exists in one of the
above named offices, such vacancy may be filled in the manner provided by the
Bylaws of Newhi.
ARTICLE III.
CONVERSION OF SHARES
3.1 Conversion. Upon the effective date of the Merger, the issued and
outstanding shares of common stock of Heidelberg, without any further action
on the part of Heidelberg or Newhi or the respective holders of such shares,
shall be converted into shares of common stock (par value $0.01 per share) of
Mines Management at a ratio of six (6) shares of the common stock of
Heidelberg for each share of the common stock of Mines Management; Mines
Management shall reserve and set aside 370,551 shares for this purpose.
There are 2,223,304 shares of common stock of Heidelberg issued and
outstanding at this time.
3.2 Surrender and Exchange of Shares. As soon as practicable after the
effective date of the Merger, each holder of an outstanding certificate or
certificates, which immediately prior to the effective date of the Merger
represented shares of common stock of Heidelberg, upon surrender to Newhi of
such certificate or certificates, shall be entitled to receive one or more
stock certificates for the number of full shares of common stock of Mines
Submission page 70 of 85
<PAGE>
Management into which the shares of Heidelberg represented by the certificate
or certificates so surrendered shall have been converted as aforesaid. Until
so surrendered for exchange, each such certificate nominally representing
shares of Heidelberg common stock shall be deemed for all corporate purposes
to evidence the ownership of the number of full shares of common stock of
Mines Management which the holder. thereof would be entitled to receive upon
its surrender. Unless and until such outstanding certificate or certificates
shall be so surrendered for exchange, no holder thereof shall be entitled to
receive any dividend or distribution, whether in cash or otherwise, payable
to holders of record of common stock of Mines Management as of a record date
after the effective date of the Merger, but upon such surrender of such
outstanding certificate or certificates, there shall be paid to the record
holder of the certificate or certificates of Mines Management issued and
exchanged therefore, the amount of any such dividends and distributions
(without interest thereon) which theretofore have become payable with respect
to shares of common stock of Mines Management represented by the certificate
or certificates issued upon such surrender and exchange. If any -shares of
Mines Management common stock are to be issued in a name other than that in
which the certificates of Heidelberg common stock surrendered for exchange
are registered, it shall be a condition of such exchange that the certificate
so surrendered be properly endorsed or otherwise in proper form for transfer
and that the person requesting such exchange pay any transfer or other taxes
required by reason of issuance of the shares of Mines Management common stock
to persons other than the registered holder of the certificates surrendered.
3.3 Status of Mines Management Stock. All shares of common stock of
Mines Management into which common stock of Heidelberg is converted as
described in this Agreement shall be authorized but previously unissued,
fully paid and nonassessable, and be freely transferable. The securities to
be issued to the shareholders of Heidelberg will be described in a
notification and offering circular filed in accordance with the provisions of
Regulation A promulgated by the Securities and Exchange Commission and
registered by coordination with the states in which the shareholders of
Heidelberg presently reside.
3.4 Issuance of Additional Mines Management. Stock. Heidelberg has
leased certain unpatented mining claims located in Sanders County, State of
Montana, to Pacific Coast Mines'. Inc. , a Delaware corporation, pursuant to
the terms and provisions of a Lease and Option to Purchase dated November 8,
1984. Pursuant to the terms of that Lease Agreement, the lessee has an
option to purchase those claims for Two Million Five Hundred Thousand Dollars
($2,500,000.00) exercisable on or before November 8 1987. In the event that
that option is exercised, then additional shares of Mines Management common
stock will be issued to the shareholders of Heidelberg. The total number of
shares shall be determined by dividing an amount equal to 80%' of the net
proceeds received by Newhi from the lessee by the closing bid price for Mines
Management shares of common stock on the date that the escrow described in
section 5 of that Lease Agreement is closed. Each former shareholder of
Heidelberg then will receive that number of additional shares of Mines
Management common stock that is equal to the percentage of the total
outstanding shares of Heidelberg owned by the former shareholder of
Heidelberg, immediately prior to the effective date of the merger. The
entire net proceeds of the transaction shall be paid by the lessee to Newhi
and the former shareholders of Heidelberg shall not be entitled to any cash
distribution.
Submission page 71 of 85
<PAGE>
If Pacific Coast Mines purchases the unpatented mining claims described above
from Newhi or any successor i n interest of Newhi, after November 8, 1967 and
before November 9, 1992, then additional shares of Mines Management common
stock will be distributed to the former Heidelberg shareholders in the same
manner as described above. The total number of shares shall be determined by
dividing a specified percentage of the net proceeds received by Newhi from
Pacific Coast Mines by the closing bid price for Mines Management common
stock on the closing date of any transaction, as follows:
After November 8, 1987 and before November 9, 1988 - 80%.
After November 8, 1988 and before November 9, 1989 - 75%
After November 8, 1989 and before November 9, 1990 - 70%
After November 8, 1990 and before November 9, 1991 - 65%
After November 8, 1991 and before November 9, 1992 - 60%
Any sale of the property to Pacific Coast Mines, Inc., other than in
accordance with the provisions' of the purchase option described above, shall
be on such terms and conditions as are acceptable mutually to Newhi (or its
successor in interest) and Pacific Coast Mines, Inc.; the former Heidelberg
shareholders shall not have any right or claim to require that any such sale
be at the price stated, or in the manner set forth in, Section S of the Lease
Agreement.
The additional shares of Mines Management common stock described in this
Section 3.4 are not included with the shares of common stock covered by the
notification and offering circular filed pursuant to Regulation A. Any shares
issued pursuant to Section 3.4 would require registration or the availability
of an exemption from the registration provisions of Section 5 of the
Securities Act of 1933.
3.5 Restriction on Sale. The shares of common stock of Mines Management
issued to Heidelberg shareholders in exchange for shares of common stock of
Heidelberg shall not be sold, transferred, or exchanged for a period of one
year from the effective date of the merger. During that period of time, no
transfer or other disposition of those shares of common stock, or any
interest therein, shall be made by any former shareholder of Heidelberg and
the certificates delivered to the former shareholders shall contain a legend
substantially as follows:
No sale, offer to sell, or transfer of the shares represented by this
certificate shall be made for a period of one year from ________ 198__, the
effective date of the merger of Heidelberg Silver Mining Company, Inc.
with and into Newhi, Inc.
ARTICLE IV.
CERTAIN EFFECTS OF MERGER
4.1 Effects of Merger. Upon and after the effective date of the Merger
and pursuant to the laws of the State of Washington, Newhi shall possess all
the rights, privileges, immunities and franchises, and all property, debts
and other chooses in action, and all and every other interest belonging to or
due to Heidelberg. All such rights and interests shall be taken and deemed
to be transferred and vested in Newhi, and Newhi shall be responsible and
liable for all the liabilities and obligations of Heidelberg.
Submission page 72 of 85
<PAGE>
4.2 Further Assurances. If at any time after the effective date of the
Merger, Newhi shall consider or be advised that any further deeds,
assignments or assurances in law or any other things are necessary, desirable
or proper to vest, perfect or confirm, of record or otherwise, in Newhi the
title of any property or rights of Heidelberg acquired or to be acquired by
reason of, or as the result of the Merger, Newhi and its proper officers and
directors shall and will execute and deliver all such property, deeds,
assignments and assurances in law or do all things necessary, desirable or
proper to vest, perfect or confirm title to such property or rights in Newhi
and otherwise to carry out the purposes of this Agreement.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF HEIDELBERG
To induce Newhi to enter into and perform its obligations under this
Agreement, Heidelberg, represents, warrants and covenants to Newhi and Mines
Management as follows:
5.1 Corporate Organization. Heidelberg is a corporation validly existing
and in good standing under the laws of the State of Idaho.
5.2 Capacity, Authorization and Effect of Agreement. Heidelberg has all
requisite corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance of
this Agreement and all of the transactions contemplated hereby have been or
will be authorized by all necessary corporate action on the part of
Heidelberg, including the approval of the Merger by Heidelberg shareholders.
As such, this Agreement constitutes the valid and binding obligation of
Heidelberg.
5.3 Interim-Operations. Until the effective date of the Merger,
Heidelberg shall:
(a) Not dispose of any material asset;
(b) Not terminate any of its operations without consulting with and
obtaining the approval of Newhi;
(c) Use its best efforts to retain all present officers and employees in
their present positions;
(d) Pay no dividends and issue no shares of its capital stock (or grant any
rights or options to acquire shares of its capital stock); and
(e) Make no changes in the compensation of officers or employees and incur
no indebtedness' other than in the ordinary course of business or with prior
written approval of Newhi.
5.4 Stock Options., and Warrants. There are no outstanding obligations,
options, warrants or other rights of any kind to acquire shares of the
capital stock of any class of Heidelberg.
5.5 Negotiations With Third Parties. Heidelberg, its officers, directors
and shareholders have terminated and until the termination or consummation of
this Agreement will not resume any negotiations with other parties looking
toward the merger or acquisition of Heidelberg or any substantial portion of
its common stock or assets. Until the termination or consummation of this
Agreement, no person will enter into any discussion relating to such
proposals on behalf of Heidelberg.
Submission page 73 of 85
<PAGE>
5.6 Material Contracts. Until the termination or consummation of this
Agreement, Heidelberg shall not enter into any material contracts or. effect
any substantial change in the business or operations of Heidelberg other than
in the ordinary course of its business and has not done so since August 31,
1987.
5.7 Capital Stock. The authorized capital stock of Heidelberg consists
of 3,000,000 shares of common stock, $.10 par value per share, of which
2,223,304 shares have been issued and are presently outstanding. There are
no outstanding options, warrants, rights, conversion privileges or other
agreements or instruments obligating Heidelberg to issue any additional share
of its capital stock of any class or to issue any other debt or equity
securities of any kind.
5.8 Financial Statements. Heidelberg, at the request of Mines
Management, has furnished to Mines Management the financial statement of
Heidelberg for the period ending August 31, 1987, and the unaudited income
statements and balance sheet information for the period ending December 31,
1986. Heidelberg has provided an audited balance sheet and income statement
for the eight-month period ending August 31, 1987. All of these balance
sheets, financial statements and income statements 'are referred to herein as
the Financial Statements. The financial statement for the period ending
August 31, 1987 has been audited by the firm of Christensen and King, P.S.,
independent public accountants. The Financial Statements are true and
correct -in all material respects and present fairly the financial condition
and results of operations of Heidelberg as at and for the periods therein
specified.
5.9 Liabilities. Except to the extent reflected or reserved against in
the company's balance sheet of August 31, 1987, Heidelberg, as of that date,
had no material liabilities of any nature, whether accrued, absolute,
contingent, or otherwise, including, without limitation, federal or state tax
liabilities of any type or nature, due or to become due, and whether incurred
in respect of or measured by the income of Heidel berg for any period prior
to August 31, 1987, or arising out of transactions entered into or any set of
facts existing prior thereto.
5.10 Litigation. There are no actions, suits, claims, proceedings, or
investigations pending, threatened against or affecting Heidelberg at law or
in equity, or before or by any federal, state, municipal, or other
governmental court, agency, or instrumentality. Heidelberg is not in default
with respect to any order or decree of any court or federal, state, municipal
or other governmental department or instrumentality of which Heidelberg has
notice. Heidelberg has complied in all material respects with all laws,
regulations, and orders applicable to its business and properties.
5.11 Tax Returns. Heidelberg has filed with the appropriate governmental
authorities all tax and related returns which are required to be filed by it
and such returns accurately reflect the taxes payable. All federal, state
and local taxes due and payable have been duly paid except as reflected in
the Financial Statements. There are no claims, penalties or assessments for
delinquent taxes arising from those tax returns.
5.12 Title to Assets. Heidelberg has good and marketable title to all
its property and assets as described in a list of physical assets furnished
to Mines Management and as reflected on the balance sheet, free and clear of
Submission page 74 of 85
<PAGE>
all security interests, liens, pledges, or other encumbrance or charges
(except personal property taxes which may become due and payable on or after
the date hereof) and Heidelberg is in possession of all properties and assets
owned by it.
5.13 Contracts and Other Documents. Newhi has been advised of all
contracts to which Heidelberg is a party. As to all such contracts,
Heidelberg has not been notified of any claim that it is in default or
otherwise in breach of its obligations.
5.14 Insurance. Any policies of fire, liability, life, and other forms
of insurance held by Heidelberg will be provided to Newhi at its request.
5.15 Absence of Certain Events. Since August 31, 1987, Heidelberg
represents that Heidelberg has not:
(a) Discharged or satisfied any lien or encumbrance or paid any obligation
or liability, whether absolute or contingent, other than current liabilities
having become due and payable since that date in the ordinary course of its
business;
(b) Declared or made any payment or distribution to shareholders or
purchased or redeemed any of its capital stock except as provided in this
Agreement;
(c) Sold or transferred any of its tangible or intangible assets or
cancelled any debts or claims, except in each case in the ordinary course of
its business;
(d) Suffered any loss, damage, or destruction to any of its properties due
to fire or other casualty, whether or not insured, which loss, damage or
destruction materially and adversely affects its business, properties or
operations;
(e) Issued or sold or agreed to issue or sell any shares of its capital
stock or any option, warrant, or right in respect to such capital stock, or
any promissory note, evidences of indebtedness or any other security;
(f) Mortgaged, pledged or subjected to lien, charge or any other
encumbrance, any of its tangible or intangible assets, except the lien of
current real and personal property taxes not yet due and payable;
(g) Loaned any money or agreed to loan money to any of its directors,
officers or shareholders;
(h) Amended its Articles of Incorporation or Bylaws; or
(i) Conducted its business otherwise than in its ordinary and usual manner.
Further between the date hereof and the effective date of the Merger, without
the written consent of Newhi, will not do any of the things listed in this
section except as expressly contemplated by this Agreement.
5.16 Disclosure. Neither this Agreement nor, any of the Financial
Statements contains any untrue statement of any material fact or omits to
state any material fact that would be required to make the statements
contained herein or the Financial Statements not misleading.
Submission page 75 of 85
<PAGE>
ARTICLE VI.
REPRESENTATIONS AND WARRANTIES OF NEWHI
To induce Heidelberg to enter into and perform its obligations under this
Agreement, Newhi hereby represents, warrants and covenants to Heidelberg as
follows:
6.1 Corporate Organization. Newhi is a corporation that will be validly
existing and in good standing under the laws of the State of Washington.
6.2 Capacity, Authorization and Effect of Agreement. Newhi has all
requisite corporate power and authority to enter into and perform all its
obligations under this Agreement. The execution, delivery and performance of
this Agreement and all of the transactions contemplated hereby either have
been or will be duly authorized by all necessary corporate action on the part
of Newhi, including any required shareholder approval. Subject to any such
shareholder approval, this Agreement constitutes the valid and binding
obligation of Newhi.
6.3 Authorized Capital. True, correct and complete copies of Newhi's
Articles of incorporation and Bylaws, including all of the respective
amendments thereto, will be provided to Heidelberg. The total authorized
capital stock of Newhi is 100,000 shares of common stock without par value,
of which 1,000 shares will be validly issued and outstanding, fully paid and
nonassessable.
6.4 Option Plans. There are no authorized, issued or outstanding
securities, whether equity or debt, of Newhi of any kind whatsoever, and no
outstanding options, warrants, rights, conversion privileges or other
agreements or instruments obligating Newhi to issue any additional shares of
its capital stock of any class or classes, or to issue any other debt or
equity securities of any kind.
6.5 Interim Operations. Until the effective, date of the Merger, Newhi
shall not dispose of any material assets or enter into any agreement or
business combination (other than the one contemplated by this Agreement)
requiring Newhi shareholder approval and shall continue to be engaged in
substantially the same line of business in which it is currently engaged.
6.6 Disclosure of Material Adverse Information. Neither this Agreement nor
any of the information described herein contains any untrue statement of any
material fact or omits to state any material fact that would be required to
make the statements not misleading. Newhi is not aware of any fact,
information or claims, whether pending, potential or threatened, that would
have or may in the future have an adverse impact upon its business, the value
of its shares, properties, assets, or its profitability prospects or
financial condition,, other than those disclosed by the information described
herein.
ARTICLE VII.
COVENANTS OF HEIDELBERG AND NEWHI
Press Releases and Communications. Neither Heidelberg nor Newhi shall issue
any press release or make any statement or other communication to its
shareholders, employees, customers the public or any other person concerning
the subject matter of this Agreement other than press releases or
communications approved in advance by both parties.
Submission page 76 of 85
<PAGE>
ARTICLE VIII.
TERMINATION OF AGREEMENT
Termination. This Agreement and the transactions contemplated by it may be
terminated and the Merger may be abandoned at any time prior to the Closing
Date, but only for one of the following reasons:
(a) Mutual Consent. By mutual consent of Heidelberg and Newhi; or
(b) Material Change in Business. By either party, if a material change
in its business or that of the other party occurs; or
(c) Material Breach of Covenants. By Newhi, if there is a material breach
of the covenants contained in Article V of this Agreement, or by
Heidelberg if there is a material breach of the covenants contained in
Article VI of this Agreement; or
(d) Dissent by Heidelberg Shareholders. By Newhi if the number of
dissenting Heidelberg shareholders asserting a right to payment pursuant
to IC 30-1-80 is not acceptable to Newhi in its sole discretion. If a
termination of this Agreement shall occur, each party will pay all of
its own fees and expenses incurred in connection with the Merger at the
time of termination.
ARTICLE IX.
CLOSING DATE
Closing. The closing for the consummation of the transactions contemplated
by this Agreement, unless another date or place is agreed to in writing by
the parties, shall take place at the offices of Paine, Hamblen, Coffin,
Brooke & Miller, Spokane, Washington, as soon as practicable but not later
than three business days after the date the shareholders of Heidelberg shall
have given the approval sought pursuant to Article X. The hour and date of
such closing is referred to as the Closing Date.
ARTICLE X.
CONDITIONS TO THE MERGER
10.1 Conditions to Obligations of Newhi. The obligations of Newhi under
this Agreement to close, at its option, are subject to the conditions that:
(a) Shareholders Approval. Heidelberg's shareholders shall have duly
approved the Merger and this Agreement in accordance with applicable law,
including IC 30-1-77, and Heidelberg's Articles of Incorporation;
(b) Accuracy of Representations and Warranties. As of the Closing Date, the
representations and warranties of Heidelberg set forth in Article V shall be
true and correct in all material respects as if made as of such date, and
Heidelberg shall have complied with its covenants set forth in Articles V and
VII, and Heidelberg shall have furnished Newhi an officer's certificate to
that effect signed by its chief executive officer or president;
(c) Litigation. There shall be no order or judgment enjoining Newhi from
completing the purchase of Heidelberg' shares pursuant to the Merger, or
seeking to compel Newhi to dispose of a significant portion of its or
Heidelberg' business as a result of the Merger, nor shall any claim or legal
action have been received by or commenced against Heidelberg which would
have a material adverse impact upon Heidelberg;
Submission page 77 of 85
<PAGE>
(d) Opinion of Heidelberg's Counsel. Newhi shall have received an
opinion satisfactory in form and content to Paine, Hamblen, Coffin, Brooke &
Miller, counsel for Newhi, from and of Olson and Olson, counsel for
Heidelberg, dated the Closing Date, to the effect that the execution and
performance of this Plan and Agreement of Merger have been duly authorized by
Heidelberg and constitute a valid and binding obligation of Heidelberg.
10.2 Conditions to Obligations of Heidelberg. The obligations of Heidelberg
under this Agreement to close are, at its option, subject to the conditions
that:
(a) Shareholders Approval. Heidelberg's shareholders shall have duly
approved the Merger and this Agreement in accordance with applicable law,
including IC 30-1-77, and Heidelberg's Articles of Incorporation;
(b) Accuracy of Representations and Warranties. As of the Closing Date, the
representations and warranties of Newhi set forth in Article VI shall be true
and correct in all material respects as if made as of such date, and Newhi
shall have complied with its covenants set forth in Article VI and VII, and
Newhi shall have furnished Heidelberg an officer's certificate to that effect
signed by its chief executive officer or president;
(c) Litigation. There shall be no order or judgment enjoining Heidelberg
from consummating the Merger; and
(d) Opinion of Newhi's Counsel. Heidelberg shall have received an opinion
satisfactory in form and content to Olson and Olson, counsel for Heidelberg,
of and from Paine Hamblen, Coffin, Brooke & Miller, counsel for Newhi, dated
the Closing Date, to the effect that the shares of common stock of Mines
Management into which the shares of common stock of Heidelberg are to be
converted pursuant to this Agreement have been duly authorized, that on the
effective date of the Merger such shares will have been duly and validly
issued and will be fully paid and nonassessable. Further, the opinion shall
be to the effect that the execution and performance of this Plan and
Agreement of Merger have been duly authorized by Newhi, and constitute a
valid and binding obligation of Newhi.
ARTICLE XI.
EFFECT OF TERMINATION AND RIGHT TO PROCEED
Effect of Termination and Right to Proceed. In the event that this Agreement
is terminated pursuant to Article VIII, or because of the failure to satisfy
any of the conditions specified in Article X, all further obligations of
Heidelberg and Newhi under this Agreement shall terminate without further
liability of the parties to each other, except for the obligations of the
parties under Section 13.2. Nevertheless, notwithstanding anything in this
Agreement to the contrary, if any of the conditions specified in Article X
have not been satisfied, either party, as the case may be, in addition to any
other rights which may be available to it, shall have the right to waive such
condition and to proceed with the Merger.
Submission page 78 of 85
<PAGE>
ARTICLE XII.
NOTICES
Notices. Any notices or other communications required or permitted hereunder
shall be sufficiently given if sent by Certified Mail, postage prepaid,
addressed as follows:
To Newhi: William R. Green, President
W. 905 Riverside, Suite 311
Spokane, WA 99201
with a copy to: Lawrence R. Small
Paine, Hamblen, Coffin, Brooke & Miller
1200 Washington Trust Financial Center
Spokane, WA 99204
To Heidelberg: Charles Anthony, President
c/o Franklin & Associates P. 0. Box 2588
Tri-Cities, WA 99302
with a copy to: Orville Olson
P.O. Box 888
Pasco, WA 99301
Or to such other address as shall be furnished in writing by the party to be
notified, and any such notice or communication shall be deemed to have been
given as of the day after the date such notice was so mailed.
ARTICLE XIII.
MISCELLANEOUS
13.1 Survival of Representations and Warranties. The representations and
warranties included or provided for herein, or in any instrument of transfer
or other document delivered pursuant hereto, shall survive the effective date
of the Merger.
13.2 Expenses. All legal and other costs and expenses incurred in
connection with this Agreement and the transactions contemplated by it shall
be paid by the party incurring such expenses.
13.3 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties and their respective successors and
assigns; provided, however, that this Agreement may not be assigned by either
party without the consent of the other party.
13.4 Amendment. This Agreement may be amended in a writing signed by
both parties with the approval of the board of directors of each party at any
time prior to the effective date of the Merger with respect to any of the
terms contained herein other than the number of shares of Mines Management
common stock which holders of Heidelberg common stock shall receive in the
Merger as set forth in Section 3. 1.
13.5 Necessary and Desirable Actions. Heidelberg and Newhi each shall
execute and deliver such other documents, certificates, agreements and other
writings and take such other actions as may be necessary or desirable in
order to consummate or implement expeditiously the transactions contemplated
by this Agreement.
Submission page 79 of 85
<PAGE>
13.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Washington.
13.7 Headings. The section headings in this Agreement are for
convenience only and shall not be considered part of or used in the
interpretation of this Agreement.
IN WITNESS WHEREOF, this Agreement has been signed by the duly authorized
officers of each of the parties on the day and year first above written.
HEIDELBERG SILVER MINING COMPANY, INC.
By: ________________________________
Charles Anthony, President
ATTEST: ____________________________
Roy G. Franklin, Secretary
NEWHI, INC.
By: _________________________________
William R. Green, President
ATTEST: _____________________________
Daniel J, Mertens, Secretary
MINES MANAGEMENT, INC.
By: _________________________________
William R. Green, President
ATTEST: _____________________________
Daniel J. Mertens, Secretary
This space intentionally left blank.
Submission page 80 of 85
<PAGE>
ARTICLES OF INCORPORATION
OF
NEWHI, INC.
KNOW ALL MEN BY THESE PRESENTS: That the undersigned, being of legal age and
a citizen of the United States of America and the State of Washington, does
this day form a corporation under the general laws of the State of
Washington, and does hereby make, certify, execute, acknowledge and deliver
the following Articles of Incorporation:
ARTICLE I
The name of this corporation shall be: NEWHI, INC.
ARTICLE II
The general nature of the business of this corporation and the objects and
purposes proposed to be transacted, promoted and carried on by the
corporation are as follows:
(a) To engage in, conduct, manage and operate a general mining, milling,
and smelting business and to locate, purchase, patent, lease or acquire in
any type or manner any mining claim or interest.
(b) To engage in any manufacturing, mercantile, warehousing or trading
business or businesses of any kind, and to do all things incidental thereto;
to maintain and operate properties and facilities for the production and sale
of any articles of commerce; and to purchase or otherwise acquire, own,
mortgage, pledge, sell, assign, and transfer or otherwise dispose of, invest,
trade and deal in goods, wares and merchandise and real and personal property
of every class and description.
(c) To purchase or otherwise acquire, the whole or any part of the
undertaking and business of any person, firm or corporation, engaged in any
business of any nature, and the property and liabilities, including the good
will, assets and stock in trade thereof, and to pay for the same either in
cash or in shares, or partly in cash and partly in shares.
(d) To purchase, take, receive, lease, or otherwise acquire, own, hold,
improve, use and otherwise deal in and with, real or personal property, or
any interest therein, which property may be located either in the United
States of America or in a foreign country.
(e) To acquire by purchase, subscription, or otherwise, and to hold for
investment or otherwise, and to use, sell, assign, transfer, mortgage, pledge
or otherwise deal with or dispose of stocks, bonds, or any obligations or
securities of any corporation or corporations; and to merge or consolidate
with any corporation in such manner as may be provided by law.
Submission page 81 of 85
<PAGE>
(f) To borrow money, and to make and issue notes, bonds, debentures,
obligations and evidences of indebtedness of all kinds, whether secured by
mortgage, pledge or otherwise, without limit as to amount, except as may be
prohibited by statute, and to mortgage, pledge, hypothecate, convey in trust,
or otherwise, any and all property of the corporation as security for the
payment of any such indebtedness, and generally to make and perform
agreements and contracts of every kind and description; and to lend money for
corporate purposes, invest and reinvest its funds and take and hold real and
personal property as security for the payment of funds so loaned or invested.
(g) To purchase, take, receive or otherwise acquire, hold, own, pledge,
transfer or otherwise dispose of its own shares, to the extent that
unreserved and unrestricted earned surplus and unreserved and unrestricted
capital surplus shall be available therefor, and to make distributions from
capital surplus.
(h) To indemnify any directors, officer or former director or officer of
the corporation, or any person who may have served at the corporation's
request as a director or officer of another corporation, against expenses
actually and reasonably incurred by such person in connection with the
defense of any action, suit or proceeding, civil or criminal, in which he
becomes a party by reason of being or having been such director or officer,
to the full extent permitted by the laws of the State of Washington as such
laws at any time may be in force and effect.
(i) To do all and everything necessary, suitable and proper for the
accomplishment of any of the purposes, or the attainment of any of the
objects, or the furtherance of any of the powers herein above set forth,
either alone or in .association with other corporations, firms or
individuals, and do every act or acts, thing or things incidental or
appurtenant to or growing out of or connected with the aforesaid business or
powers, or any part or parts thereof; and to have and to exercise all the
powers conferred by the laws of the State of Washington, as such laws may now
be in effect or as they may at any time hereafter be amended.
The foregoing statement of purposes shall be construed as a statement of both
purposes and powers, and the purposes and powers stated in each clause shall
be in no way limited or restricted by reference to or inference from the
terms or provisions of any other clause, but shall be regarded as independent
purposes and powers.
ARTICLE III
A director of this corporation shall not be disqualified by his office from
dealing or contracting with this corporation, nor shall any transaction or
contract of this corporation be void or voidable by reason of the fact that
any director or any firm of which any director is a member or any corporation
of which any director is a shareholder, officer, or director, is in any way
interested in such transaction or contract provided that, after such interest
shall have been disclosed, such transaction or contract is, or shall be
authorized, ratified or approved either (1) by a vote of a majority of a
quorum of the Board of Directors without counting in such majority or quorum
any director so interested, or any director who is a member of a firm so
interested, or a shareholder, officer or director of a corporation so
interested, or (2) by the written consent, or by a vote at any stockholders'
meeting of the holders of record of a majority of all the outstanding shares
Submission page 82 of 85
<PAGE>
of stock of this corporation entitled to vote; nor shall any director be
liable to account to this corporation for any profits realized from such
transaction or contract, authorized, ratified or approved as aforesaid.
ARTICLE IV
The corporation shall have perpetual existence.
ARTICLE V
The registered office of the corporation shall be the office of the company
at West 905 Riverside, Suite 311, Spokane, Washington 99201, and the
registered agent of this corporation shall be William R. Green at the address
of the company.
ARTICLE VI
The aggregate number of shares which the corporation shall have authority to
issue is 100,000 shares of common stock, which share shall be issued without
par value. No shareholder shall be entitled as of right to purchase or
subscribe for any shares of this corporation authorized but unissued at this
time or for any shares, debentures, bonds, or other certificates of
indebtedness of whatever kind and nature which may hereafter be authorized
and issued.
The shareholders of this corporation shall not be entitled to exercise the
right of cumulative voting in the election of directors.
ARTICLE VII
The management of this corporation shall be vested in a Board of Directors,
which Board shall not be less than the minimum number required by law, and
the number, qualifications, compensation, terms of office, manner of
election, time and place of meeting, powers and duties of the directors shall
be such as are prescribed by the Bylaws of the corporation. The authority to
make Bylaws for the corporation is hereby expressly vested in the Board of
Directors of this corporation, and said Board may adopt, alter, amend or
repeal such Bylaws and provisions for the regulation and management of the
affairs of the corporation as shall be consistent with the laws of the State
of Washington and these Articles of Incorporation.
ARTICLE VIII
The corporation reserves the right to amend, alter, change or repeal any
provisions contained in these Articles of Incorporation in the manner now or
hereafter prescribed by statute, and all rights conferred on the stockholders
herein are granted subject to this reservation.
ARTICLE IX
The name and post office address of the director who shall first manage the
affairs of this corporation is as follows:
Name Post Office Address
- ----------------------- --------------------------------
William R. Green West 905 Riverside, Suite 311
Spokane, Washington 99201
Submission page 83 of 85
<PAGE>
and the director shall hold office until June 30, 1988, or until his
successor has been elected and qualified in the manner prescribed by law.
ARTICLE X
William R. Green shall be the incorporator of this corporation whose address
is West 905 Riverside, Suite 311, Spokane, Washington 99201.
IN WITNESS WHEREOF, the incorporator has hereunto set his hand this 2nd day
of November, 1987.
William R. Green
STATE OF WASHINGTON )
)Ss.
County of Spokane )
I certify that I know or have satisfactory evidence that William R. Green
signed this instrument, on oath stated that he was authorized to execute the
instrument and acknowledged it as the incorporation of NEWHI, INC. to be the
free and voluntary act of such party for the uses and purposes mentioned in
the instrument.
Dated November, 2, 1987
Notary Public in and for the State
of Washington, residing at Spokane
My appointment expires 9-26-91
CONSENT TO SERVE AS REGISTERED AGENT
I, WILLIAM R. GREEN, hereby consent to serve as Registered Agent, in the
State of Washington, for the following corporation, NEWHI, INC. I understand
that as agent for the corporation, it will be my responsibility to receive
service of process in the name of the corporation; to forward all mail to the
corporation; and to immediately notify the office of the Secretary of State
in the event of my resignation, or of any changes in the registered office
address of the corporation for which I am agent.
November 2, 1987
(date) WILLIAM R. GREEN
West 905 Riverside, Suite 311
Spokane, Washington 99201
Submission page 84 of 85
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheets for Mines Management, Inc. at June 30,
1998 and the Consolidated Statements of Operations and Comprehensive Income
for the six month period ended June 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<CASH> 121,915
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 148,132
<PP&E> 65,325
<DEPRECIATION> 59,865
<TOTAL-ASSETS> 517,747
<CURRENT-LIABILITIES> 28,742
<BONDS> 0
0
0
<COMMON> 46,087
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 517,747
<SALES> 0
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</TABLE>