UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
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Mines Management, Inc. | ||||
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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Mines Management, Inc.
905 West Riverside Avenue, Suite 311
Spokane, Washington 99201
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held June 15, 2007
Dear Shareholder,
We are pleased to invite you to attend the Annual Meeting of Shareholders of Mines Management, Inc., which will be held at 2:00 p.m. local Spokane time on Friday, June 15, 2007, at the Red Lion Inn at the Park, 303 W. North River Drive, Spokane, Washington 99201. The primary business of the meeting will be to:
Only shareholders of record at the close of business on May 8, 2007, the record date fixed by the Board of Directors, are entitled to notice of, and to vote at, the Annual Meeting and at any postponements or adjournments thereof.
Our annual report to shareholders for the fiscal year ended December 31, 2006, including financial statements, is being mailed with this proxy statement to all of our shareholders, and your board of directors urges you to read it.
It is important that your shares be represented at the meeting whether or not you are personally able to attend. You are therefore urged to complete, date and sign the accompanying Proxy and mail it in the enclosed postage-paid envelope as promptly as possible. Your Proxy is revocable, either in writing or by voting in person at the Annual Meeting, at any time prior to its exercise. Thank you for your timely response.
We look forward to seeing you at the Annual Meeting in June.
Sincerely,
Glenn M. Dobbs
President and Chief Executive Officer
May 11, 2007
Spokane, Washington
As your vote is important, please complete and sign the enclosed proxy card and mail it promptly in the posted return envelope provided. Shares cannot be voted at the meeting unless the owner is present to vote or is represented by Proxy.
Mines Management, Inc.
905 West Riverside Avenue, Suite 311
Spokane, Washington 99201
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
June 15, 2007
This Proxy Statement is being furnished by the Board of Directors of Mines Management, Inc. (the "Company") to holders of shares of the Company's common stock, par value $0.001 per share (the "Common Stock") in connection with the solicitation by the Board of Directors of Proxies to be voted at the Annual Meeting of Shareholders of the Company to be held on June 15, 2007, and any postponements or adjournments thereof (the "Annual Meeting"), for purposes set forth in the accompanying Notice of Annual Meeting of Shareholders. This Proxy Statement is first being mailed to the Shareholders on or about May 15, 2007.
As of the record date, members of the Company's management are the record and beneficial owners of a total of 2,325,183 shares (approximately 11.3%) of the Company's outstanding Common Stock. It is management's intention to vote all of its shares in favor of each matter to be considered by the shareholders.
Election of Directors
Shareholders will be asked to elect two directors to serve a three (3) year term until the annual meeting of shareholders to be held in 2010 or until such director's successor is elected and qualifies.
Other Business
Shareholders will be asked to transact such other business as may properly come before the Annual Meeting or any postponements or adjournments thereof.
1. Record Date. The Board of Directors of the Company has fixed the close of business on May 8, 2007, as the record date for the purpose of determining shareholders of the Company entitled to notice of and to vote at the Annual Meeting. At the close of business on that date, the Company had 18,899,467 issued and outstanding shares of Common Stock. A majority of such shares will constitute a quorum for the transaction of business at the Annual Meeting. Proxies which are submitted but are not voted for or against (whether by abstentions, broker non-votes, or otherwise) will be treated as present for all matters considered at the meeting.
2. Solicitation of Proxies. The accompanying Proxy is solicited on behalf of the Board of Directors of the Company, and the cost of solicitation will be borne by the Company. Following the original mailing of the Proxies and soliciting materials, directors, officers and employees of the Company may solicit Proxies by mail, telephone, facsimile, email, or personal interviews. The Company may request brokers, custodians, nominees, and other record holders to forward copies of the Proxies and soliciting materials to persons for whom they hold shares of the Company and to request authority for the exercise of Proxies. In such cases, the Company will reimburse such holders for their reasonable expenses. The Company plans to engage Computershare and ADP Investor Services to assist in its solicitation effort at estimated fees of approximately $4,000 and $6,000, respectively.
3. Revocation of Proxy. Any Proxy delivered in the accompanying form may be revoked by the person executing the Proxy by written notice to that effect received by the Secretary of the Company at any time before the authority thereby granted is exercised, by execution of a Proxy bearing a later date presented at the meeting, or by the attendance and vote of such person at the Annual Meeting.
4. How Proxies will be Voted. Proxies received by the Board of Directors in the accompanying form will be voted at the Annual Meeting as specified therein by the person giving the Proxy. If no specification is made with respect to the matters to be voted upon at the meeting, the shares represented by such Proxy will be voted FOR the nominee to the Board of Directors in the election of directors. All shares represented by valid Proxy will be voted at the discretion of the proxy holders on any other matters that may properly come before the meeting. However, the Board of Directors does not know of any matters to be considered at the meeting other than those specified in the Notice of Meeting.
5. Voting Power. Shareholders of the Common Stock of the Company are entitled to one vote for each share held. There is no cumulative voting.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 8, 2007 regarding the number and percentage of shares of Common Stock of the Company beneficially owned (as such term is defined in Rule 13d-3 under the Exchange Act) by each beneficial holder of more than five percent of the Common Stock, each director, each of the named executive officers and the Company's directors and officers as a group:
| Name of Beneficial Owner(1) | Amount and Nature of Beneficial Ownership(2) | Percent of Class(3) | |||
|---|---|---|---|---|---|
| Praetorian Capital Management, LLC(4) | 1,088,600 shares 275,000 warrants | 7.11 | % | ||
Glenn M. Dobbs | 536,919 shares 895,000 options 50,000 warrants | (5) | 7.47 | % | |
Roy G. Franklin | 78,053 shares 85,000 options | * | |||
Robert L. Russell | 20,000 options | * | |||
Jerry G. Pogue | 30,000 shares 20,000 options 5,000 warrants | * | |||
Russell C. Babcock | 70,000 options | * | |||
James H. Moore | 10,000 shares 160,000 options 5,000 warrants | * | |||
Eric C. Klepfer | 140,000 options | * | |||
Douglas D. Dobbs | 211 shares 220,000 options | 1.1 | % | ||
Total of all officers and Directors (8 individuals) | 78,053 shares 85,000 options 60,000 warrants | 11.30 | % |
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PROPOSAL NO. 1—ELECTION OF DIRECTORS
The Board consists of three classes of directors, with each class serving for a three-year term or until their successors are elected and qualified. The terms of the classes are scheduled to end in successive years. The authorized number of directors permitted by the Company's bylaws is up to 15. The Class II directors, Jerry G. Pogue and Robert L. Russell, whose current terms are scheduled to expire at the 2007 annual meeting of shareholders, are nominees for reelection at the Annual Meeting. The Class III directors, whose current terms are scheduled to expire at the 2008 annual meeting of shareholders, are Glenn Dobbs and Roy G. Franklin. The current term of Class I director Russell C. Babcock is scheduled to expire at the 2009 annual meeting of shareholders.
The proxies appointed in the accompanying Proxy intend to vote, unless directed to the contrary therein, in their discretion, for the election to the Board of Directors of the two persons named below. However, if the nominee at the time of election is unable or unwilling to serve, or is otherwise unavailable for election, such that substitute nominees are designated, the Proxies in their discretion intend to for all or a lesser number of such other nominees.
Nominees
Certain information with respect to the nominees for Director, Jerry G. Pogue and Robert L. Russell, follows:
| Name | Age | Year First Became A Director | Shares Owned Beneficially, Directly or Indirectly, as of May 8, 2007 | |||
|---|---|---|---|---|---|---|
| Jerry G. Pogue | 64 | 1999 | 55,000 | |||
| Robert L. Russell | 72 | 1999 | 20,000 |
Jerry G. Pogue is a businessman with experience in the management and financing of junior resource companies. Mr. Pogue has been a self employed financial consultant in the mining sector since 1995. He has managed a large sales organization, has worked as a stockbroker and investment analyst, and has financed and managed a number of companies in the resource and technology sectors. He lectures at international mining investment conferences.
Robert L. Russell, a Professional Engineer, has served as President and Director of Idaho General Mines, a publicly held metals exploration company, since March 1999. From September 1998 to May 2004, Mr. Russell was engaged in providing mining management consulting services through his consulting company, R.L. Russell Associates. Prior to 1998, Mr. Russell held positions with Exxon Minerals and Freeport McMoRan Copper and Gold, where he served as Vice President of Mining. Mr. Russell acted as General Manager of Freeport's Indonesian gold operations. From 1995 to 1998 Mr. Russell was employed by Zambia Consolidated Copper Mines, including as General Manager of the Nchanga Division. In that position Mr. Russell was responsible for two operating mines and several metallurgical facilities.
Recommendation
The Board of Directors unanimously recommends that the Company's shareholders vote FOR the election of Jerry C. Pogue and Robert L. Russell.
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Other Directors and Officers
| Name | Age | Office Held | Year First Elected | |||
|---|---|---|---|---|---|---|
| Glenn M. Dobbs | 64 | President and Chief Executive Officer, Director | 2003 | |||
| Roy G. Franklin | 70 | Director | 1988 | |||
| Russell C. Babcock | 69 | Director | 2004 | |||
| James H. Moore | 62 | Chief Financial Officer | 2004 | |||
| Eric C. Klepfer | 50 | Vice President, Operations | 2004 | |||
| Douglas D. Dobbs | 40 | Vice President, Corporate Development and Investor Relations | 2002 |
Glenn M Dobbs is President and Chief Executive Officer and a member of the Board of Directors of Mines Management, Inc., with experience in international finance, investment banking, natural resource financing and as a business development consultant. He has been President and CEO of MMI since January 2003 and served as Vice President from December 2002 to January 2003. Prior to joining MMI Mr. Dobbs was the Managing Director of the InterGold (Hedge Fund) from 1996 to December 2002. Mr. Dobbs was the founder of the Alpha Commodities Fund in 1976, founder and Board Chairman of First American Bank in 1978, Dallas regional manager for Monex International, founder of the InterGold (Hedge) Fund in 1996, and a former member of the Washington State House of Representatives. Mr. Dobbs has written and lectured on precious metals sector investing, resource development and financing.
Roy G. Franklin is a certified public accountant with 38 years experience in small company administration and finance. He was formerly a director of Heidelberg Silver Mining Company and was a principal in the accounting firm of Oswalt, Teel, and Franklin, P.S. from 1964 until his retirement in June 2003. Since his retirement, he has served as a consultant for several businesses in the State of Washington.
Russell C. Babcock was employed by Kennecott in various exploration geology positions from 1956 through his retirement in 1994, including service as Director of Exploration from January 1986 through November 1990 and Chief Geologist from November 1990 until he retired in 1994. Since his retirement, he has worked as a consulting economic geologist, specializing in exploration for and evaluation of base and precious metal deposits worldwide. In 2003, he was the recipient of the Society for Mining Metallurgy, and Exploration Ben Dickerson Award. Mr. Babcock received a B.S. in geology from Lawrence College in 1957 and an M.S. in geology from the University of Wisconsin, Madison.
James H. Moore is Chief Financial Officer of Mines Management, Inc. and has over 30 years senior level experience in financial management with the mining sector. Prior to joining Mines Management, from 2002 to 2004 Mr. Moore was an independent consultant for Idaho General Mining Inc. From 1997 through 2003 he was the Vice President of Business Development for RAHCO International, Inc., a heavy mining equipment designer and manufacturer in Spokane, Washington. Prior to that time Mr. Moore was employed by Barrick Gold Corporation in Santiago, Chile as Vice President and Chief Financial Officer for its Latin American division. Other experience includes service as Division Controller for Mobil Oil, Energy Minerals Division, and Operations Controller for United Nuclear Corporation. Mr. Moore attended Stanford University and graduated from University of Utah with a B.S. in accounting.
Eric C. Klepfer is Vice President, Operations of Mines Management, Inc. Mr. Klepfer has more than 22 years mining experience including project management, regulatory and environmental engineering, and mine planning and is responsible for all activities related to the advancement of the Montanore Project. Prior to joining us in August 2004, he worked as an environmental engineering and regulatory consultant from October 2003. Mr. Klepfer was employed by Coeur d'Alene Mines from
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1995 through 2003: as Manager of Environmental Affairs from 1995 through 1998 for subsidiary Coeur Alaska; Director of Environmental Affairs from 1998 through 2002; and as Vice President of Technical Services from 2002 through October 2003 for subsidiary Earthworks Technology. Mr. Klepfer was employed by Newmont Mining from 1994 through 1995. Mr. Klepfer is a director of Timberline Resources Corporation, a mineral exploration and drilling services company traded on the Pink Sheets. Mr. Klepfer holds B.S. degrees in Mining Engineering and Engineering Administration from Michigan Technological University.
Douglas D. Dobbs is Vice President, Corporate Development and Investor Relations of Mines Management, Inc. Mr. Dobbs has 13 years experience in investments, corporate planning and marketing. He joined MMI in October 2002, prior to which he served from April 2001 to October 2002 as senior business and marketing analyst with Avista Labs, a wholly owned subsidiary of Avista Corp., involved in the development of energy technology. While at Avista, Mr. Dobbs was responsible for strategic planning, as well as market and corporate development activities. Prior to joining Avista, Mr. Dobbs worked with companies including Piper Jaffray Co., and National Securities Corp., and was the founder and principal of Dobbs Financial Services, an investment management firm involved with investment and market analysis and portfolio management. Mr. Dobbs holds a B.A. in economics from Hillsdale College and was formerly a licensed investment manager and registered investment advisor.
Meetings and Committees of the Board of Directors
Board of Directors. The Board consists of three classes of directors, with each director serving for a three-year term, or until his successor is elected and qualified. The terms of the classes are scheduled to end in successive years. The number of directors authorized by the Company's bylaws is up to 15. During 2006, the Company had twp board meetings and acted upon written consent in other instances.
Audit and Finance Committee. Roy B. Franklin (Chairman), Russell C. Babcock, and Jerry G. Pogue comprise the Audit and Finance Committee. The Audit and Finance Committee held two meetings during 2006 and acted informally on a quarterly basis during 2006. Each member of the Audit and Finance Committee meets the independence and experience requirements of the American Stock Exchange. The Audit and Finance Committee engages the Company's independent certified public accountants to audit the annual financial statements, discusses with the auditors and approves in advance the scope of the audit, reviews with the independent auditors their independence, the financial statements and their audit report, reviews management's administration of the system of internal accounting controls, and reviews the Company's procedures relating to business ethics. The Audit and Finance Committee charter was adopted June 18, 2004 by the Board of Directors and is available on our website www.minesmanagement.com under the heading "Corporate Governance."
Nominating Committee. The Nominating Committee consists of Russell C. Babcock, Roy B. Franklin and Jerry Pogue. Each member of the Nominating Committee meets the independence requirements of the American Stock Exchange. The Nominating Committee held one meeting during 2006. The Nominating Committee is appointed by the Board to identify individuals qualified to become Board members, to recommend to the Board proposed nominees for Board membership, and to recommend to the Board directors to serve on each standing committee. The Nominating Committee charter is available on our website www.minesmanagement.com under the heading "Corporate Governance."
Compensation Committee. The Compensation Committee is composed of Roy G. Franklin, Russell C. Babcock and Jerry Pogue. Each member of the Compensation Committee meets the independence requirements of the American Stock Exchange. The Compensation Committee held two
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meetings during 2006. The Compensation Committee is appointed by the Board to establish, administer and evaluate the compensation philosophy, policies and plans for non-employee directors and executive officers, to make recommendations to the Board regarding director and executive compensation and to review the performance and determine the compensation of the President and Chief Executive Officer, based on criteria including the Company's performance and accomplishment of long-term strategic objectives. The Compensation Committee charter is available on our website www.minesmanagement.com under the heading "Corporate Governance."
Director Nomination
There have been no material changes to our policies regarding director nomination. A nominee for director should be a person of integrity and be committed to devoting the time and attention necessary to fulfill his or her duties to Mines Management. The Nominating Committee will evaluate the independence of directors and potential directors, as well as his or her business experience, or specialized skills or experience. Diversity of background and experience, including diversity of race, ethnicity, international background, gender and age, are also important factors in evaluating candidates for board membership. The Nominating Committee will also consider issues involving possible conflicts of interest of directors or potential directors. Shareholders wishing to recommend a director candidate to serve on the Board may do so by providing advance written notice to the Corporate Secretary, which identifies the candidate and includes certain information regarding the nominating shareholder and the candidate.
Communications with Security Holders
Shareholders or other interested parties wishing to communicate with the Board of Directors may do so by delivering or mailing the communication in writing to: Corporate Secretary, Mines Management Inc., 905 W. Riverside, Suite 311, Spokane, WA 99201. Concerns relating to accounting, internal controls, or auditing matters are immediately brought to the attention of the Company's Audit and Finance Committee and handled in accordance with procedures established by the Audit and Finance Committee with respect to such matters.
Director Attendance at the Annual Meeting
All members of the Board of Directors are encouraged, but not required, to attend the annual meeting of shareholders. All members of the Board of Directors except Jerry G. Pogue attended our 2006 annual meeting of shareholders.
Code of Ethics
We have adopted a Code of Ethics, which applies to our CEO and senior financial officers. The text can be found on our website www.minesmanagement.com under the heading "Corporate Governance."
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Director Compensation
The following table sets forth information concerning the compensation of the directors during the fiscal year ended December 31, 2006.
| Name | Fees Earned or Paid in Cash ($)(1) | Option Awards ($)(2) | All Other Compensation ($) | Total ($) | ||||
|---|---|---|---|---|---|---|---|---|
| Roy G. Franklin | 4,500 | 35,560 | — | 40,060 | ||||
| Robert L Russell | 3,500 | 35,560 | — | 39,060 | ||||
| Jerry G. Pogue | 2,500 | 35,560 | — | 38,060 | ||||
| Russell C. Babcock | 5,000 | 35,560 | — | 40,560 |
Compensation Discussion & Analysis
General
We compensate our executives through a mix of base salary, cash bonus awards and performance-based equity compensation. Our compensation program is designed to attract and retain the best possible executive talent, to tie annual and long-term cash and equity incentive compensation to the achievement of measurable corporate, business unit and individual performance objectives, and to align compensation incentives available to our executives with the goal of creating stockholder value. To achieve these objectives, we tie a substantial portion of our executives' overall compensation to goals specific to the areas of the executive's responsibility and that relate to the achievement of corporate objectives, including financial objectives. In addition, we provide our executives a variety of other benefits that we also make available generally to all salaried employees.
Establishing Compensation Opportunities
Overall, our aim is to offer our executives total compensation opportunities that represent a compensatory level consistent with a peer group of competitive companies. Accordingly, we seek to review the compensation that we offer against that offered by peer group companies on an annual basis. Peer group companies reviewed in 2006 include: Idaho General Mines, Inc., Gold Reserve Corporation, Golden Star Resources, Ltd., and Hecla Mining Co.
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Allocation Among Compensation Components for 2006
| | Base Salary | Cash Bonus Awards | Equity Compensation | ||||
|---|---|---|---|---|---|---|---|
| Glenn M. Dobbs, President and Chief Executive Officer | 70 | % | 18 | % | 12 | % | |
| James H. Moore, Chief Financial Officer | 73 | % | 9 | % | 18 | % | |
| Eric C. Klepfer, Vice President Operations | 72 | % | 8 | % | 20 | % | |
| Douglas D. Dobbs, Vice President Corporate Development, Investor Relations | 74 | % | 2 | % | 24 | % |
Compensation Components
We provide the following compensation components to our executives:
Base Salary. We establish base salaries for our executives based on the scope of their responsibilities, and take into account competitive market compensation paid by companies in our competitive peer group for similar positions. Generally, we believe that executive base salaries should be targeted to be consistent with the salaries for executives in similar positions and with similar responsibilities at comparable companies in order to best attract, retain and equitably reward our executives.
We review base salaries annually, and adjust base salaries from time to time to realign salaries with market levels after taking into account individual responsibilities, performance and experience. Our Compensation Committee determines the salary for our Chief Executive Officer, and, after consideration of the Chief Executive Officer's recommendations, for each officer other than the Chief Executive Officer. In 2006, we increased base salaries for each of our executive officers in the following percentages: Mr. Dobbs: 14%; Mr. Moore: 40%; Mr. Klepfer: 6% and Mr. Douglas Dobbs: 11%. The increases were based on individual performance, the Company's performance, and to bring salaries in line with our identified peer group.
Based on information gathered, we believe that we compensate our executives equitably when compared to competitive or similar companies.
Cash Bonus Awards. We utilize cash bonus awards to align executive compensation with corporate objectives and individual performance and contribution. Our Compensation Committee determines the bonus level for our Chief Executive Officer, and, after consideration of the Chief Executive Officer's recommendations, for each officer other than the Chief Executive Officer.
In 2006, cash bonuses were awarded to our executive officers in the following amounts: Mr. Dobbs: $53,000; Mr. Moore: $18,000; Mr. Klepfer: $14,000; and Mr. Douglas Dobbs: $3,000. Cash bonuses were awarded in recognition of achievement of individual goals and completion of the acquisition of Noranda Mineral Corporation and Normin Corporation in May 2006.
Performance-Based Equity Awards. We believe that share ownership, facilitated in part through the use of stock-based awards, encourages long-term performance by our executive officers. Our 2003 Stock Option Plan permits the grant of stock options to our employees, directors and consultants.
In 2006, we granted stock options to three of our executive officers, Mr. Dobbs, Mr. Moore and Mr. Klepfer, to purchase 60,000, 20,000 and 20,000 shares, respectively, of our common stock at exercise prices ranging from $6.20 to $6.42 per share. Incentive awards for officers are based on achievement of corporate objectives and are determined annually by the Board of Directors.
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In addition to granting equity-based awards to our executives as part of a long-term incentive plan, we also intend to utilize these shares in recognition of individual achievements and contributions to corporate or business unit performance or in circumstances where we face a critical retention need. We do not maintain any equity or other security ownership guidelines or requirements for our executives. Additionally, we do not have a formal or informal policy regarding adjustment or recovery of awards or payments if the relevant performance goals or measures upon which they are based are restated or otherwise adjusted so that awards or payments are reduced.
In May 2004 the Company adopted a repricing policy. Under that policy, if the price of our Common Stock drops $1.00 or more below the exercise price of a previously granted option, the exercise price of such options is reduced to the closing price of our Common Stock on the date of the repricing. This policy may be applied to an option that was previously repriced. This policy has been consistently applied since its implementation.
Termination of Employment Payments
Upon termination of a participant's employment or service, the participant will forfeit any outstanding performance-based equity awards except that a participant will have 90 days following termination of employment or service to exercise any vested options or stock appreciation rights (one year if termination of employment or service is a result of the participant's disability or death). Additionally, Mr. Dobbs and Mr. Moore are entitled to receive certain payments from us in the event of certain change of control events.
Companies of our size in the mining industry face a number of risks, including the risk of being acquired in the future. We believe that entering into change of control and severance arrangements with certain of our executives has helped us attract and retain the best possible executive talent. Without these provisions, some of our executives may not have chosen to accept employment with us or to remain employed by us. For a further description of the payments that Mr. Dobbs and Mr. Moore, two of our executive officers, are entitled to receive in the event of certain change of control or termination events, please see "Potential Payments Upon Termination or Change of Control" below.
Section 162(m) Treatment Regarding Performance-Based Equity Awards
Under Section 162(m) of the Internal Revenue Code of 1986, as amended, a public company is generally denied deductions for compensation paid to the chief executive officer and the next four most highly compensated executive officers to the extent the compensation for any such individual exceeds one million dollars for the taxable year. Our Compensation Committee intends to preserve the deductibility of compensation payable to our executives, although deductibility will be only one among a number of factors considered in determining appropriate levels or modes of compensation.
Indemnification of Officers and Directors
We are incorporated in the State of Idaho. Sections 30-1-351 through 30-1-852 of the Idaho Business Corporation Act provide that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any action, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director, officer, employee, fiduciary, or agent of the Company, or was serving at its request in a similar capacity for another entity, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection therewith if he acted in good faith and in a manner he reasonably believed to be in the best interest of the Company and which was at least not opposed to the best interests of the Company, and with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. In case of an action brought by or in the right of
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the Company, such persons are similarly entitled to indemnification if they acted in accordance with the standard of conduct set forth above, but no indemnification shall be made if such person was adjudged liable on the basis that he received a financial benefit to which he was not entitled. In such event, indemnification is limited to reasonable expenses. Such indemnification is not deemed exclusive of any other rights to which those indemnified may be entitled under the Company's Articles of Incorporation, bylaws, agreement, vote of shareholders or disinterested directors, or otherwise.
Our Articles of Incorporation generally allow indemnification of officers and directors to the fullest extent allowed by law. We currently intend to indemnify our officers and directors to the fullest extent permitted by the Articles of Incorporation and Idaho law. We have no other agreements with our officers or directors that pertain to indemnification.
We also maintain insurance policies under which our directors and officers are insured, within the limits and subject to the limitations of the policies, against expenses in connection with the defense of actions, suits or proceedings, and certain liabilities that might be imposed as a result of such actions, suits or proceedings, to which they are parties by reason of being or having been a director or officer of Mines Management, Inc.
Summary Compensation
The following table sets forth the compensation paid or accrued for the benefit of the principal executive officer, principal financial officer and each other executive officer whose total compensation exceeded $100,000 for the year ended December 31, 2006 (together, the "Named Executive Officers").
| Name and Principal Position(1) | Year | Salary ($) | Bonus ($) | Option Awards ($)(2) | All Other Compensation ($) | Total ($) | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Glen M. Dobbs, Chief Executive Officer and President(3) | 2006 | 205,000 | 53,000 | 35,360 | (4) | — | 293,560 | |||||
| James H. Moore, Chief Financial Officer | 2006 | 143,331 | 18,000 | 213,360 | (5) | — | 374,691 | |||||
| Eric C. Klepfer, Vice President Operations | 2006 | 127,000 | 14,000 | 35,560 | — | 176,560 | ||||||
| Douglas Dobbs, Vice President Corporate Development | 2006 | 108,000 | 3,000 | 35,560 | — | 146,560 |
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share and repriced to an exercise price of $5.01 per share in accordance with Company policy in October 2006.
Grants of Plan Based Awards
The following table sets forth information with respect to options granted to the Named Executive Officers under our 2003 Stock Option Plan in fiscal year 2006. No restricted stock, stock appreciation rights or other equity awards were granted in 2006.
| Name | Grant Date | Number of Securities Underlying Options(1) | Exercise or Base Price of Option Awards ($) | Closing Market Price on Grant Date ($)(2) | ||||
|---|---|---|---|---|---|---|---|---|
| Glenn M. Dobbs | 06/13/06 07/10/06 | 20,000 40,000 | (3) | 5.01 5.01 | 6.20 6.42 | |||
| James H. Moore | 06/13/06 | 20,000 | 5.01 | 6.20 | ||||
| Eric C. Klepfer | 06/13/06 | 20,000 | 5.01 | 6.20 | ||||
| Douglas Dobbs | 06/13/06 | 20,000 | 5.01 | 6.20 |
2003 Stock Option Plan
Our 2003 Stock Option Plan (the "Stock Option Plan") was approved by the Company's shareholders at the Company's 2003 annual meeting of shareholders. Under the Stock Option Plan, stock options may be granted to employees, officers and consultants of the Company and designated affiliates. In determining the terms of each grant of stock options, consideration is given to the participant's present and potential contribution to the success of the Company. The vesting terms of options granted under the Stock Option Plan are determined by the board when grants of options are made, and all options remain exercisable for ten (10) years. In the case of incentive stock options, as that term is used in the Internal Revenue Code of 1986, the exercise price per share is not to be less than 100% of the market price of the Common Stock on the date of grant, except that the exercise price of an incentive stock option granted to any 10% shareholder must be 110% of the market price of the Common Stock on the date of grant. The exercise price of non-qualified stock options is determined by the Board. The Stock Option Plan is administered by the Board in consultation with the Compensation Committee.
The aggregate maximum number of shares of Common Stock that may be reserved for issuance under the Stock Option Plan is 3,000,000, representing approximately 13.7% of the issued and outstanding Common Stock, no more than 1,000,000 of which shall be incentive stock options. As of May 2, 2007, options to purchase an aggregate of 2,074,000 shares of Common Stock, representing approximately 9.9% of the issued and outstanding shares of Common Stock, are outstanding under the Stock Option Plan, leaving options to purchase an aggregate of 806,000 shares of Common Stock, representing approximately 4% of the issued and outstanding shares of Common Stock available for issuance under the Stock Option Plan. Any options granted under the Stock Option Plan and which have been cancelled or terminated in accordance with the terms of the Stock Option Plan without having been exercised will again be available for re-granting under the Stock Option Plan. However,
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any options granted under the Stock Option Plan and exercised will not be available for re-granting under the Stock Option Plan.
Options are not assignable, except with the permission of the Company, and in the absence of a provision to the contrary in an option agreement, vested options terminate: (i) three (3) months following the termination of an optionee's employment, with or without cause, or the retirement of an optionee from the Company; and (ii) twelve (12) months following the disability of an optionee, as determined by the Board, subject to any extension or acceleration of the right to exercise at the sole discretion of the Board. In the event of the death of an optionee, such person's vested options will remain exercisable by their designated beneficiary until the expiration of the term of such options. Unvested options are cancelled on the date of termination, death or disability of an optionee. In the event of a change of control which results in the termination of an optionee's eligibility to participate in the Stock Option Plan, the Board has the authority to permit participants to exercise their options within the original term.
Under the Stock Option Plan, the Board may from time to time amend or revise the terms of the Stock Option Plan or may discontinue the Stock Option Plan at any time, subject to receipt of requisite shareholder and regulatory approval.
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Outstanding Equity Awards at December 31, 2006
The following table sets forth information with respect to outstanding options held by the Named Executive Officers as of December 31, 2006.
| | Option Awards | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name | Number of Securities Underlying Unexercised Options (#) Exercisable | Number of Securities Underlying Unexercised Options (#) Unexercisable | Equity Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#) | Option Exercise Price ($)(1) | Option Expiration Date | |||||||
| Glenn M. Dobbs | 500,000 100,000 250,000 25,000 20,000 | — — — — — 40,000 | — — — — — — | $ $ $ $ $ $ | 1.60 1.85 4.65 3.93 5.01 5.01 | 3/4/2008 8/27/2008 5/2/2009 1/31/2010 6/12/2011 (2 | ) | |||||
James H. Moore | 15,000 25,000 50,000 50,000 20,000 | — — — — — | — — — — — | $ $ $ $ $ | 3.95 3.93 5.01 5.01 5.01 | 6/21/2009 1/31/2010 12/12/2010 12/12/2011 6/12/2011 | ||||||
Eric C. Klepfer | 120,000 — 20,000 | — 100,000 — | — — — | $ $ $ | 3.75 3.75 5.01 | 8/30/2009 (3 6/12/2011 | ) | |||||
Douglas Dobbs | 150,000 50,000 20,000 | — — — | — — — | $ $ $ | 4.65 3.93 5.01 | 5/3/2009 1/31/2010 6/12/2011 | ||||||
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Option Exercises and Stock Vested
The following table sets forth information concerning all exercises of stock options during fiscal year 2006 by each of the Named Executive Officers.
| | Option Awards | |||
|---|---|---|---|---|
| Name | Number of Shares Acquired on Exercise (#)(1) | Value Realized on Exercise ($)(2) | ||
| Glenn M. Dobbs | — | — | ||
| James H. Moore | — | — | ||
| Eric C. Klepfer | 30,000 | 122,073 | ||
| Douglas Dobbs | — | — | ||
Potential Payments upon Termination or Change in Control
Glenn M. Dobbs. We entered into an Executive Compensation Agreement with Glenn Dobbs, our Chief Executive Officer and President, dated November 20, 2003 (the "Compensation Agreement"). Under the terms of the Compensation Agreement, Mr. Dobbs' salary of $100,000 took effect as of September 1, 2003 and automatically increased to $120,000 effective January 1, 2004. Mr. Dobbs currently receives an annual salary of $240,000 per year. Mr. Dobbs was granted an option to acquire 500,000 shares of our common stock pursuant to the Mines Management, Inc. 2003 Stock Option Plan. Mr. Dobbs is also eligible to participate in the Company's employee benefit plans. In the event of either a change of control or termination without Cause or for Good Reason, as such terms are defined in the Compensation Agreement, Mr. Dobbs shall receive a lump sum payment equal to thirty-six (36) months salary, such payment calculated on his annual salary at the highest rate in effect during the twelve (12) month period immediately preceding change of control plus 25% of such base amount in lieu of employee benefit programs and club fees. In addition, all unvested options owned by Mr. Dobbs on the date of such termination shall vest immediately.
James H. Moore. We entered into an Employment Agreement with James H. Moore, our Chief Financial Officer, dated August 10, 2005 (the "Employment Agreement"), effective as of April 1, 2005. Under the terms of the Employment Agreement, Mr. Moore receives an annual base salary of $160,000 and is eligible to receive incentive stock options in such amounts as may be recommended from time to time by the Compensation Committee and approved by the Board of Directors. Mr. Moore is also eligible to participate in the Company's employee benefit plans. In the event of either a change of control or termination without Cause or for Good Reason, as such terms are defined in the Employment Agreement, he will be entitled to receive a lump sum payment equaling two (2) times his annual base salary and two (2) years of continued health benefits. In addition, all unvested options owned by Mr. Moore as of the date of such termination shall vest immediately.
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Compensation Committee Report
The compensation committee of the Company has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Form 10-K/A.
Respectfully submitted,
THE COMPENSATION COMMITTEE
Roy G. Franklin
Russell C. Babcock
Jerry Pogue
Compensation Committee Interlocks and Insider Participation
During 2006, our compensation committee consisted of Roy G. Franklin, Russell C. Babcock and Jerry Pogue. We did not compensate any of the current members of the compensation committee during 2006 other than for service on the board of directors. No member of our compensation committee and none of our executive officers serve as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of our board of directors or compensation committee.
Report of the Audit and Finance Committee
In connection with the Company's December 31, 2006 financial statements, the Audit and Finance Committee (i) reviewed and discussed the audited financial statements with management; (ii) discussed with the auditors the matters required by Statement on Auditing Standards No. 61; and (iii) received and discussed with the auditors the matters required by Independence Standards Board Statement No. 1 and considered the compatibility of non-audit services with the auditors' independence. Based upon these reviews and discussions, the Audit and Finance Committee has recommended to the Board of Directors, and the Board of Directors has approved, that our audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2006, as amended.
Submitted by the Audit and Finance Committee of the Board of Directors
Roy B. Franklin, Chairman
Russell C. Babcock
Jerry G. Pogue
Auditor Fees
The following presents fees for professional audit services rendered by LeMaster & Daniels PLLC, for the audit or review of the Company's financial statements for the years ended December 31, 2006 and December 31, 2005, and fees billed for other services rendered by LeMaster & Daniels, during those periods.
Audit Fees. The aggregate fees billed for professional services rendered by the Company's principal accountant for the audit of the Company's annual financial statements for the fiscal year ended December 31, 2006 were $36,800.
Audit Related Fees. The Company did not incur any Audit Related Fees in 2006 or 2005.
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Tax Fees. The Company incurred fees totaling $2,878 during the fiscal year ended December 31, 2006 for the professional services rendered by the Company's principal accountant for tax compliance, tax advice and tax planning.
All Other Fees. The Company incurred no other fees during the last fiscal year for products and services rendered by the Company's principal accountant.
Certain Relationships and Related Transactions
Douglas Dobbs, son of Glenn Dobbs, President, Chief Executive Officer and a director of the Company, is employed by the Company as Vice President, Corporate Development and Corporate Secretary. Douglas Dobbs was employed by the Company prior to Glenn Dobbs becoming an officer or director of the Company. During the year ending December 31, 2006 Mr. Dobbs received a salary of $120,000 and was granted 20,000 options exercisable for 5 years at the then market price of $5.01 per share.
Section 16(a) Compliance
Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to the Company pursuant to Section 240.16a-3 during the most recent fiscal year, and Form 5 and amendments thereto furnished to the Registrant with respect to the most recent fiscal year, no person who at any time during the fiscal year was a director, officer, or beneficial owner or more than ten percent of any class of equity securities of the Company failed to file on a timely basis, as disclosed in the above forms, reports required by Section 16(a) of the Exchange Act during the most recent fiscal year, except Eric Klepfer (two Forms 4), James Moore (two Forms 4), Jerry Pogue (four Forms 4), Robert L. Russell (two forms 4), Roy G. Franklin (three Forms 4), Glenn M. Dobbs (three Forms 4), Douglas D. Dobbs (two Forms 4) and Russell C. Babcock (two Forms 4).
Shareholder Proposals for the 2008 Annual Meeting
The Company will review shareholder proposals intended to be included in the Company's proxy material for the 2008 Annual Meeting of Shareholders which are received by the company at its principal executive offices no later than January 15, 2008. Such proposals must be submitted in writing and should be sent to the attention of the Secretary of the Company. The Company will comply with Rule 14a-8 of the Exchange Act with respect to any proposal that meets its requirements.
ADDITIONAL SHAREHOLDER INFORMATION
Annual Report
The Company's Annual Report is being mailed to all Shareholders with this Proxy Statement. The Annual Report is not part of the proxy solicitation materials for the Annual Meeting. In addition, a Shareholder of record may obtain a copy of the Company's Form 10-K for the fiscal year ended December 31, 2006, as amended, without cost, upon written request to the Secretary of the Company at the following address: 905 W. Riverside Ave., Suite 311, Spokane, WA 99201. The Company's Form 10-K/A may also be accessed at SEC's website at www.sec.gov.
Other Business
As of the date of this Proxy Statement, the Board of Directors is not aware of any matters that will be presented for action at the Annual Meeting other than those described above. However, should other business properly be brought before the Annual Meeting, the proxies will be voted thereon at the discretion of the persons acting thereunder.
By Order of the Board of Directors
Glenn M. Dobbs, President and Chairman
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Mines Management, Inc.
905 W. Riverside, Suite 311
Spokane, WA 99201
The undersigned hereby appoints Glenn M. Dobbs and Roy C. Franklin, or either of them, as Proxies, each with the power to appoint his substitute, and hereby authorizes them to represent and vote, as designated below, all of the shares of Common Stock of Mines Management, Inc., held on record by the undersigned on May 15, 2006 at the 2006 Annual Meeting of Shareholders to be held on June 28, 2006, or any adjournment thereof.
(To withhold authority for proxies to vote for any Nominee please cross out such persons name)
Jerry G. Pogue
Robert L. Russell
This proxy, when properly executed, will be voted in the manner directed herein by the undersigned shareholder. If no direction is made, this proxy will be voted for each proposal.
Please sign exactly as name appears below. When shares are held by joint tenants, both should sign. When signing as attorney, as executor, administrator, trustee, or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person.
DATED: | DATED: | |||
SIGNED: | SIGNED: | |||
| (Print Name) | (Print Name) |
PLEASE MARK, SIGN, DATE, AND RETURN THIS PROXY PROMPTLY USING THE ENCLOSED ENVELOPE
