MINES MANAGEMENT INC - S-3 filing on 2004-04-07

EXHIBIT 10.V

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS

EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR

THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM

REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES

ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN

EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN

AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION

REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE

SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR

REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH

SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.

COMMON STOCK PURCHASE WARRANT

To Purchase 5,000 Shares of Common Stock of

MINES MANAGEMENT, INC.

THIS COMMON STOCK PURCHASE WARRANT (the "Warrant") CERTIFIES that,

for value received,

the "Holder"), is entitled, upon the terms and subject to the limitations on

exercise and the conditions hereinafter set forth, at any time on or after the

date of issuance of this Warrant (the "Initial Exercise Date") and on or prior

to the fifth anniversary of the Initial Exercise Date (the "Termination Date")

but not thereafter, to subscribe for and purchase from Mines Management, Inc.,

an Idaho corporation (the "Company"), up to 5,000 shares (the "Warrant Shares")

of Common Stock, par value $0.01 per share, of the Company (the "Common

Stock"). The purchase price of one share of Common Stock (the "Exercise

Price") under this Warrant shall be $7.25, subject to adjustment hereunder.

The Exercise Price and the number of Warrant Shares for which the Warrant is

exercisable shall be subject to adjustment as provided herein. CAPITALIZED

TERMS USED AND NOT OTHERWISE DEFINED HEREIN SHALL HAVE THE MEANINGS SET FORTH

IN THAT CERTAIN SECURITIES PURCHASE AGREEMENT (THE "PURCHASE AGREEMENT"), DATED

FEBRUARY 3, 2004, AMONG THE COMPANY AND THE PURCHASERS SIGNATORY THERETO.

1. Title to Warrant. Prior to the Termination Date and subject to

compliance with applicable laws and Section 7 of this Warrant, this Warrant and

all rights hereunder are transferable, in whole or in part, at the office or

agency of the Company by the Holder in person or by duly authorized attorney,

upon surrender of this Warrant together with the Assignment Form annexed hereto

properly endorsed. The transferee shall sign an investment letter in form and

substance reasonably satisfactory to the Company.

2. Authorization of Shares. The Company covenants that all Warrant

Shares which may be issued upon the exercise of the purchase rights represented

by this Warrant will, upon exercise of the purchase rights represented by this

Warrant, be duly authorized, validly issued, fully paid and nonassessable and

free from all taxes, liens and charges in respect of the issue thereof (other

than taxes in respect of any transfer occurring contemporaneously with such

issue).

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3. Exercise of Warrant.

(a) Exercise of the purchase rights represented by this

Warrant may be made at any time or times on or after the Initial Exercise

Date and on or before the Termination Date by delivery to the Company of

a duly executed facsimile copy of the Notice of Exercise Form annexed

hereto (or such other office or agency of the Company as it may designate

by notice in writing to the registered Holder at the address of such

Holder appearing on the books of the Company); provided, however, within

5 Trading Days of the date said Notice of Exercise is delivered to the

Company, the Holder shall have surrendered this Warrant to the Company

and the Company shall have received payment of the aggregate Exercise

Price of the shares thereby purchased by wire transfer or cashier's check

drawn on a United States bank. Certificates for shares purchased

hereunder shall be delivered to the Holder within 5 Trading Days from the

delivery to the Company of the Notice of Exercise Form, surrender of this

Warrant and payment of the aggregate Exercise Price as set forth above

("Warrant Share Delivery Date"). This Warrant shall be deemed to have

been exercised on the later of the date the Notice of Exercise is

delivered to the Company by facsimile copy and the date the Exercise

Price is received by the Company. The Warrant Shares shall be deemed to

have been issued, and Holder or any other person so designated to be

named therein shall be deemed to have become a holder of record of such

shares for all purposes, as of the date the Warrant has been exercised by

payment to the Company of the Exercise Price and all taxes required to be

paid by the Holder, if any, pursuant to Section 5 prior to the issuance

of such shares, have been paid. If the Company fails to deliver to the

Holder a certificate or certificates representing the Warrant Shares

pursuant to this Section 3(a) by the fifth Trading Day following the

Warrant Share Delivery Date, then the Holder will have the right to

rescind such exercise. In addition to any other rights available to the

Holder, if the Company fails to deliver to the Holder a certificate or

certificates representing the Warrant Shares pursuant to an exercise by

the fifth Trading Day after the Warrant Share Delivery Date, and if after

such day the Holder is required by its broker to purchase (in an open

market transaction or otherwise) shares of Common Stock to deliver in

satisfaction of a sale by the Holder of the Warrant Shares which the

Holder anticipated receiving upon such exercise (a "Buy-In"), then the

Company shall (1) pay in cash to the Holder the amount by which (x) the

Holder's total purchase price (including brokerage commissions, if any)

for the shares of Common Stock so purchased exceeds (y) the amount

obtained by multiplying (A) the number of Warrant Shares that the Company

was required to deliver to the Holder in connection with the exercise at

issue times (B) the price at which the sell order giving rise to such

purchase obligation was executed, and (2) at the option of the Holder,

either reinstate the portion of the Warrant and equivalent number of

Warrant Shares for which such exercise was not honored or deliver to the

Holder the number of shares of Common Stock that would have been issued

had the Company timely complied with its exercise and delivery

obligations hereunder. For example, if the Holder purchases Common Stock

having a total purchase price of $11,000 to cover a Buy-In with respect

to an attempted exercise of shares of Common Stock with an aggregate sale

price giving rise to such purchase obligation of $10,000, under clause

(1) of the immediately preceding sentence the Company shall be required

to pay the Holder $1,000. The Holder shall provide the Company written

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notice indicating the amounts payable to the Holder in respect of the

Buy-In, together with applicable confirmations and other evidence

reasonably requested by the Company. Nothing herein shall limit a

Holder's right to pursue any other remedies available to it hereunder, at

law or in equity including, without limitation, a decree of specific

performance and/or injunctive relief with respect to the Company's

failure to timely deliver certificates representing shares of Common

Stock upon exercise of the Warrant as required pursuant to the terms

hereof.

(b) If this Warrant shall have been exercised in part, the

Company shall, at the time of delivery of the certificate or certificates

representing Warrant Shares, deliver to Holder a new Warrant evidencing the

rights of Holder to purchase the unpurchased Warrant Shares called for by this

Warrant, which new Warrant shall in all other respects be identical with this

Warrant.

portion of this Warrant, pursuant to Section 3(a) or otherwise, to the extent

that after giving effect to such issuance after exercise, the Holder (together

with the Holder's affiliates), as set forth on the applicable Notice of

Exercise, would beneficially own in excess of 4.99% of the number of shares of

the Common Stock outstanding immediately after giving effect to such issuance.

For purposes of the foregoing sentence, the number of shares of Common Stock

beneficially owned by the Holder and its affiliates shall include the number of

shares of Common Stock issuable upon exercise of this Warrant with respect to

which the determination of such sentence is being made, but shall exclude the

number of shares of Common Stock which would be issuable upon (A) exercise of

the remaining, nonexercised portion of this Warrant beneficially owned by the

Holder or any of its affiliates and (B) exercise or conversion of the

unexercised or nonconverted portion of any other securities of the Company

(including, without limitation, any other Warrants) subject to a limitation on

conversion or exercise analogous to the limitation contained herein

beneficially owned by the Holder or any of its affiliates. Except as set forth

in the preceding sentence, for purposes of this Section 3(c), beneficial

ownership shall be calculated in accordance with Section 13(d) of the Exchange

Act, it being acknowledge by Holder that the Company is not representing to

Holder that such calculation is in compliance with Section 13(d) of the

Exchange Act and Holder is solely responsible for any schedules required to be

filed in accordance therewith. To the extent that the limitation contained in

this Section 3(c) applies, the determination of whether this Warrant is

exercisable (in relation to other securities owned by the Holder) and of which

a portion of this Warrant is exercisable shall be in the sole discretion of

such Holder, and the submission of a Notice of Exercise shall be deemed to be

such Holder's determination of whether this Warrant is exercisable (in relation

to other securities owned by such Holder) and of which portion of this Warrant

is exercisable, in each case subject to such aggregate percentage limitation,

and the Company shall have no obligation to verify or confirm the accuracy of

such determination. For purposes of this Section 3(c), in determining the

number of outstanding shares of Common Stock, the Holder may rely on the number

of outstanding shares of Common Stock as reflected in (x) the Company's most

recent Form 10-QSB or Form 10-KSB, as the case may be, (y) a more recent public

announcement by the Company or (z) any other notice by the Company or the

Company's Transfer Agent setting forth the number of shares of Common Stock

outstanding. Upon the written or oral request of the Holder, the Company shall

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within two Trading Days confirm orally and in writing to the Holder the number

of shares of Common Stock then outstanding. In any case, the number of

outstanding shares of Common Stock shall be determined after giving effect to

the conversion or exercise of securities of the Company, including this

Warrant, by the Holder or its affiliates since the date as of which such number

of outstanding shares of Common Stock was reported.

(d) If at any time after one year from the date of issuance

of this Warrant there is no effective Registration Statement registering

the resale of the Warrant Shares by the Holder, this Warrant may also be

exercised at such time by means of a "cashless exercise" in which the

Holder shall be entitled to receive a certificate for the number of

Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by

(A), where:

(A) = the Closing Price on the Trading Day immediately preceding

the date of such election;

(B) = the Exercise Price of this Warrant, as adjusted; and

(X) = the number of Warrant Shares issuable upon exercise of this

Warrant in accordance with the terms of this Warrant by means

of a cash exercise rather than a cashless exercise.

4. No Fractional Shares or Scrip. No fractional shares or scrip

representing fractional shares shall be issued upon the exercise of this

Warrant. As to any fraction of a share which Holder would otherwise be

entitled to purchase upon such exercise, the Company shall pay a cash

adjustment in respect of such final fraction in an amount equal to such

fraction multiplied by the Exercise Price.

5. Charges, Taxes and Expenses. Issuance of certificates for

Warrant Shares shall be made without charge to the Holder for any issue or

transfer tax or other incidental expense in respect of the issuance of such

certificate, all of which taxes and expenses shall be paid by the Company, and

such certificates shall be issued in the name of the Holder or in such name or

names as may be directed by the Holder; provided, however, that in the event

certificates for Warrant Shares are to be issued in a name other than the name

of the Holder, this Warrant when surrendered for exercise shall be accompanied

by the Assignment Form attached hereto duly executed by the Holder; and the

Company may require, as a condition thereto, the payment of a sum sufficient to

reimburse it for any transfer tax incidental thereto.

6. Closing of Books. The Company will not close its stockholder

books or records in any manner which prevents the timely exercise of this

Warrant, pursuant to the terms hereof.

7. Transfer, Division and Combination.

(a) Subject to compliance with any applicable securities laws

and the conditions set forth in Sections 1 and 7(e) hereof and to the

provisions of Section 4.1 of the Purchase Agreement, this Warrant and all

rights hereunder are transferable, in whole or in part, upon surrender of this

Warrant at the principal office of the Company, together with a written

assignment of this Warrant substantially in the form attached hereto duly

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executed by the Holder or its agent or attorney and funds sufficient to pay any

transfer taxes payable upon the making of such transfer. Upon such surrender

and, if required, such payment, the Company shall execute and deliver a new

Warrant or Warrants in the name of the assignee or assignees and in the

denomination or denominations specified in such instrument of assignment, and

shall issue to the assignor a new Warrant evidencing the portion of this

Warrant not so assigned, and this Warrant shall promptly be cancelled. A

Warrant, if properly assigned, may be exercised by a new holder for the

purchase of Warrant Shares without having a new Warrant issued.

(b)This Warrant may be divided or combined with other

Warrants upon presentation hereof at the aforesaid office of the Company,

together with a written notice specifying the names and denominations in which

new Warrants are to be issued, signed by the Holder or its agent or attorney.

Subject to compliance with Section 7(a), as to any transfer which may be

involved in such division or combination, the Company shall execute and deliver

a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided

or combined in accordance with such notice.

(c)The Company shall prepare, issue and deliver at its own

expense (other than transfer taxes) the new Warrant or Warrants under this

Section 7.

(d)The Company agrees to maintain, at its aforesaid office,

books for the registration and the registration of transfer of the Warrants.

(e)If, at the time of the surrender of this Warrant in

connection with any transfer of this Warrant, the transfer of this Warrant

shall not be registered pursuant to an effective registration statement under

the Securities Act and under applicable state securities or blue sky laws, the

Company may require, as a condition of allowing such transfer (i) that the

Holder or transferee of this Warrant, as the case may be, furnish to the

Company a written opinion of counsel (which opinion shall be in form, substance

and scope customary for opinions of counsel in comparable transactions) to the

effect that such transfer may be made without registration under the Securities

Act and under applicable state securities or blue sky laws, (ii) that the

holder or transferee execute and deliver to the Company an investment letter in

form and substance acceptable to the Company and (iii) that the transferee be

an "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7),

or (a)(8) promulgated under the Securities Act or a qualified institutional

buyer as defined in Rule 144A(a) under the Securities Act.

8. No Rights as Shareholder until Exercise. This Warrant does not

entitle the Holder to any voting rights or other rights as a shareholder of the

Company prior to the exercise hereof. Upon the surrender of this Warrant and

the payment of the aggregate Exercise Price (or by means of a cashless

exercise), the Warrant Shares so purchased shall be and be deemed to be issued

to such Holder as the record owner of such shares as of the close of business

on the later of the date of such surrender or payment.

9. Loss, Theft, Destruction or Mutilation of Warrant. The Company

covenants that upon receipt by the Company of evidence reasonably satisfactory

to it of the loss, theft, destruction or mutilation of this Warrant or any

stock certificate relating to the Warrant Shares, and in case of loss, theft or

destruction, of indemnity or security reasonably satisfactory to it (which, in

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the case of the Warrant, shall not include the posting of any bond), and upon

surrender and cancellation of such Warrant or stock certificate, if mutilated,

the Company will make and deliver a new Warrant or stock certificate of like

tenor and dated as of such cancellation, in lieu of such Warrant or stock

certificate.

10.Saturdays, Sundays, Holidays, etc. If the last or appointed day

for the taking of any action or the expiration of any right required or granted

herein shall be a Saturday, Sunday or a legal holiday, then such action may be

taken or such right may be exercised on the next succeeding day not a Saturday,

Sunday or legal holiday.

11. Adjustments of Exercise Price and Number of Warrant Shares.

(a) Stock Splits, etc. The number and kind of securities

purchasable upon the exercise of this Warrant and the Exercise Price shall be

subject to adjustment from time to time upon the happening of any of the

following. In case the Company shall (i) pay a dividend in shares of Common

Stock or make a distribution in shares of Common Stock to holders of its

outstanding Common Stock, (ii) subdivide its outstanding shares of Common Stock

into a greater number of shares, (iii) combine its outstanding shares of Common

Stock into a smaller number of shares of Common Stock, or (iv) issue any shares

of its capital stock in a reclassification of the Common Stock, then the number

of Warrant Shares purchasable upon exercise of this Warrant immediately prior

thereto shall be adjusted so that the Holder shall be entitled to receive the

kind and number of Warrant Shares or other securities of the Company which it

would have owned or have been entitled to receive had such Warrant been

exercised in advance thereof. Upon each such adjustment of the kind and number

of Warrant Shares or other securities of the Company which are purchasable

hereunder, the Holder shall thereafter be entitled to purchase the number of

Warrant Shares or other securities resulting from such adjustment at an

Exercise Price per Warrant Share or other security obtained by multiplying the

Exercise Price in effect immediately prior to such adjustment by the number of

Warrant Shares purchasable pursuant hereto immediately prior to such adjustment

and dividing by the number of Warrant Shares or other securities of the Company

that are purchasable pursuant hereto immediately thereafter. An adjustment

made pursuant to this paragraph shall become effective immediately after the

effective date of such event retroactive to the record date, if any, for such

event.

(b) Anti-Dilution Provisions. During the Exercise Period,

the Exercise Price shall be subject to adjustment from time to time as provided

in this Section 11(b). In the event that any adjustment of the Exercise Price

as required herein results in a fraction of a cent, such Exercise Price shall

be rounded up or down to the nearest cent.

(i) Adjustment of Exercise Price. If and whenever the

Company issues or sells, or in accordance with Section 11(b)(ii)

hereof is deemed to have issued or sold, any shares of Common Stock

for an effective consideration per share of less than the then

Exercise Price or for no consideration (such lower price, the "Base

Share Price" and such issuances collectively, a "Dilutive

Issuance"), then, the Exercise Price shall be reduced to equal the

Base Share Price. Such adjustment shall be made whenever shares of

Common Stock or Common Stock Equivalents are issued.

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(ii) Effect on Exercise Price of Certain Events. For

purposes of determining the adjusted Exercise Price under Section

11(b) hereof, the following will be applicable:

(A) Issuance of Rights or Options. If the

Company in any manner issues or grants any warrants, rights

or options, whether or not immediately exercisable, to

subscribe for or to purchase Common Stock or Common Stock

Equivalents (such warrants, rights and options to purchase

Common Stock or Common Stock Equivalents are hereinafter

referred to as "Options") and the effective price per share

for which Common Stock is issuable upon the exercise of such

Options is less than the Exercise Price ("Below Base Price

Options"), then the maximum total number of shares of Common

Stock issuable upon the exercise of all such Below Base Price

Options (assuming full exercise, conversion or exchange of

Common Stock Equivalents, if applicable) will, as of the date

of the issuance or grant of such Below Base Price Options, be

deemed to be outstanding and to have been issued and sold by

the Company for such price per share and the maximum

consideration payable to the Company upon such exercise

(assuming full exercise, conversion or exchange of Common

Stock Equivalents, if applicable) will be deemed to have been

received by the Company. For purposes of the preceding

sentence, the "effective price per share for which Common

Stock is issuable upon the exercise of such Below Base Price

Options" is determined by dividing (i) the total amount, if

any, received or receivable by the Company as consideration

for the issuance or granting of all such Below Base Price

Options, plus the minimum aggregate amount of additional

consideration, if any, payable to the Company upon the

exercise of all such Below Base Price Options, plus, in the

case of Common Stock Equivalents issuable upon the exercise

of such Below Base Price Options, the minimum aggregate

amount of additional consideration payable upon the exercise,

conversion or exchange thereof at the time such Common Stock

Equivalents first become exercisable, convertible or

exchangeable, by (ii) the maximum total number of shares of

Common Stock issuable upon the exercise of all such Below

Base Price Options (assuming full conversion of Common Stock

Equivalents, if applicable). No further adjustment to the

Exercise Price will be made upon the actual issuance of such

Common Stock upon the exercise of such Below Base Price

Options or upon the exercise, conversion or exchange of

Common Stock Equivalents issuable upon exercise of such Below

Base Price Options.

(B) Issuance of Common Stock Equivalents. If

the Company in any manner issues or sells any Common Stock

Equivalents, whether or not immediately convertible (other

than where the same are issuable upon the exercise of

Options) and the effective price per share for which Common

Stock is issuable upon such exercise, conversion or exchange

is less than the Exercise Price, then the maximum total

number of shares of Common Stock issuable upon the exercise,

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conversion or exchange of all such Common Stock Equivalents

will, as of the date of the issuance of such Common Stock

Equivalents, be deemed to be outstanding and to have been

issued and sold by the Company for such price per share and

the maximum consideration payable to the Company upon such

exercise (assuming full exercise, conversion or exchange of

Common Stock Equivalents, if applicable) will be deemed to

have been received by the Company. For the purposes of the

preceding sentence, the "effective price per share for which

Common Stock is issuable upon such exercise, conversion or

exchange" is determined by dividing (i) the total amount, if

any, received or receivable by the Company as consideration

for the issuance or sale of all such Common Stock

Equivalents, plus the minimum aggregate amount of additional

consideration, if any, payable to the Company upon the

exercise, conversion or exchange thereof at the time such

Common Stock Equivalents first become exercisable,

convertible or exchangeable, by (ii) the maximum total number

of shares of Common Stock issuable upon the exercise,

conversion or exchange of all such Common Stock Equivalents.

No further adjustment to the Exercise Price will be made upon

the actual issuance of such Common Stock upon exercise,

conversion or exchange of such Common Stock Equivalents.

If there is a change at any time in (i) the amount of

additional consideration payable to the Company upon the

exercise of any Options; (ii) the amount of additional

consideration, if any, payable to the Company upon the

exercise, conversion or exchange of any Common Stock

Equivalents; or (iii) the rate at which any Common Stock

Equivalents are convertible into or exchangeable for Common

Stock (in each such case, other than under or by reason of

provisions designed to protect against dilution), the

Exercise Price in effect at the time of such change will be

readjusted to the Exercise Price which would have been in

effect at such time had such Options or Common Stock

Equivalents still outstanding provided for such changed

additional consideration or changed conversion rate, as the

case may be, at the time initially granted, issued or sold.

(D) Calculation of Consideration Received. If

any Common Stock, Options or Common Stock Equivalents are

issued, granted or sold for cash, the consideration received

therefor for purposes of this Warrant will be the amount

received by the Company therefor, before deduction of

reasonable commissions, underwriting discounts or allowances

or other reasonable expenses paid or incurred by the Company

in connection with such issuance, grant or sale. In case any

Common Stock, Options or Common Stock Equivalents are issued

or sold for a consideration part or all of which shall be

other than cash, the amount of the consideration other than

cash received by the Company will be the fair market value of

such consideration, except where such consideration consists

of securities, in which case the amount of consideration

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received by the Company will be the fair market value

(closing bid price, if traded on any market) thereof as of

the date of receipt. In case any Common Stock, Options or

Common Stock Equivalents are issued in connection with any

merger or consolidation in which the Company is the surviving

corporation, the amount of consideration therefor will be

deemed to be the fair market value of such portion of the net

assets and business of the non-surviving corporation as is

attributable to such Common Stock, Options or Common Stock

Equivalents, as the case may be. The fair market value of

any consideration other than cash or securities will be

determined in good faith by an investment banker or other

appropriate expert of national reputation selected by the

Company and reasonably acceptable to the holder hereof, with

the costs of such appraisal to be borne by the Company.

(E) Exceptions to Adjustment of Exercise Price.

Notwithstanding the foregoing, no adjustment will be made

under this Section 11(b) in respect of (1) the granting of

options to employees, officers or directors of the Company

pursuant to any stock option plan duly adopted by a majority

of the non-employee members of the Board of Directors of the

Company or a majority of the members of a committee of non-

employee directors established for such purpose or (2) upon

the exercise of or conversion of any Common Stock Equivalents

or Options issued and outstanding on the Original Issue Date,

provided that the securities have not been amended since the

date of the Purchase Agreement except as a result of the

Purchase Agreement.

(i) Minimum Adjustment of Exercise Price. No adjustment of

the Exercise Price shall be made in an amount of less

than 1% of the Exercise Price in effect at the time

such adjustment is otherwise required to be made, but

any such lesser adjustment shall be carried forward and

shall be made at the time and together with the next

subsequent adjustment which, together with any

adjustments so carried forward, shall amount to not

less than 1% of such Exercise Price.

12. Reorganization, Reclassification, Merger, Consolidation or

Disposition of Assets. In case the Company shall reorganize its capital,

reclassify its capital stock, consolidate or merge with or into another

corporation (where the Company is not the surviving corporation or where there

is a change in or distribution with respect to the Common Stock of the

Company), or sell, transfer or otherwise dispose of its property, assets or

business to another corporation and, pursuant to the terms of such

reorganization, reclassification, merger, consolidation or disposition of

assets, shares of common stock of the successor or acquiring corporation, or

any cash, shares of stock or other securities or property of any nature

whatsoever (including warrants or other subscription or purchase rights) in

addition to or in lieu of common stock of the successor or acquiring

corporation ("Other Property"), are to be received by or distributed to the

holders of Common Stock of the Company, then the Holder shall have the right

thereafter to receive, at the option of the Holder, (a) upon exercise of this

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Warrant, the number of shares of Common Stock of the successor or acquiring

corporation or of the Company, if it is the surviving corporation, and Other

Property receivable upon or as a result of such reorganization,

reclassification, merger, consolidation or disposition of assets by a Holder of

the number of shares of Common Stock for which this Warrant is exercisable

immediately prior to such event or (b) cash equal to the value of this Warrant

as determined in accordance with the Black Scholes option pricing formula. In

case of any such reorganization, reclassification, merger, consolidation or

disposition of assets, the successor or acquiring corporation (if other than

the Company) shall expressly assume the due and punctual observance and

performance of each and every covenant and condition of this Warrant to be

performed and observed by the Company and all the obligations and liabilities

hereunder, subject to such modifications as may be deemed appropriate (as

determined in good faith by resolution of the Board of Directors of the

Company) in order to provide for adjustments of Warrant Shares for which this

Warrant is exercisable which shall be as nearly equivalent as practicable to

the adjustments provided for in this Section 12. For purposes of this Section

12, "common stock of the successor or acquiring corporation" shall include

stock of such corporation of any class which is not preferred as to dividends

or assets over any other class of stock of such corporation and which is not

subject to redemption and shall also include any evidences of indebtedness,

shares of stock or other securities which are convertible into or exchangeable

for any such stock, either immediately or upon the arrival of a specified date

or the happening of a specified event and any warrants or other rights to

subscribe for or purchase any such stock. The foregoing provisions of this

Section 12 shall similarly apply to successive reorganizations,

reclassifications, mergers, consolidations or disposition of assets.

13. Voluntary Adjustment by the Company. The Company may at any

time during the term of this Warrant reduce the then current Exercise Price to

any amount and for any period of time deemed appropriate by the Board of

Directors of the Company.

14. Notice of Adjustment. Whenever the number of Warrant Shares or

number or kind of securities or other property purchasable upon the exercise of

this Warrant or the Exercise Price is adjusted, as herein provided, the Company

shall give notice thereof to the Holder, which notice shall state the number of

Warrant Shares (and other securities or property) purchasable upon the exercise

of this Warrant and the Exercise Price of such Warrant Shares (and other

securities or property) after such adjustment, setting forth a brief statement

of the facts requiring such adjustment and setting forth the computation by

which such adjustment was made.

15. Notice of Corporate Action. If at any time:

(a) the Company shall take a record of the holders of its

Common Stock for the purpose of entitling them to receive a dividend or

other distribution, or any right to subscribe for or purchase any

evidences of its indebtedness, any shares of stock of any class or any

other securities or property, or to receive any other right, or

(b) there shall be any capital reorganization of the

Company, any reclassification or recapitalization of the capital stock of

the Company or any consolidation or merger of the Company with, or any

sale, transfer or other disposition of all or substantially all the

property, assets or business of the Company to, another corporation or,

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liquidation or winding up of the Company;

then, in any one or more of such cases, the Company shall give to Holder (i) at

least 20 days' prior written notice of the date on which a record date shall be

selected for such dividend, distribution or right or for determining rights to

vote in respect of any such reorganization, reclassification, merger,

consolidation, sale, transfer, disposition, liquidation or winding up, and (ii)

in the case of any such reorganization, reclassification, merger,

consolidation, sale, transfer, disposition, dissolution, liquidation or winding

up, at least 20 days' prior written notice of the date when the same shall take

place. Such notice in accordance with the foregoing clause also shall specify

(i) the date on which any such record is to be taken for the purpose of such

dividend, distribution or right, the date on which the holders of Common Stock

shall be entitled to any such dividend, distribution or right, and the amount

and character thereof, and (ii) the date on which any such reorganization,

reclassification, merger, consolidation, sale, transfer, disposition,

dissolution, liquidation or winding up is to take place and the time, if any

such time is to be fixed, as of which the holders of Common Stock shall be

entitled to exchange their Warrant Shares for securities or other property

deliverable upon such disposition, dissolution, liquidation or winding up.

Each such written notice shall be sufficiently given if addressed to Holder at

the last address of Holder appearing on the books of the Company and delivered

in accordance with Section 17(d).

16. Authorized Shares. The Company covenants that during the period

the Warrant is outstanding, it will reserve from its authorized and unissued

Common Stock a sufficient number of shares to provide for the issuance of the

Warrant Shares upon the exercise of any purchase rights under this Warrant.

The Company further covenants that its issuance of this Warrant shall

constitute full authority to its officers who are charged with the duty of

executing stock certificates to execute and issue the necessary certificates

for the Warrant Shares upon the exercise of the purchase rights under this

Warrant. The Company will take all such reasonable action as may be necessary

to assure that such Warrant Shares may be issued as provided herein without

violation of any applicable law or regulation, or of any requirements of the

Trading Market upon which the Common Stock may be listed.

Except and to the extent as waived or consented to by the Holder,

the Company shall not by any action, including, without limitation, amending

its certificate of incorporation or through any reorganization, transfer of

assets, consolidation, merger, dissolution, issue or sale of securities or any

other voluntary action, avoid or seek to avoid the observance or performance of

any of the terms of this Warrant, but will at all times in good faith assist in

the carrying out of all such terms and in the taking of all such actions as may

be necessary or appropriate to protect the rights of Holder as set forth in

this Warrant against impairment. Without limiting the generality of the

foregoing, the Company will (a) not increase the par value of any Warrant

Shares above the amount payable therefor upon such exercise immediately prior

to such increase in par value, (b) take all such action as may be necessary or

appropriate in order that the Company may validly and legally issue fully paid

and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use

commercially reasonable efforts to obtain all such authorizations, exemptions

<PAGE>

or consents from any public regulatory body having jurisdiction thereof as may

be necessary to enable the Company to perform its obligations under this

Warrant.

Before taking any action which would result in an adjustment in the

number of Warrant Shares for which this Warrant is exercisable or in the

Exercise Price, the Company shall obtain all such authorizations or exemptions

thereof, or consents thereto, as may be necessary from any public regulatory

body or bodies having jurisdiction thereof.

17. Miscellaneous.

(a)Jurisdiction. All questions concerning the construction,

validity, enforcement and interpretation of this Warrant shall be determined in

accordance with the provisions of the Purchase Agreement.

(b)Restrictions. The Holder acknowledges that the Warrant

Shares acquired upon the exercise of this Warrant, if not registered, will have

restrictions upon resale imposed by state and federal securities laws.

(c)Nonwaiver and Expenses. No course of dealing or any delay

or failure to exercise any right hereunder on the part of Holder shall operate

as a waiver of such right or otherwise prejudice Holder's rights, powers or

remedies, notwithstanding all rights hereunder terminate on the Termination

Date. If the Company willfully and knowingly fails to comply with any

provision of this Warrant, which results in any material damages to the Holder,

the Company shall pay to Holder such amounts as shall be sufficient to cover

any costs and expenses including, but not limited to, reasonable attorneys'

fees, including those of appellate proceedings, incurred by Holder in

collecting any amounts due pursuant hereto or in otherwise enforcing any of its

rights, powers or remedies hereunder.

(d)Notices. Any notice, request or other document required

or permitted to be given or delivered to the Holder by the Company shall be

delivered in accordance with the notice provisions of the Purchase Agreement.

(e)Limitation of Liability. No provision hereof, in the

absence of any affirmative action by Holder to exercise this Warrant or

purchase Warrant Shares, and no enumeration herein of the rights or privileges

of Holder, shall give rise to any liability of Holder for the purchase price of

any Common Stock or as a stockholder of the Company, whether such liability is

asserted by the Company or by creditors of the Company.

(f)Remedies. Holder, in addition to being entitled to

exercise all rights granted by law, including recovery of damages, will be

entitled to specific performance of its rights under this Warrant. The Company

agrees that monetary damages would not be adequate compensation for any loss

incurred by reason of a breach by it of the provisions of this Warrant and

hereby agrees to waive the defense in any action for specific performance that

a remedy at law would be adequate.

<PAGE>

(g)Successors and Assigns. Subject to applicable securities

laws, this Warrant and the rights and obligations evidenced hereby shall inure

to the benefit of and be binding upon the successors of the Company and the

successors and permitted assigns of Holder. The provisions of this Warrant are

intended to be for the benefit of all Holders from time to time of this Warrant

and shall be enforceable by any such Holder or holder of Warrant Shares.

(h)Amendment. This Warrant may be modified or amended or the

provisions hereof waived with the written consent of the Company and the

Holder.

(i)Severability. Wherever possible, each provision of this

Warrant shall be interpreted in such manner as to be effective and valid under

applicable law, but if any provision of this Warrant shall be prohibited by or

invalid under applicable law, such provision shall be ineffective to the extent

of such prohibition or invalidity, without invalidating the remainder of such

provisions or the remaining provisions of this Warrant.

(j)Headings. The headings used in this Warrant are for the

convenience of reference only and shall not, for any purpose, be deemed a part

of this Warrant.

********************

IN WITNESS WHEREOF, the Company has caused this Warrant to be

executed by its officer thereunto duly authorized.

Dated: February 10, 2004

MINES MANAGEMENT, INC.

By: ____________________________________

Name: Glenn M. Dobbs

Title: President

<PAGE>

NOTICE OF EXERCISE

To: Mines Management, Inc.

(1)The undersigned hereby elects to purchase ________ Warrant Shares

of the Company pursuant to the terms of the attached Warrant (only if exercised

in full), and tenders herewith payment of the exercise price in full, together

with all applicable transfer taxes, if any.

(2)Payment shall take the form of (check applicable box):

[ ] in lawful money of the United States; or

[ ] the cancellation of such number of Warrant Shares as is

necessary, in accordance with the formula set forth in

subsection 3(d), to exercise this Warrant with respect to the

maximum number of Warrant Shares purchasable pursuant to the

cashless exercise procedure set forth in subsection 3(d).

(3)Please issue a certificate or certificates representing said

Warrant Shares in the name of the undersigned or in such other name as is

specified below:

_______________________________

The Warrant Shares shall be delivered to the following:

_______________________________

(4) Accredited Investor. The undersigned is an "accredited

investor" as defined in Regulation D under the Securities Act of 1933, as

amended.

[PURCHASER]

By: ______________________________

Name:

Title:

Dated: ________________________

<PAGE>

ASSIGNMENT FORM

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

FOR VALUE RECEIVED, the foregoing Warrant and all rights evidenced

thereby are hereby assigned to

_______________________________________________ whose address is

_______________________________________________________________.

_______________________________________________________________

Dated: ______________, _______

Holder's Signature:_____________________________

Holder's Address:_____________________________

_____________________________

Signature Guaranteed: ___________________________________________

NOTE: The signature to this Assignment Form must correspond with the name as

it appears on the face of the Warrant, without alteration or enlargement or any

change whatsoever, and must be guaranteed by a bank or trust company. Officers

of corporations and those acting in a fiduciary or other representative

capacity should file proper evidence of authority to assign the foregoing

Warrant.