<PAGE> 1
As filed with the Securities and Exchange Commission on December 5, 1997
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------------------
SUNSHINE MINING AND REFINING COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 75-2618333
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
877 W. MAIN STREET, SUITE 600
BOISE, IDAHO 83702
(208) 345-0660
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
--------------------------
JOHN S. SIMKO, CHIEF EXECUTIVE OFFICER
877 W. MAIN STREET, SUITE 600
BOISE, IDAHO 83702
(208) 345-0660
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
--------------------------
COPY TO:
JANICE V. SHARRY
HAYNES AND BOONE, LLP
3100 NATIONSBANK PLAZA
901 MAIN STREET
DALLAS, TEXAS 75202-3789
(214) 651-5000
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [x]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==================================================================================================================================
Proposed
Maximum
Proposed Maximum Aggregate Amount of
Title of Each Class Amount to be Offering Price Offering Registration
of Securities to be Registered Registered Per Share Price Fee
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per
share . . . . . . . . . . . . . . . 25,000,000 shares $ 0.75 (1) $ 18,750,000 (1) $ 5,531.25
==================================================================================================================================
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457, based on the last reported sale price of the Common Stock on
the New York Stock Exchange on December 4, 1997.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE> 2
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
SUBJECT TO COMPLETION DATED DECEMBER 5, 1997
PROSPECTUS
______________________________
SUNSHINE MINING AND REFINING COMPANY
UP TO 25,000,000 SHARES OF COMMON STOCK
______________________________
This Prospectus relates to the resale by certain selling stockholders
named herein (the "Selling Stockholders") of up to an aggregate of 25,000,000
shares (the "Shares") of common stock, par value $.01 per share (the "Common
Stock"), of Sunshine Mining and Refining Company, a Delaware corporation (the
"Company"), which are issuable (i) upon the conversion and pursuant to other
payment terms of the Company's currently outstanding $15,000,000 Senior
Convertible Notes (the "Notes") and (ii) upon the exercise of certain warrants
to purchase Common Stock (the "Warrants").
The Shares being registered represent a current estimate of the number
of Shares subject to issuance from time to time by the Company pursuant to the
terms of the Notes and Warrants. No assurance can be given that all such
Shares will be issued because the issuance of a portion of the Shares is
subject to, among other factors, the Company's determination to make interest
and mandatory prepayments on the Notes in Shares rather than cash and the then
current bid price of the Shares.
Application has been made to list the Shares offered hereby on the New
York Stock Exchange ("NYSE"). The Company's Common Stock is traded on the NYSE
under the symbol "SSC." On December 4, 1997, the reported closing sale price of
the Company's Common Stock was $0.75 per share.
SEE "RISK FACTORS" WHICH BEGINS ON PAGE 2 FOR CERTAIN FACTORS THAT SHOULD BE
CONSIDERED BY PROSPECTIVE INVESTORS.
______________________________
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
The date of this Prospectus is December ___, 1997
<PAGE> 3
RISK FACTORS
Investors should carefully consider the following matters in
connection with an investment in the securities in addition to the other
information contained or incorporated by reference in this Prospectus.
Information contained or incorporated by reference in this Prospectus contains
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995, which can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "anticipate,"
"estimate" or "continue" or the negative thereof or other variations thereon or
comparable terminology. The following matters constitute cautionary statements
identifying important factors with respect to such forward-looking statements,
including certain risks and uncertainties, that could cause actual results to
differ materially from those in such forward-looking statements. Reference
should be made to (i) the Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, and the Amendment to that Annual Report filed on Form 10-K/A
on October 16, 1997 (collectively, the "Annual Report"), (ii) the Quarterly
Reports on Form 10-Q for the quarters ended March 31, 1997 and June 30, 1997,
each as amended by Amendments on Form 10-Q/A to the identified Quarterly
Reports filed on October 16, 1997, and the Quarterly Report on Form 10-Q for
the quarter ended September 30, 1997 (collectively, the "Quarterly Reports"),
(iii) the Prospectus/Proxy Statement on Form S-4 for the Special Meeting of
Stockholders of the Company held on March 29, 1996 (the "Prospectus/Proxy
Statement"), (iv) the Post-Effective Amendment No. 4 on Form S-3 to Form S-4
dated November 12, 1997, (v) the Proxy Statement for the Annual Meeting of
Stockholders of the Company held on June 10, 1997, and (vi) all financial
statements and notes thereto contained in the foregoing (all of which are
incorporated herein by reference) for a more detailed discussion of the
following matters.
OPERATING LOSSES
Substantially all of the Company's revenues are derived from the sale
of silver mined from its Sunshine Mine in Kellogg, Idaho. Accordingly, the
Company's earnings are directly related to the price of silver. Silver prices
have been depressed since 1985, and as a result the Company has experienced
losses from operations for each of the last ten years. The Company reported
net losses of $25.9 million, $15.5 million, and $4.9 million in each of 1996,
1995 and 1994, respectively. The Company expects to fund its losses for fiscal
1997 from the Company's cash and cash equivalents and silver bullion held for
investment. On a pro forma basis after giving effect to the sale of the Notes,
at September 30, 1997, Sunshine's cash and silver bullion held for investment
totaled approximately $25.7 million.
The operating losses and cash flow deficiencies of the Company are
expected to continue until silver prices recover substantially or the Company's
exploration efforts at the Sunshine Mine or its other properties are successful
in developing significant additional production. Absent the foregoing, the
Company may eventually be required to further curtail operations or cease its
mining activities at the Sunshine Mine altogether. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
"Business and Properties" and the Consolidated Financial Statements (including
the Notes thereto) of the Company appearing in the Annual Report and Quarterly
Reports.
VOLATILITY OF SILVER PRICES
The Company's earnings are directly related to the price of silver,
and the value of the Common Stock has historically moved in correlation with
movements in silver prices. Silver prices are subject to fluctuation and are
affected by numerous factors beyond the control of the Company, which alone or
in combination may cause the price of silver to rise or fall. These factors
include, among others, expectations for inflation, speculative activities,
levels of silver production and demand for silver as a component of
manufactured goods. The following table sets forth for the periods
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indicated the high, low and average closing spot prices per ounce of silver on
the Commodity Exchange, Inc. ("COMEX") and also translates the average price as
stated into constant 1996 dollars.
<TABLE>
<CAPTION>
CONSTANT
NOMINAL DOLLARS 1996 DOLLARS
--------------------------------------- ------------
YEAR HIGH LOW AVERAGE AVERAGE
- ------------------------------------------ ------ ----- ------- ------------
<S> <C> <C> <C> <C>
1983 . . . . . . . . . . . . . . . . . . $14.74 $8.38 $11.46 $17.05
1984 . . . . . . . . . . . . . . . . . . 10.17 6.25 8.15 11.39
1985 . . . . . . . . . . . . . . . . . . 6.89 5.48 6.14 8.19
1986 . . . . . . . . . . . . . . . . . . 6.32 4.85 5.49 7.13
1987 . . . . . . . . . . . . . . . . . . 11.25 5.35 6.99 8.85
1988 . . . . . . . . . . . . . . . . . . 8.06 6.01 6.53 7.91
1989 . . . . . . . . . . . . . . . . . . 6.20 5.02 5.47 6.28
1990 . . . . . . . . . . . . . . . . . . 5.35 3.94 4.82 5.16
1991 . . . . . . . . . . . . . . . . . . 4.55 3.51 4.03 4.11
1992 . . . . . . . . . . . . . . . . . . 4.32 3.63 3.94 3.88
1993 . . . . . . . . . . . . . . . . . . 5.44 3.52 4.31 4.18
1994 . . . . . . . . . . . . . . . . . . 5.78 4.61 5.28 5.01
1995 . . . . . . . . . . . . . . . . . . 6.10 4.38 5.20 4.76
1996 . . . . . . . . . . . . . . . . . . 5.84 4.71 5.21 5.21
</TABLE>
On December 4, 1997, the closing price of spot silver as reported on
the COMEX was $5.24 per ounce. In constant 1996 dollars, the average spot
silver price from 1990 through 1996 has been approximately $4.62.
DEPENDENCE ON EXPLORATION SUCCESS
Substantially all of the Company's revenues are derived from the
Sunshine Mine which at current silver prices is not profitable. Therefore, the
future earnings of the Company are presently dependent on the success of
exploration at the Sunshine Mine and at the Company's other exploration
projects. No assurance can be given that the Company's exploration program
will prove successful. See "Business and Properties - Operations --
Exploration Activities at the Sunshine Mine" included in the Annual Report.
IMPRECISION OF RESERVE ESTIMATES
The ore reserve estimates presented in the Annual Report and Quarterly
Reports are estimates made by the Company's geologic personnel, and no
assurance can be given that the indicated quantity of in situ silver will be
realized. No independent consultants have been retained by the Company to
review and verify such estimates. Reserve estimates are expressions of
judgment based largely on data from diamond drill holes and underground
openings, such as drifts or raises which expose the mineralization on 1, 2 or 3
sides, sampling and similar examinations. Reserve estimates may change
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as ore bodies are mined and additional data is derived. The Company's
estimates of proven and probable reserves for the Sunshine Mine are as of
January 1, 1997.
MINING RISKS AND INSURANCE
The Company's operations may be affected by risks and hazards
generally associated with the mining industry, including fires, cave-ins, rock
bursts, flooding, industrial accidents, mechanical or electrical failures, and
unusual or unexpected rock formations. Such risks could result in damage to,
or destruction of, mineral properties or producing facilities, personal injury,
environmental damage, delays in mining, monetary losses and possible legal
liability. Although the Company maintains insurance at levels consistent with
its historical experience and industry practice, no assurance can be given that
such insurance will continue to be available at economically feasible premiums.
Insurance for environmental risks (including potential for pollution or other
hazards as a result of the disposal of waste products occurring from
production) is not generally available to the Company or to other companies
within the industry.
GOVERNMENT REGULATION
The Company's activities are subject to extensive federal, state, and
local laws and regulations controlling not only the mining of and exploration
for mineral properties, but also the possible effects of such activities upon
the environment. Except as described under "Legal Proceedings - Environmental
Matters" included in the Annual Report and under "Legal Proceedings" included
in the Quarterly Reports, the Company is not aware of any material violations
of environmental laws, regulations, permits or licenses issued with respect to
the Company's operations. Future legislation and regulations could cause
additional expense, capital expenditures, restrictions and delays in the
mining, production or development of the Company's properties, the extent of
which cannot be predicted.
RISKS INHERENT IN FOREIGN OPERATIONS
The Company presently conducts international operations and
anticipates that it will continue to conduct significant international
operations in the future. Foreign properties, operations or investments may be
adversely affected by local, political and economic developments, exchange
controls, currency fluctuations, royalty and tax increases, retroactive tax
claims, renegotiation of contracts with governmental entities, expropriation,
import and export regulations and other foreign laws or policies governed by
operations of foreign-based companies, as well as by laws of policies of the
United States affecting foreign trade, taxation and investment. In addition,
as certain of the Company's operations are governed by foreign laws, in the
event of a dispute, the Company may be subject to the exclusive jurisdiction of
foreign courts or may not be successful in subjecting foreign persons to the
jurisdiction of courts in the United States. The Company may also be hindered
or prevented from enforcing the rights with respect to a governmental
instrumentality because of the doctrine of sovereign immunity.
DILUTION; EFFECT OF SALES OF COMMON STOCK ON MARKET PRICE
As of October 14, 1997, there were 255.1 million shares of Common
Stock outstanding (excluding 4.7 million treasury shares). The Company has
previously registered with the Commission an aggregate of approximately
55 million shares of Common Stock for resale by certain stockholders of the
Company, including approximately 30,000,000 of which are estimated to be
issuable upon conversion of the Eurobonds at a current conversion price of
$1.00 per share. In addition, the Company has reserved a significant number of
shares of Common Stock for future issuance pursuant to the exercise of
outstanding warrants and options. There can be no assurance that the sale of
shares of Common Stock previously registered or to be registered for resale or
the issuance of the shares of
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Common Stock which have been reserved for future issuance will not have a
material adverse effect on the then prevailing market price of the Common
Stock. Furthermore, issuance of the shares of Common Stock would result in
significant dilution to the stockholders of the Company.
THE COMPANY
The Company is one of the world's leading silver producers. The
Company owns the Sunshine Mine in the Coeur d'Alene Mining District of northern
Idaho and the Pirquitas Mine in northwest Argentina. The Sunshine Mine, in
operation for over 100 years, has produced more silver than any other primary
silver producing mine in North America. Preliminary pre-feasibility studies at
Pirquitas have already resulted in the classification as proven and probable
reserves of 66.9 million ounces of silver.
The Company is a Delaware corporation. The Company's principal
executive office and mailing address are 877 W. Main Street, Suite 600, Boise,
Idaho 83702 and its telephone number is (208) 345-0660.
RECENT DEVELOPMENTS
ISSUANCE OF NOTES
On November 24, 1997, the Company completed a private placement of the
Notes and Warrants to Stonehill Partners, L.P., GRS Partners, Aurora Limited
Partnership and Stonehill Offshore Partners (collectively, the "Investors").
The Notes and Warrants were purchased pursuant to a purchase agreement dated as
of November 24, 1997, and in connection with the sale of such Notes and
Warrants, the Company granted registration rights covering the Shares to the
Investors pursuant to a registration rights agreement (the "Registration Rights
Agreement") dated as of November 24, 1997, between the Company and the
Investors.
The Notes rank senior to all subordinated obligations of the Company
and are convertible into shares of Common Stock. The initial conversion price
of the Notes is $0.95, subject to reset and adjustment as set forth in the
terms of the Notes. In addition, the Company may, at its option, make interest
payments, mandatory prepayments and certain other payments in respect of the
Notes in shares of Common Stock. Interest on the Notes accrues at an initial
rate of 10% per annum (subject to adjustment) and is payable semi-annually.
The Notes are guaranteed by Sunshine Argentina, Inc. and Sunshine Exploration,
Inc., subsidiaries of the Company, and may be guaranteed by Sunshine Precious
Metals, Inc. ("SPMI"), also a subsidiary of the Company, upon the retirement
or refinancing of SPMI's 8% Senior Exchangeable Notes due 2000. The Notes
amortize in twelve equal quarterly installments commencing February 24, 2000
and mature on November 24, 2002.
Warrants to purchase an aggregate of 1,500,000 shares of Common Stock
were also issued to the Investors on November 24, 1997. The Warrants are
exercisable beginning on the first date on which none of the Notes remain
outstanding until November 24, 2002 (subject to extension as set forth in the
Warrants). The exercise price of the Warrants is equal to 110% of the
conversion price last in effect under the Notes. The number of shares of
Common Stock issuable upon exercise of the Warrants is subject to adjustment
based on certain anti-dilution provisions set forth in the Notes and Warrants.
The Notes and the Warrants are subject to limitation on transfer which
prohibit any transfer of the Notes or Warrants which would result in there
being more that 10 holders of the Notes or Warrants, respectively. In
addition, both the Notes and Warrants limit the number of shares of Common
Stock which may be issued in respect of the Notes and Warrants. Such shares
(which
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constitute the Shares offered hereby) may not exceed the maximum number (the
"Maximum Number") of shares of Common Stock that can be issued without
obtaining stockholder approval under the rules of the NYSE. In the event an
issuance of shares of Common Stock under the terms of the Notes or Warrants
would exceed the Maximum Number, the Company is required to make a cash payment
in lieu thereof.
The Company believes the sale of the Notes gives the Company more than
sufficient liquidity to carry out the additional test work required to bring
the Pirquitas Mine through its final feasibility studies and to do a
significant amount of drilling at the La Joya del Sol in southern Argentina and
at its other properties. The Company anticipates that additional capital may
also be subsequently required to finance its contemplated exploration and
development program. Although no assurance can be given that the additional
financing will be available, the Company believes that advances in the status
of its properties in Argentina and the major improvements to date at the
Sunshine Mine, along with the prospects of silver prices improving
significantly in the next year, will allow the Company access the capital
markets on significantly better terms next year.
NEW MINING TECHNIQUES
The Company has been implementing mechanized cut and fill mining over
the last two years as development of the West Change area has proceeded. The
Company also expects to use the methodology in the development of future
undeveloped areas in the mine, and in the extraction of a portion of the
reserves in the mine not contained in the West Chance. The benefits of the
method are two-fold. There can be a reduction in direct mining costs from the
method if the ore body has characteristics to allow the benefits of the method
to be fully implemented. This would normally mean that the ore body has
sufficient continuity and strike length to allow the crew and equipment to
access multiple headings in each shift.
However, the biggest benefit of the method is the ability to rapidly
develop an ore body and put it into production, as has been demonstrated in the
West Chance area. Using the Company's traditional development methodology
would likely have required an additional one to two years to bring the ore body
into full production. Full production itself provides the biggest cost benefit
to the mine versus its recent history as fixed costs, which represented 40-50%
of total costs in 1996, are spread over a larger base of production.
USE OF PROCEEDS
The Company will not receive any proceeds from the resale of the
Shares.
The Company may, in the future, receive proceeds from the exercise of
the Warrants, but only if and to the extent the Warrants are exercised.
Management cannot predict the amount of proceeds, if any, that may be generated
from the exercise of the Warrants. The net proceeds that may be realized by
the Company upon exercise of the Warrants will not be utilized for any specific
purpose other than to contribute to the Company's working capital and to
continue the operations of the Company in accordance with the business strategy
identified by management. In addition, the Company may have its indebtedness
reduced as a result of conversion of the Notes, but only if the Notes are
converted and then only in an amount equal to the outstanding principal amount
of such Notes converted. Based upon the current outstanding principal amount
of such Notes and assuming that all such Notes are converted, the aggregate
reduction in the Company's indebtedness (on a consolidated basis) would be
approximately $15.0 million. The Company incurred such indebtedness in order to
fund the Company's exploration and development program at the Pirquitas Mine in
northwest Argentina, its evaluation program at the Joya del Sol in southern
Argentina, as well as the exploration program on its numerous properties.
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DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (i) 600
million shares of Common Stock, par value $.01 per share, of which 255.1
million shares were outstanding (excluding 4.7 million treasury shares) at
October 14, 1997 and were held of record by approximately 30,000 holders, and
(ii) 20 million shares of Preferred Stock, $1.00 par value, issuable in one or
more series, with such dividend rates, liquidation preferences, redemption,
conversion and voting rights and such further designations, powers,
preferences, rights, limitations and restrictions as may be fixed and
determined by the Board of Directors of the Company, all without a vote of the
Company's stockholders. No shares of Preferred Stock are outstanding. The
Company's outstanding capital stock is fully paid and nonassessable and none of
the authorized capital stock is entitled to preemptive rights.
The Company also has outstanding warrants to purchase Common Stock
which are all currently exercisable, except for the Warrants which are
exercisable when the Notes are no longer outstanding.
For a summarized description of recent transactions which have
affected the capital stock of the Company, see the Prospectus/Proxy Statement,
the Consolidated Statements of Stockholders Equity contained in the
Consolidated Financial Statements appearing in the Annual Report and the
November 12 Post-Effective Amendment No. 4 on Form S-3.
COMMON STOCK
Subject to the rights of holders of any outstanding shares of
Preferred Stock, holders of shares of the Common Stock are entitled to share
equally in dividends from sources legally available when, as and if declared by
the Board of Directors. The Company's payment of cash dividends on its shares
of capital stock is restricted.
Each stockholder is entitled to one vote for each share of Common
Stock held by such holder. Because stockholders are not entitled to cumulate
their votes, stockholders holding a majority of the outstanding Common Stock,
and any shares of voting preferred stock which may be issued, are able to elect
all members of the Board of Directors of the Company. Holders of Common Stock
have no preemptive rights, and shares of Common Stock have no redemption,
sinking fund or conversion privileges.
In the event of any liquidation, dissolution or winding up of the
affairs of the Company, subject to the rights of holders of any Preferred
Stock, the holders of Common Stock are entitled to receive pro rata any assets
of the Company after the satisfaction of corporate liabilities.
Article Five of the Certificate of Incorporation of the Company
requires the affirmative vote or consent of the holders of (i) a majority of
the Company's shares entitled to vote thereon and (ii) a majority of any series
or class of Preferred Stock entitled to vote as a class thereon, in order to
approve any business combination, including any merger, consolidation, or the
sale, lease, exchange or other disposition of all or substantially all of the
Company's assets (including a disposition in connection with the dissolution or
winding up or liquidation of the Company). Article Five may not be amended,
altered, changed or repealed without the prior affirmative vote or consent of
the holders of (i) 66 2/3% of all shares of stock entitled to vote thereon and
(ii) 66 2/3% of any series or class of preferred stock upon which the right to
vote as a class thereon has been conferred by the resolution or resolutions
adopted by the Company's Board of Directors providing for the issue of such
series or class of preferred stock. Such provisions may have the effect of
delaying, deterring or preventing a change of control of the Company.
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The Company currently does not pay cash dividends on its shares of
Common Stock and has not paid cash dividends on its shares of Common Stock
since the third quarter of 1981. Any future declaration of dividends will be
at the discretion of the Board of Directors of the Company, which will
consider, among other factors, current and projected earnings and the liquidity
position of the Company. The Company does not expect any resumption of
dividends in the foreseeable future.
The payment of cash dividends by the Company is subject to certain
restrictions. Certain of the Company's debt securities impose restrictions on
the Company's ability to declare or pay cash dividends and make certain
distributions on its capital stock. Pursuant to the most restrictive of these
provisions, at December 31, 1996, no funds were available for cash dividends on
shares of the Company's capital stock, including its Common Stock.
Meetings of the Stockholders. The By-Laws of the Company provide that
the stockholders shall have annual meetings, at such date and time designated
by the Board of Directors, and special meetings, called by the Chairman of the
Board, the President or by the Board of Directors or by written order of a
majority of the directors. The stockholders must be given written notice of
each such meeting of stockholders. In the case of special meetings, the
purpose or purposes for which the meeting is called shall be given to each
stockholder entitled to vote, not less than ten nor more than sixty days before
the meeting. In order to determine the stockholders entitled to notice of or
to vote at any meeting of stockholders, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting. The Company shall prepare and make, at
least ten days before every meeting of the stockholders, a complete list of the
stockholders entitled to vote at the meeting. Such list shall be open to the
examination of any stockholder for a period of ten days prior to the meeting.
The holders of a majority of the shares of capital stock issued and
outstanding and entitled to vote, present in person or represented by proxy,
shall constitute a quorum at any meeting of stockholders. When a quorum is
present at any meeting of the stockholders, the vote of the holders of a
majority of the shares of capital stock entitled to vote, present in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which a different vote is required by law, the
Certificate of Incorporation or the By-Laws.
Limitation of Liability. As permitted by the Delaware General
Corporation Law (the "DGCL"), the Company's Certificate of Incorporation
provides that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of a fiduciary duty
as a director, including gross negligence, except to the extent such exemption
from liability is not permitted by the DGCL. This includes liability for (i)
any breach of the director's duty of loyalty to the Company or its
stockholders, (ii) any act or omission not in good faith or which involves
intentional misconduct or a knowing violation of law, (iii) any transaction
from which the director derived any improper personal benefit or (iv) any act
or omission where the liability of the director is expressly provided by the
statute.
As a result of this provision, the Company and its stockholders may be
unable to obtain monetary damages from a director for breach of the duty of
care. Although stockholders may continue to seek injunctive or other equitable
relief for an alleged breach of fiduciary duty by a director, stockholders may
not have an effective remedy against the challenged conduct if equitable
remedies are unavailable.
In addition, the Company's Certificate of Incorporation and By-Laws
provide certain rights of indemnification for all officers and directors.
The Delaware Business Combination Act. The Company is subject to the
provisions of Section 203 of the DGCL. Section 203 prohibits a publicly held
Delaware corporation from engaging
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in a "business combination" with an "interested stockholder" for a period of
three years after the date of the transaction in which the person became an
interested stockholder, unless the business combination is approved in a
prescribed manner. A "business combination" includes mergers, asset sales and
certain other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, as defined therein, owns,
or within three years did own, 15% or more of the corporation's voting stock.
This statute contains provisions enabling a corporation to avoid the statute's
restrictions if the stockholders holding a majority of the shares of the
corporation's voting stock approve an amendment to the corporation's
certificate of incorporation or bylaws. The Company does not intend to "elect
out" of this statute.
Miscellaneous. The Common Stock is listed on the NYSE. American
Stock Transfer & Trust Company is the transfer agent and registrar for the
Common Stock.
PREFERRED STOCK
The Board of Directors is authorized, subject to any limitations
prescribed by Delaware law, to provide for the issuance of Preferred Stock in
one or more series, to establish from time to time the number of shares to be
included in each such series, to fix the rights, preferences and privileges of
the shares of each wholly unissued series and any qualifications, limitations
or restrictions therein, and to increase or decrease the number of shares of
any such series (but not below the number of shares of such series then
outstanding), without any further vote or action by the stockholders. The
Board of Directors may authorize the issuance of Preferred Stock with voting or
conversion rights that could adversely affect the voting power or other rights
of the holders of Common Stock. Thus, the issuance of Preferred Stock may have
the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no current plan to issue any shares of Preferred
Stock.
PLAN OF DISTRIBUTION
The Company will not receive any of the proceeds of the sale of the
Shares offered hereby. The Shares may be sold from time to time to purchasers
directly by the Selling Stockholders. Alternatively, the Selling Stockholders
may from time to time offer the Shares through brokers, dealers or agents who
may receive compensation in the form of discounts, concessions or commissions
from the Selling Stockholders and/or the purchasers of the Shares for whom they
may act as agent. The Selling Stockholders and any such brokers, dealers or
agents who participate in the distribution of the Shares may be deemed to be
"underwriters", and any profits on the sale of the Shares by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act. To the extent the Selling Stockholders may be deemed to be
underwriters, the Selling Stockholders may be subject to certain statutory
liabilities of the Securities Act, including, but not limited to, Sections 11,
12 and 17 of the Securities Act and Rule 10b-5 under the Exchange Act.
The Shares offered hereby may be sold from time to time by the Selling
Stockholders, or, to the extent permitted, by pledgees, donees, transferees or
other successors in interest. The Shares may be disposed of from time to time
in one or more transactions through any one or more of the following: (i) the
purchasers directly, (ii) in ordinary brokerage transactions and transactions
in which the broker solicits purchasers, (iii) through underwriters or dealers
who may receive compensation in the form of underwriting discounts,
concessions, or commissions from the Selling Stockholders or such successors in
interest and/or from the purchasers of the Shares for whom they may act as
agent, (iv) the writing of options on the Shares, (v) the pledge of the Shares
as security for any loan or obligation, including pledges to brokers or dealers
who may, from time to time, themselves effect distributions of the Shares or
interests therein, (vi) purchases by a broker or dealer as principal and resale
by such
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<PAGE> 11
broker or dealer for its own account, (vii) a block trade in which the broker
or dealer so engaged will attempt to sell the Shares as agent but may position
and resell a portion of the block as principal to facilitate the transaction
and (viii) an exchange distribution in accordance with the rules of such
exchange or transactions in the over the counter market. Such sales may be
made at prices and at terms then prevailing or at prices related to the then
current market price or at negotiated prices and terms. In effecting sales,
brokers or dealers may arrange for other brokers or dealers to participate.
The Selling Stockholders or such successors in interest, and any underwriters,
brokers, dealers or agents that participate in the distribution of the Shares,
may be deemed to be "underwriters" within the meaning of the Securities Act,
and any profit on the sale of the Shares by them and any discounts, commissions
or concessions received by any such underwriters, brokers, dealers or agents
may be deemed to be underwriting commissions or discounts under the Securities
Act. At any time a particular offer of the Shares is made, a revised Prospectus
or Prospectus Supplement, if required, will be distributed which will set forth
the aggregate amount and type of Shares being offered and the terms of the
offering, including the name or names of any underwriters, dealers or agents,
any discounts, commissions and other items constituting compensation from the
Selling Stockholders and any discounts, commissions or concessions allowed or
reallowed or paid to dealers. Such Prospectus Supplement and, if necessary, a
post-effective amendment to the Registration Statement of which this Prospectus
is a part, will be filed with the Commission to reflect the disclosure of
additional information with respect to the distribution of the Shares. In
addition, the Shares covered by this Prospectus may be sold in private
transactions or under Rule 144 rather than pursuant to this Prospectus.
To the best knowledge of the Company, there are currently no plans,
arrangements or understandings between any Selling Stockholders and any broker,
dealer, agent or underwriter regarding the sale of the Shares by the Selling
Stockholders. There is no assurance that any Selling Stockholder will sell any
or all of the Shares offered by it hereunder or that any such Selling
Stockholder will not transfer, devise or gift such Shares by other means not
described herein.
The Selling Stockholders and other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which may limit the timing of purchases and sales of any of the Shares by
the Selling Stockholders and any other such person. Furthermore, under
Regulation M under the Exchange Act, any person engaged in the distribution of
the Shares may not simultaneously engage in market-making activities with
respect to the particular Shares being distributed for certain periods prior to
the commencement of such distribution. All of the foregoing may affect the
marketability of the Shares and the ability of any person or entity to engage
in market-making activities with respect to the Shares.
Pursuant to the Registration Rights Agreement entered into in
connection with the offer and sale of the Notes by the Company, each of the
Company and the Selling Stockholders will be indemnified by the other against
certain liabilities, including certain liabilities under the Securities Act, or
will be entitled to contribution in connection therewith.
The Company has agreed to pay substantially all of the expenses
incidental to the registration, offering and sale of the Shares to the public
other than commissions, fees and discounts of underwriters, brokers, dealers
and agents.
SELLING STOCKHOLDERS
The Selling Stockholders consist of Stonehill Partners, L.P., GRS
Partners, Aurora Limited Partnership, and Stonehill Offshore Partners Limited.
The Selling Stockholders
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<PAGE> 12
currently hold Notes and Warrants convertible into or exercisable for the
Shares. It is unknown if, when or in what amounts a Selling Stockholder may
offer Shares for sale and the names of the Selling Stockholders who may sell
the Shares.
There can be no assurance that the Selling Stockholders will sell any
or all of the Shares offered hereby. Because the Selling Stockholders may
offer all or some of the Shares pursuant to the Offering contemplated by this
Prospectus or understandings with respect to the sale of any of the Shares that
will be held by the Selling Stockholders after completion of this Offering, no
estimate can be given by the Selling Stockholder until after completion of this
Offering.
Other than as a result of the ownership of the Notes, to the best of
the Company's knowledge, none of the Selling Stockholders had any material
relationship with the Company within the three year period ending on the date
of this Prospectus.
SHARES ELIGIBLE FOR FUTURE SALE
The up to 25,000,000 shares of Common Stock offered and sold in this
Offering will be freely tradeable without restrictions or further registration
under the Securities Act, except for any such securities owned by an
"affiliate" of the Company as such term is defined under Rule 144. Shares
owned by an "affiliate" of the Company may not be resold in the absence of
registration under the Securities Act unless an exemption from registration is
available, including the exemptions contained in Rule 144.
In general, under Rule 144 as currently in effect, a person (or
persons whose shares are aggregated) who has beneficially owned his or her
shares for at least two years, including an "affiliate," as that term is
defined below, is entitled to sell, within any three-month period, that number
of shares that does not exceed the greater of 1% of the then outstanding shares
or the average weekly trading volume of the then outstanding shares during the
four calendar weeks preceding each such sale. A person (or persons whose
shares are aggregated) who is not deemed an "affiliate" of the Company, and who
has beneficially owned shares for at least three years, is entitled to sell
such shares under Rule 144 without regard to the volume limitations described
above. As defined in Rule 144, an "affiliate" of an issuer is a person that
directly, or indirectly through the use of one or more intermediaries,
controls, or is controlled by, or is under the common control with, such
issuer.
The Company is unable to estimate the number of shares that may be
sold in the future by its existing and future stockholders or the effect, if
any, that sales of shares by such stockholders will have on the market price of
the Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock by existing stockholders could adversely affect the prevailing
market price.
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<PAGE> 13
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be
passed on for the Company by Haynes and Boone, LLP, Dallas, Texas.
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report (Form 10-K) for the year ended December 31, 1996, as
amended by the amendment filed on Form 10-K/A on October 16, 1997, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
report thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). In
accordance with the Exchange Act, the Company files reports, proxy statements
and other information with the Securities and Exchange Commission (the
"Commission"). The reports, proxy statements, and other information can be
inspected and copied at the public reference facilities that the Commission
maintains at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission's regional offices located at 7 World Trade Center, 13th Floor,
New York, New York 10048, and Northwestern Atrium Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661. Copies of these materials can be
obtained at prescribed rates from the Public Reference Section of the
Commission at the principal offices of the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission maintains a Web site that contains
reports, proxy and information statements and other information regarding
registrants, including the Company, that file electronically with the
Commission. The address of the Commission's Web Site is http://www.sec.gov.
The Company's Common Stock is listed for trading on the New York Stock Exchange
under the symbol "SSC". Quarterly Reports and other information concerning the
Company can be inspected at the offices of such Exchange, 20 Broad Street, New
York, New York 10005.
The Company has filed with the Commission the Registration Statement
on Form S-3 under the Securities Act with respect to the Common Stock offered
hereby. This Prospectus, which constitutes a part of the Registration
Statement, does not contain all the information set forth in the Registration
Statement, certain items of which are contained in schedules and exhibits to
the Registration Statement as permitted by the rules and regulations of the
Commission. Statements made in the Prospectus concerning the contents of any
documents referred to herein are not necessarily complete. With respect to
each such document filed with the Commission as an exhibit to the Registration
Statement, reference is made to the exhibit for a more complete description,
and each such statement shall be deemed qualified in its entirety by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, which have been filed by the Company with the
Commission pursuant to the Exchange Act, are hereby incorporated by reference
in this Prospectus: (i) Annual Report on Form 10-K for the fiscal year ended
December 31, 1996, as amended by the Amendment filed on form 10K/A on October
16, 1997, (file No. 001-10012); (ii) Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1997 and June 30, 1997, each as amended by Amendments
to the identified Quarterly Reports filed on Form 10-Q/A on October 16, 1997,
and for the quarter ended
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<PAGE> 14
September 30, 1997 (file No. 001-10012); (iii) the Proxy Statement for the
Annual Meeting of Stockholders of the Company held on June 10, 1996 (File No.
001-10012); (iv) the description of Common Stock contained in Sunshine's
Registration Statement No. 1-7966, as amended, filed pursuant to the Securities
Exchange Act of 1934; and (v) all other reports filed pursuant to Section 13(a)
or 15(d) of the Exchange Act since the fiscal year ended December 31, 1996.
All documents subsequently filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus
and prior to the completion of the Offering shall be deemed to be incorporated
by reference herein. Any statement contained in a document incorporated or
deemed to be incorporated by reference herein shall be deemed superseded or
modified for purposes of this Prospectus to the extent that a statement
contained herein (or in any other subsequently filed document which also is
incorporated by reference herein) modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom this Prospectus is delivered, on the written or oral
request of any such person, a copy of any or all of the documents incorporated
by reference (other than exhibits to such documents which are not specifically
incorporated by reference in such documents). Written requests for such copies
should be directed to the Company, 877 W. Main Street, Suite 600, Boise, Idaho
83702, Attention: Rebecca L. Saunders, Secretary. Telephone requests may be
directed to Rebecca L. Saunders, Secretary, at (208) 345-0660.
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<PAGE> 15
================================================================================
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND IF GIVEN OR
MADE SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR ANY OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY
SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS
UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
______________________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RECENT DEVELOPMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
USE OF PROCEEDS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
SHARES ELIGIBLE FOR FUTURE SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
</TABLE>
UP TO 25,000,000 SHARES OF
COMMON STOCK
SUNSHINE MINING AND
REFINING COMPANY
_________________________________
PROSPECTUS
_________________________________
December __, 1997
================================================================================
<PAGE> 16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee . . . . . . . . . . . . . . . . . . . . . . . $ 5,700
NYSE Listing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87,500
Printing and Photocopying Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,000
Accounting Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Legal Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,000
Miscellaneous Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,000
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133,200
=========
</TABLE>
All of the above expenses except the Securities and Exchange
Commission registration fee and the NYSE listing fee listing fee are estimated.
All of such expenses will be borne by the Registrant.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The information set forth pursuant to Item 20 of the Registrant's
Registration Statement on Form S-4 (Registration No. 33-98876) is incorporated
herein.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. EXHIBIT
----------- -------
<S> <C>
* 4.1 Certificate of Incorporation, filed as Exhibit 3.1 to the Registrant's Registration
Statement on Form S-4 (Registration No. 33-98876), which exhibit is incorporated herein by
reference.
* 4.2 Amendment to Certificate of Incorporation, filed as Exhibit 4.1 to the Registrant's Current
Report on Form 8-K dated May 22, 1996 (File No. 33-98876), which exhibit is incorporated
herein by reference.
* 4.3 Bylaws, filed as Exhibit 3.2 to the Registrant's Registration Statement on Form
S-4 (Registration No. 33-99876), which exhibit is incorporated herein by reference.
* 4.4 Specimen Common Stock Certificate, filed as Exhibit 4.2 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-63446), which exhibit is incorporated herein by
reference.
*** 5.1 Opinion of Haynes and Boone, LLP.
* 10.1 Employee Nonqualified Stock Option Plan of Sunshine, filed as Exhibit 10.9 to Sunshine's
Annual Report on Form 10-K for the fiscal year ended December 31, 1986, and incorporated
herein by reference.
* 10.2 Amendment No. 1 to the 1987 Employee Nonqualified Stock Option Plan of Sunshine, filed as
Exhibit 10.8 to Sunshine's Registration Statement on Form S-1 (Registration No. 33-63446),
as amended and incorporated herein by reference.
* 10.3 Amendment No. 2 to the 1987 Employee Nonqualified Stock Option Plan of Sunshine, filed as
Exhibit 10.1 to Sunshine's Quarterly Report on Form 10-Q for the period ended June 30,
1994, and incorporated herein by reference.
* 10.4 1993 Incentive Stock Option Plan of Sunshine, filed as Exhibit 10.18 to Sunshine's
Registration Statement on Form S-1 (Registration No. 33-63446), as amended and incorporated
herein by reference.
</TABLE>
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<PAGE> 17
<TABLE>
<S> <C>
* 10.5 1995 Employee Nonqualified Stock Option Plan of Sunshine.
* 10.6 Executive Employment Agreement entered into as of January 1, 1994, between Sunshine and
John S. Simko, filed as Exhibit 10.8 to Sunshine's Registration Statement on Form S-1
(Registration No. 33-73608), as amended and incorporated herein by reference.
* 10.7 Executive Employment Agreement entered into as of January 1, 1994, between Sunshine and
William W. Davis, filed as Exhibit 10.9 to Sunshine's Registration Statement on Form S-1
(Registration No. 33-73608), as amended and incorporated herein by reference.
* 10.8 Executive Employment Agreement entered into as of January 1, 1994, between Sunshine and
Harry F. Cougher, filed as Exhibit No. 10.10 to Sunshine's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, and incorporated herein by reference.
* 10.9 Mining Lease, dated March 15, 1994, by and between Revenue-Virginiuus Mines Corporation, a
Colorado corporation, as lessor, and Sunshine, as lessee, filed as Exhibit No. 10.1 to
Sunshine's Quarterly Report on Form 10-Q for the period ended March 31, 1994, and
incorporated herein by reference.
* 10.10 Agreement dated July 1, 1995 by and between Consolidated Silver Corporation and Sunshine
Precious Metals, Inc., as purchaser, for the purchase of a certain mining property, filed
as Exhibit 10.1 to Sunshine's Quarterly Report on Form 10-Q for the period ended June 10,
1995, and incorporated herein by reference.
** 10.11 Registration Rights Agreement dated November 24, 1997, between the Company and Stonehill
Partners, L.P., GRS Partners, Aurora Limited Partnership and Stonehill Offshore Partners
Limited.
** 10.12 Specimen form of Warrant to Purchase Common Stock issued on November 24, 1997, to
affiliates of Stonehill Investment Corp.
** 10.13 Specimen form of Senior Convertible Promissory Note issued on November 24, 1997, to
affiliates of Stonehill Investment Corp.
*** 23.1 Consent of Haynes and Boone, LLP (included in the opinion filed as Exhibit 5.1).
** 23.2 Consent of Ernst & Young LLP.
** 24.1 Power of Attorney (set forth on signature page hereof).
- --------------------------
</TABLE>
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration
Statement (or the most recent post-effective
amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the
information set forth in the Registration Statement
(notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar of securities would not exceed that
which
II-2
<PAGE> 18
was registered) and any deviation from the low or
high end of the estimated maximum offering range may
be reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) if in the
aggregate, the changes in volume and price represents
no more than 20% change in the maximum aggregate
offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration
Statement); and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in
the Registration Statement or any material change to
such information in the Registration Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to
be a new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof; and
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for the purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in this
Registration Statement shall be deemed to be a new Registration Statement
relating to the securities offered herein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or otherwise,
the Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as expressed
in the Securities Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of Prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in a
form of Prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
II-3
<PAGE> 19
(2) For the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form of
Prospectus shall be deemed to be a new Registration Statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Dallas, State of Texas, as of the 5th day of
December, 1997.
SUNSHINE MINING AND REFINING COMPANY
By:/s/ JOHN S. SIMKO
-----------------------------------------
John S. Simko
Chief Executive Officer and
Chairman of the Board
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers
and directors of Sunshine Mining and Refining Company (the "Company") hereby
constitutes and appoints John S. Simko and William W. Davis, or either of them
(with full power to each of them to act alone), his true and lawful
attorneys-in-fact and agents, with full power of substitution, for him and on
his behalf and in his name, place and stead, in any and all capacities, to
sign, execute and file any of the documents referred to below relating to the
proposed issuance and registration of shares of Common Stock and the
Registration Statement on Form S-3 under the Securities Act of 1933, as
amended, pertaining thereto, including any amendments increasing the amount of
securities for which registration is being sought, with all exhibits and any
and all documents required to be filed with respect thereto with any regulatory
authority, granting unto said attorneys, and each of them, full power and
authority to do and perform each and every act and thing requisite and
necessary to be done in and about the premises in order to effectuate the same
as fully to all intents and purposes as he himself might or could do if
personally present, thereby ratifying and confirming all that said
attorneys-in-fact and agents, or either of them, or their or his substitute or
substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and as of the 5th day of December, 1997:
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ JOHN S. SIMKO Director, Chief Executive Officer and
- ----------------------------------------------- Chairman of the Board
John S. Simko
/s/ G. CHRIS ANDERSEN Director
- -----------------------------------------------
G. Chris Andersen
/s/ DANIEL D. JACKSON Director
- -----------------------------------------------
Daniel D. Jackson
/s/ V. DALE BABBITT Director
- -----------------------------------------------
V. Dale Babbitt
/s/ WILLIAM W. DAVIS Executive Vice President,
- ----------------------------------------------- Chief Financial and
William W. Davis Accounting Officer
</TABLE>
II-5
<PAGE> 21
<TABLE>
<S> <C>
/s/ ROBERT B. SMITH, JR. Director
- -----------------------------------------------
Robert B. Smith, Jr.
/s/ OREN G. SHAFFER Director
- -----------------------------------------------
Oren G. Shaffer
/s/ GEORGE M. ELVIN Director
- -----------------------------------------------
George M. Elvin
</TABLE>
II-6
<PAGE> 22
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT EXHIBIT
------- -------
NO.
---
<S> <C>
* 4.1 Certificate of Incorporation, filed as Exhibit 3.1 to the Registrant's Registration
Statement on Form S-4 (Registration No. 33-98876), which exhibit is incorporated herein by
reference.
* 4.2 Amendment to Certificate of Incorporation, filed as Exhibit 4.1 to the Registrant's Current
Report on Form 8-K dated May 22, 1996 (File No. 33-98876), which exhibit is incorporated
herein by reference.
* 4.3 Bylaws, filed as Exhibit 3.2 to the Registrant's Registration Statement on Form
S-4 (Registration No. 33-99876), which exhibit is incorporated herein by reference.
* 4.4 Specimen Common Stock Certificate, filed as Exhibit 4.2 to the Registrant's Registration
Statement on Form S-1 (Registration No. 33-63446), which exhibit is incorporated herein by
reference.
*** 5.1 Opinion of Haynes and Boone, LLP.
* 10.1 Employee Nonqualified Stock Option Plan of Sunshine, filed as Exhibit 10.9 to Sunshine's
Annual Report on Form 10-K for the fiscal year ended December 31, 1986, and incorporated
herein by reference.
* 10.2 Amendment No. 1 to the 1987 Employee Nonqualified Stock Option Plan of Sunshine, filed as
Exhibit 10.8 to Sunshine's Registration Statement on Form S-1 (Registration No. 33-63446),
as amended and incorporated herein by reference.
* 10.3 Amendment No. 2 to the 1987 Employee Nonqualified Stock Option Plan of Sunshine, filed as
Exhibit 10.1 to Sunshine's Quarterly Report on Form 10-Q for the period ended June 30,
1994, and incorporated herein by reference.
* 10.4 1993 Incentive Stock Option Plan of Sunshine, filed as Exhibit 10.18 to Sunshine's
Registration Statement on Form S-1 (Registration No. 33-63446), as amended and incorporated
herein by reference.
* 10.5 1995 Employee Nonqualified Stock Option Plan of Sunshine.
* 10.6 Executive Employment Agreement entered into as of January 1, 1994, between Sunshine and
John S. Simko, filed as Exhibit 10.8 to Sunshine's Registration Statement on Form S-1
(Registration No. 33-73608), as amended and incorporated herein by reference.
* 10.7 Executive Employment Agreement entered into as of January 1, 1994, between Sunshine and
William W. Davis, filed as Exhibit 10.9 to Sunshine's Registration Statement on Form S-1
(Registration No. 33-73608), as amended and incorporated herein by reference.
* 10.8 Executive Employment Agreement entered into as of January 1, 1994, between Sunshine and
Harry F. Cougher, filed as Exhibit No. 10.10 to Sunshine's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993, and incorporated herein by reference.
* 10.9 Mining Lease, dated March 15, 1994, by and between Revenue-Virginiuus Mines Corporation, a
Colorado corporation, as lessor, and Sunshine, as lessee, filed as Exhibit No. 10.1 to
Sunshine's Quarterly Report on Form 10-Q for the period ended March 31, 1994, and
incorporated herein by reference.
* 10.10 Agreement dated July 1, 1995 by and between Consolidated Silver Corporation and Sunshine
Precious Metals, Inc., as purchaser, for the purchase of a certain mining property, filed
as Exhibit 10.1 to Sunshine's Quarterly Report on Form 10-Q for the period ended June 10,
1995, and incorporated herein by reference.
</TABLE>
<PAGE> 23
<TABLE>
<S> <C>
** 10.11 Registration Rights Agreement dated November 24, 1997, between the Company and Stonehill
Partners, L.P., GRS Partners, Aurora Limited Partnership and Stonehill Offshore Partners
Limited.
** 10.12 Specimen form of Warrant to Purchase Common Stock issued on November 24, 1997, to
affiliates of Stonehill Investment Corp.
** 10.13 Specimen form of Senior Convertible Promissory Note issued on November 24, 1997, to
affiliates of Stonehill Investment Corp.
*** 23.1 Consent of Haynes and Boone, LLP (included in the opinion filed as Exhibit 5.1).
** 23.2 Consent of Ernst & Young LLP.
** 24.1 Power of Attorney (set forth on signature page hereof).
- --------------------------
</TABLE>
* Previously filed.
** Filed herewith.
*** To be filed by amendment.
<PAGE> 1
EXHIBIT 10.11
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is entered into
as of November 24, 1997, by and among SUNSHINE MINING AND REFINING COMPANY, a
Delaware corporation (the "Company"), on the one hand, and Stonehill Partners,
L.P., GRS Partners, Aurora Limited Partnership and Stonehill Offshore Partners
Limited (collectively, the "Stockholders"), on the other hand.
R E C I T A L S
A. This Agreement is entered into pursuant to the Purchase Agreement
dated as of November 24, 1997 (the "Purchase Agreement"), by and among
the Company and each of the Stockholders.
B. The Purchase Agreement provides for the issuance by the Company of an
aggregate of $15,000,000 of senior unsecured notes (the "Notes") which
are convertible into shares of the Company's common stock, par value
$.01 per share (each share of such class being referred to herein as a
share of "Common Stock", and the shares to be issued on conversion of
the Notes being referred to herein as the "Conversion Shares"), to the
Stockholders on the date hereof.
C. The Purchase Agreement also provides for the issuance by the Company
of shares of Common Stock to the Stockholders (i) in lieu of cash to
satisfy the coupon payments and certain other payments on the Notes
(the "Payment Shares") and (ii) upon the exercise of certain warrants
issued to them pursuant to the Purchase Agreement (the "Warrant
Shares").
D. The Company and the Stockholders wish to provide for the registration
of the Conversion Shares, the Coupon Shares and the Warrant Shares on
the terms and conditions set forth herein.
A G R E E M E N T
Based on the recitals set forth above and the promises contained
herein, the parties agree as follows:
1. Definitions. Any capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Notes or the
Purchase Agreement. As used herein, the following terms shall have the
following meanings:
"Agreement" has the meaning set forth in the preamble.
"Average Bid Price" has the meaning set forth in the Purchase
Agreement.
"Business Day" means a day other than a Saturday, a Sunday, a day on
which the banking institutions in the State and City of New York are authorized
or obligated by law or executive order to close or a day that is declared a
national or New York state holiday.
<PAGE> 2
"Closing Date" means the date of this Agreement.
"Company" has the meaning set forth in the preamble.
"Company Counsel" has the meaning set forth in Section 2(a).
"Common Stock" has the meaning set forth in the Recitals.
"Conversion Price" means, with respect to any Note, the conversion
price then in effect with respect to such Note as specified therein.
"Conversion Shares" has the meaning set forth in the Recitals.
"Default" means a Registration Default or an Effectiveness Default, as
the case may be.
"Effectiveness Default" has the meaning set forth in Section 3(a).
"Effectiveness Period" has the meaning set forth in Section 2(a).
"Effectiveness Target Date" means the 90th day after the Closing Date.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Liquidated Damages" has the meaning set forth in Section 3(a).
"Notes" has the meaning set forth in the Recitals.
"Outstanding Principal" has the meaning set forth in Section 3(a).
"Payment Shares" has the meaning set forth in the Recitals.
"Person" means a corporation, an association, a partnership, an
individual, a joint venture, a joint stock company, a trust, an unincorporated
organization or a government or an agency or political subdivision thereof.
"Prospectus" means the prospectus included in the Registration
Statement, as amended or supplemented including, without limitation, by any
post-effective amendments thereto, and all material incorporated by reference
into such prospectus.
"Purchase Agreement" has the meaning set forth in the Recitals.
"Registration Default" has the meaning set forth in Section 3(a).
"Registration Statement" has the meaning set forth in Section 2(a).
- 2 -
<PAGE> 3
"Requisite Information" has the meaning set forth in Section 2(b).
"Rule 144" means Rule 144 (as currently in effect or as amended or any
successor or similar provision) promulgated by the SEC under the Securities
Act.
"Rule 415" means Rule 415 (as currently in effect or as amended or any
successor or similar provision) promulgated by the SEC under the Securities
Act.
"SEC" or "Commission" means the United States Securities and Exchange
Commission.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
"Selling Stockholder" means any Stockholder whose Shares (in whole or
in part) are included in a Registration Statement.
"Shares" means (a) the Conversion Shares, the Coupon Shares and the
Warrant Shares and (b) any securities issued or issuable in respect of the
Conversion Shares, the Coupon Shares or the Warrant Shares by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, reclassification, merger, consolidation or similar event, and
any other securities issued pursuant to any other pro rata distribution with
respect to such shares of Common Stock. For purposes hereof, a share of Common
Stock ceases to be an Conversion Share, a Coupon Share, a Warrant Share or a
Share (each as defined herein) when (i) it has been effectively registered
under the Securities Act and sold or distributed pursuant to an effective
Registration Statement covering it or (ii) it has become eligible, in the
opinion of counsel to the Company, to be sold or distributed pursuant to Rule
144(k).
"Stockholders" has the meaning set forth in the preamble.
"Trading Day" has the meaning set forth in the Purchase Agreement.
"Underwritten Offering" means a registration in which securities of
the Company are sold to an underwriter for reoffering to the public.
"Violations" has the meaning set forth in Section 8(a).
"Warrant Shares" has the meaning set forth in the Recitals.
2. Shelf Registration.
(a) The Company hereby agrees to use all reasonable
efforts to:
(i) as soon as practicable after the date hereof,
file with the SEC a registration statement for an offering to
be made on a continuous basis pursuant to Rule 415 under the
Securities Act (or any successor provision thereto) covering
all of the Shares (the "Registration Statement"); and
- 3 -
<PAGE> 4
(ii) cause the Registration Statement to be
declared effective pursuant to the Securities Act as soon as
practicable after the date hereof but not later than the
Effectiveness Target Date, and subject to Sections 4(d) and
4(f), use all reasonable efforts to keep the Registration
Statement continuously effective and available for resale of
the Shares under the Securities Act for the period (the
"Effectiveness Period") ending on the earlier of (A) the date
on which there ceases to be outstanding any Shares and (B) the
date on which the Company receives an opinion from its legal
counsel ("Company Counsel") to the effect that all Shares can
be freely traded without the continued effectiveness of the
Registration Statement, and, in the case of (A) or (B), no
further Shares are issuable under the Notes or the Warrants.
(b) The Company may require each Selling Stockholder to
furnish to the Company, within three (3) Business Days after the Closing Date
and thereafter promptly as any additional information becomes known to such
Selling Shareholder, such information regarding the Selling Stockholder and the
distribution of such Selling Stockholder's Shares as is required by law to be
disclosed in the Registration Statement (the "Requisite Information").
Subject to Section 4(f), the Company shall file
within three (3) Business Days of the receipt of notice from any Selling
Stockholder which includes the Requisite Information with respect to such
Selling Stockholder, a prospectus supplement pursuant to Rule 424 under the
Securities Act (or any successor provision thereto) to amend or supplement the
Registration Statement to include in the Registration Statement the Requisite
Information as to such Selling Stockholder (and the Shares held by such Selling
Stockholder). The Company shall provide each Selling Stockholder a copy of
such Prospectus as so amended or supplemented containing the Requisite
Information within three (3) Business Days of filing such Prospectus with the
Commission in order to permit such Selling Stockholder to comply with the
prospectus delivery requirements of the Securities Act in a timely manner with
respect to any proposed disposition of such Selling Stockholder's Shares.
No Selling Stockholder shall be entitled to use the
Prospectus unless and until such Selling Stockholder shall have furnished the
information required by this Section 2(b) in accordance with the first or
second paragraph hereof and such information with respect to such Selling
Stockholder shall have been included in the Prospectus. If any information
furnished to the Company by a Selling Stockholder for inclusion in the
Registration Statement or the Prospectus becomes materially misleading, such
Selling Stockholder agrees (i) to furnish promptly to the Company all
information required to be disclosed in such Registration Statement in order to
make the information previously furnished to the Company not materially
misleading and (ii) to stop selling or offering for sale Shares pursuant to the
Registration Statement until such Selling Stockholder's receipt of the copies
of a supplemented or amended Prospectus as contemplated by Section 4(b)(xi)
hereof.
3. Liquidated Damages.
(a) The Company and the Stockholders agree that the
Selling Stockholders will suffer damages if the Company fails to fulfill its
obligations pursuant to Section 2 hereof and that it would not be possible to
ascertain the extent of such damages. Accordingly, the
- 4 -
<PAGE> 5
Company hereby agrees to pay liquidated damages ("Liquidated Damages") to each
Selling Stockholder under the circumstances and to the extent set forth below:
(i) if the Registration Statement is not declared
effective by the Commission on or prior to the Effectiveness
Target Date (a "Registration Default"); or
(ii) if, at any time during the Effectiveness
Period for a period of time which shall exceed 20 days in the
aggregate in any 360-day period, the Registration Statement
has been declared effective by the Commission and such
Registration Statement ceases to be effective (without being
succeeded on the same day by a post-effective amendment to
such Registration Statement that cures such failure and that
is immediately declared effective) or use of the Prospectus is
suspended pursuant to Section 4(c), except as set forth in
Sections 4(e) and 4(f) (an "Effectiveness Default").
In the event of any such Registration Default, the Company shall pay as the
sole remedy Liquidated Damages to each Selling Stockholder an amount equal to
one percent (1%) of the aggregate principal amount of such Notes held by such
Selling Stockholder during such Default (the "Outstanding Principal"), for each
30-day period following the Effectiveness Target Date during which a
Registration Default has occurred and is continuing and during which the
Average Bid Price of the Common Stock exceeds the Conversion Price by ten
percent (10%) during any ten (10) consecutive Trading Days during such 30-day
period.
In the event of an initial Effectiveness Default during any 360-day period, the
Company shall pay as the sole remedy Liquidated Damages to each Selling
Stockholder an amount equal to one percent (1%) of the Outstanding Principal
and shall pay an additional amount equal to one and one-half percent (1 1/2%)
of the Outstanding Principal for each subsequent 35 day period in such 360-day
period during which the Effectiveness Default is continuing.
The Company may elect, at its sole option, by notice to the Holders given at
any time prior to the 15 Trading Day period referred to below, to pay any
amounts due pursuant to this Section 3, in whole or in part in cash. To the
extent the Company does not elect to pay such amounts in cash within such
specified time period, the Company shall, by issuing on the next Interest
Payment Date following the event that gave rise to the Liquidated Damages the
number of shares of the Company's Common Stock (rounded to the nearest whole
number), valued as provided below, with an aggregate value equal to the amount
of Liquidated Damages to be paid in stock. For this purpose, the shares of the
Company's Common Stock shall be valued at the Average Bid Price for the 15
Trading Days ending five (5) days prior to the Interest Payment Date, less a
discount of 5% of such Average Bid Price, or if the Conversion Price is then
being determined pursuant to the Issuer's Election, less a discount of 10% of
such Average Bid Price. In that event, the Company shall, as soon as
practicable after the Interest Payment Date, issue and deliver to the Holders a
certificate or certificates for the number of shares of Common Stock (rounded
to the nearest whole number) issuable to the Holders in payment of Liquidated
Damages or shall issue and deliver such shares as otherwise agreed to by the
Company and the Holders.
Following the cure of all Registration Defaults or Effectiveness Defaults
relating to any Shares, the accrual of Liquidated Damages with respect to such
Shares will cease (without
- 5 -
<PAGE> 6
in any way limiting the effect of any subsequent Registration Default or
Effectiveness Default). A Registration Default shall be cured on the date that
Prospectuses are delivered to the Selling Stockholders after the Registration
Statement is declared effective by the Commission; and an Effectiveness Default
shall be cured on the date Prospectuses are delivered to the Selling
Stockholders after a post-effective amendment to the Registration Statement is
declared effective or suspension of the use of the Prospectus is withdrawn.
Notwithstanding the foregoing, no Selling Stockholder
shall be entitled to Liquidated Damages unless and until such Selling
Stockholder shall have provided all information required by Section 2(b).
(b) The Company shall notify the Stockholders of a
Registration Default or an Effectiveness Default within three (3) Business Days
after each and every date on which such Default occurs. Liquidated Damages
shall be paid by the Company to the Selling Stockholders entitled to Liquidated
Damages on the next Interest Payment Date under the Notes.
(c) All of the Company's obligations set forth in this
Section 3 which are outstanding with respect to any Shares at the time such
security ceases to be a Share shall survive until such time as all such
obligations with respect to such security have been satisfied in full.
4. Registration Procedures.
(a) The parties hereto agree that the Shares shall not be
sold in any Underwritten Offering and the Company shall in no event be required
to cooperate with or pay for any Underwritten Offering.
(b) In connection with the Registration Statement and any
Prospectus required by this Agreement, during the Effectiveness Period the
Company shall, subject to any notice by the Company of the existence of any
fact or the happening of any event described in Section 4(b)(iv)(D) and the
provisions of Sections 4(d) and 4(g):
(i) use all reasonable efforts to keep the
Registration Statement continuously effective for the
Effectiveness Period; upon the occurrence of any event that
would cause the Registration Statement or the Prospectus
contained therein (A) to contain a material misstatement or
omission or (B) to not be effective or to not be usable for
resales of Shares during the Effectiveness Period, the Company
shall in the case of clause (A) file promptly an appropriate
amendment to the Registration Statement or a supplement to the
Prospectus correcting any such misstatement or omission, and,
in the case of either clause (A) or (B), use all reasonable
efforts to cause such amendment, if applicable, to be declared
effective or the Registration Statement and the related
Prospectus to become usable for their intended purposes as
soon as practicable thereafter;
(ii) furnish to each of the Selling Stockholders
and to counsel for the Selling Stockholders, before filing
with the Commission, copies of the Registration Statement and
the Prospectus included therein, and any
- 6 -
<PAGE> 7
pre-effective amendments thereof, which documents shall be
subject to the review of the Selling Stockholders and such
counsel for a period of at least three (3) Business Days; and
shall consider any requests for additions to or modifications
of the Registration Statement and the Prospectus, included
therein and any pre-effective amendments thereto reasonably
made by any Selling Stockholder or counsel for the Selling
Stockholders;
(iii) use all reasonable efforts to prepare and
file with the Commission such amendments and post-effective
amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective during the
Effectiveness Period; use all reasonable efforts to cause the
Prospectus to be supplemented by any required Prospectus
supplement within the time period specified in Section 2(b)
hereof, and as so supplemented, cause the Prospectus to be
filed pursuant to Rule 424 under the Securities Act and to
comply fully with the applicable provisions of Rule 424 under
the Securities Act in a timely manner; and use all reasonable
efforts to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by
the Registration Statement during the Effectiveness Period in
accordance with the intended method or methods of distribution
by the sellers thereof set forth in the Registration Statement
or supplement to the Prospectus;
(iv) use all reasonable efforts to notify the
Selling Stockholders promptly and, if requested by such
Persons, to confirm such advice in writing, (A) when the
Prospectus, any Prospectus supplement or any post-effective
amendment to the Registration Statement applicable to such
Stockholder has been filed, and, with respect to the
Registration Statement or any post-effective amendment
thereto, when the same has become effective, (B) of any
request by the Commission for amendments to the Registration
Statement or amendments or supplements to the Prospectus or
for additional information relating thereto, (C) of the
issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the
Securities Act or of the suspension by any state securities
commission of the qualification of the Shares for offering or
sale in any jurisdiction or of the initiation of any
proceeding for any of the preceding purposes or (D) of the
existence of any fact or of the happening of any event (but
not the substance or details of any such fact or event) that
makes untrue any statement of a material fact made in the
Registration Statement, the Prospectus, any amendment or
supplement thereto or any document incorporated by reference
therein, or that requires the making of any additions to or
changes in the Registration Statement or the Prospectus in
order to make the statements therein not misleading;
(v) if at any time the Commission shall issue any
stop order suspending the effectiveness of the Registration
Statement, or any state securities commission shall issue an
order suspending the qualification or exemption from
qualification of the Shares under state securities or Blue Sky
laws, use all reasonable efforts to obtain the withdrawal or
lifting of such order at the earliest possible time;
- 7 -
<PAGE> 8
(vi) if requested by any Selling Stockholder,
within the period specified in Section 2(b) hereof, use all
reasonable efforts to incorporate in the Registration
Statement or Prospectus, pursuant to a supplement or
post-effective amendment, if necessary, such Requisite
Information as such Selling Stockholders request to have
included therein, and use all reasonable efforts to make all
required filings of any such Prospectus supplement or
post-effective amendment as soon as practicable after the
Company is notified of the matters to be incorporated in such
Prospectus supplement or post-effective amendment; provided,
however, that the Company shall not be required to take any
action pursuant to this Section 4(b)(vi) that would, in the
opinion of Company Counsel, violate applicable law or to
include information to which the Company reasonably objects;
(vii) deliver to each Selling Stockholder, without
charge, as many copies of the Registration Statement and the
Prospectus (including each preliminary prospectus intended for
public distribution) (including documents incorporated by
reference therein and exhibits thereto) and any amendment or
supplement thereto as such Selling Stockholder reasonably may
request; subject to Section 4(c) below, the Company hereby
consents to the use of the Prospectus and any amendment or
supplement thereto by each of the Selling Stockholders in
connection with the offering and the sale of the Shares
covered by the Prospectus or any amendment or supplement
thereto in conformity with the Plan of Distribution set forth
in the Prospectus and in compliance with all applicable laws
and this Agreement;
(viii) take all such other actions in connection
therewith as are reasonable and customary in order to expedite
or facilitate the disposition of the Shares pursuant to the
Registration Statement contemplated by this Agreement, all to
such extent as may be reasonably requested by any Stockholder
in connection with any sale or resale pursuant to the
Registration Statement contemplated by this Agreement;
(ix) prior to any public offering of Shares,
cooperate with the Selling Stockholders, and their respective
counsel in connection with the registration and qualification
of the Shares under the securities or Blue Sky laws of such
domestic jurisdictions as the Selling Stockholders may
reasonably request; and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in
such jurisdictions of the Shares covered by the Registration
Statement; provided, however, that in no event shall the
Company be obligated to (i) qualify as a foreign corporation
or as a dealer in securities in any jurisdiction where it is
not now so qualified, (ii) file any general consent to service
of process in any jurisdiction where it is not as of the date
hereof so subject or (iii) subject itself to taxation in any
jurisdiction if it is not so subject;
(x) cooperate with the Selling Stockholders to
facilitate the timely (but in no event later than one (1)
Business Day after such request) preparation and delivery of
certificates representing Shares to be sold and not bearing
any restrictive legends; and enable such Shares to be in such
- 8 -
<PAGE> 9
denominations and registered in such names as the Selling
Stockholders may request;
(xi) as soon as reasonably practicable after the
occurrence of any fact or event of the kind described in
Section 4(b)(iv)(D) above, use all reasonable efforts to
prepare a supplement or post-effective amendment to the
Registration Statement or related Prospectus or any document
incorporated therein by reference or file any other required
document so that, as thereafter delivered to the purchasers of
Shares, the Prospectus shall not contain an untrue statement
of a material fact or omit to state any material fact
necessary, to make the statements made therein not misleading
in the light of the circumstances in which they were made;
provided, however, that notwithstanding anything to the
contrary herein, the Company shall not be required to prepare
and file such a supplement or post-effective amendment or
document if the fact no longer exists;
(xii) make generally available to its security
holders, in a regular filing on Form 10-Q or Form 10-K, a
consolidated earnings statement meeting the requirements of
Rule 158 under the Securities Act (which need not be audited)
for the twelve-month period commencing after the effective
date of the Registration Statement.
(xiii) cause the Common Stock covered by the
Registration Statement to be listed on the New York Stock
Exchange or such other national securities exchange or
automated quotation system on which the Common Stock is then
listed or quoted; and
(xiv) provide promptly to each Stockholder upon
request any document filed with the Commission pursuant to the
requirements of Section 13 and Section 15 of the Exchange Act.
(c) Each Stockholder agrees by acquisition of a Share
that, upon receipt of any notice from the Company of the existence of any fact
or event of the kind described in Section 4(b)(iv)(D) hereof, such Stockholder
shall: (i) keep the fact of such notice confidential and (ii) stop selling or
offering for sale Shares pursuant to the Registration Statement until such
Stockholder's receipt of the copies of a supplemental or amended Prospectus as
contemplated by Section 4(b)(xi) hereof, or until it receives advice in writing
from the Company that the use of the Prospectus may be resumed, and has
received copies of any additional or supplemental filings that are incorporated
by reference in the Prospectus. If so directed by the Company, each
Stockholder shall deliver to the Company (at the expense of the Company) all
copies, other than permanent file copies then in such Stockholder's possession,
of the Prospectus covering such Shares that was current at the time of receipt
of such notice.
(d) Notwithstanding any provision of this Agreement to
the contrary, it shall not be a breach or violation of any obligation of the
Company hereunder if the Company fails to take any action otherwise required
hereunder because, in its reasonable determination, such action would require
the Company to disclose material, non-public information that the Company has a
bona fide business or legal reason for not disclosing regardless of whether the
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<PAGE> 10
Company caused such material, non-public information to exist; provided, that
any suspension of the use of the Prospectus included in the Registration
Statement as a result of this Section 4(d) shall not effect the Company's
obligation to pay Liquidated Damages pursuant to Section 3.
(e) The Company shall have no obligation to keep a
Prospectus usable or to give notice that a Prospectus is not usable by a
particular Selling Stockholder to the extent such Prospectus is not usable by
such Selling Stockholder because current Requisite Information with respect to
such Selling Stockholder is not included therein because such Selling
Stockholder has not provided such information to the Company in accordance with
Section 2(b).
(f) Notwithstanding anything to the contrary contained
herein, the Company shall not be obligated to amend the Registration Statement
or amend or supplement the Prospectus more often than quarterly if the sole
reason for such amendment or supplement is the furnishing of new or amended
information from one or more Selling Stockholders, and until any such amendment
or supplement is filed, such Selling Stockholder or Selling Stockholders shall
not sell any Shares pursuant to the then current Registration Statement and
Prospectus.
5. Registration Expenses.
All expenses incident to the Company's performance of or
compliance with this Agreement shall be borne by the Company regardless of
whether the Registration Statement becomes effective, including, but not
limited to, the following: (i) all registration and filing fees and expenses;
(ii) all fees and expenses associated with compliance with federal securities
and state Blue Sky or securities laws; (iii) all expenses of printing of
copying (including printing of any certificates evidencing the Shares and
copying of Prospectuses), messenger and delivery services and telephone; (iv)
all fees and disbursements of Company Counsel; (v) all application and filing
fees in connection with listing any securities on a national securities
exchange or automated quotation system; and (vi) all fees and disbursements of
independent certified public accountants of the Company (including the expenses
of any special audit and comfort letters required by or incident to such
performance).
The Company shall, in any event, bear its own internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company.
6. Other Securities. The Company may, in its sole discretion,
include in any Registration Statement the issuance of securities by the Company
and the sale or distribution of securities previously issued to, or securities
issuable upon exercise of options or warrants previously issued to, other
persons.
7. Stockholder Undertakings. Each Stockholder covenants with the
Company as follows:
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<PAGE> 11
(a) No Stabilization. No Stockholder shall effect any
stabilization transactions or engage in any stabilization activity proscribed
by Regulation M under the Exchange Act in connection with any securities of the
Company during the period of any distribution of the Shares by Selling
Stockholders pursuant to any Registration Statement.
(b) Brokers. Each Selling Stockholder (i) shall furnish
each broker through whom such Selling Stockholder offers the Shares such number
of copies of any Prospectus and any supplements thereto or amendments thereof
which such broker may require (provided that the Company has provided such
Selling Stockholder with such Prospectus, supplements and amendments), (ii)
shall inform such broker as to the number of Shares offered through such
broker, that such Shares are part of a distribution and that such broker is
subject to the provisions of Regulation M under the Exchange Act until such
time as such broker has completed the sale of all such Shares, and (iii) shall
notify such broker when distribution of the Shares by such Selling Stockholder
pursuant to any Registration Statement has been completed or any Registration
Statement is no longer effective or is withdrawn.
(c) Amendments and Supplements. Each Selling Stockholder
shall promptly furnish to each person (including each broker) to whom such
Selling Stockholder has delivered copies of the Prospectus an equivalent number
of copies of any amendment thereof or supplement thereto (provided that the
Company has provided such Selling Stockholder with such amendment or
supplement).
(d) Transaction Information. Each Stockholder shall
report promptly to the Company upon completion of the distribution of such
Selling Stockholder's Shares pursuant to any Registration Statement.
(e) Exchange Act Compliance. Each Selling Stockholder
shall, at any time such Selling Stockholder is engaged in a distribution of the
Shares under any Registration Statement, comply to the extent required with
Rules 10b-5 and Regulation M (as currently in effect or as amended or any
successor or similar provisions) promulgated under the Exchange Act and shall
distribute the Shares solely in the manner described in any Registration
Statement, and shall not do any of the following during the period from the
effective date of any Registration Statement until the completion of any
offering of the Shares by such Selling Stockholder pursuant to such
Registration Statement:
(i) Bid for or purchase, for any account in which
such Selling Stockholder or any affiliate of such Selling
Stockholder has a beneficial interest, any securities of the
Company other than in transactions permitted by Regulation M
under the Exchange Act;
(ii) Attempt to induce any person to purchase any
securities of the Company other than in transactions permitted
by Regulation M under the Exchange Act; and
(iii) Pay or offer or agree to pay to anyone,
directly or indirectly, any compensation for soliciting
another to purchase any securities of the Company on a
national securities exchange or pay or offer or agree to pay
to anyone any
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<PAGE> 12
compensation for purchasing securities of the Company on a
national securities exchange other than those securities
offered by such Selling Stockholder.
(f) Publicity; Selling Efforts. Each Selling Stockholder
shall not, during the period of any offering by such Selling Stockholder of any
Shares under any Registration Statement, use or disseminate any information
concerning the Company other than the Prospectus (or any amendment thereof or
supplement thereto furnished by the Company) and may not undertake any form of
publicity with respect to the Company or engage in any similar activities that
may be deemed to be an unlawful selling effort within the meaning of Section 10
of the Exchange Act.
(g) Material Nonpublic Information. A Stockholder shall
not offer to sell, sell or otherwise enter into any transaction in connection
with any Shares if the Stockholder is aware of material nonpublic information
regarding the Company or its subsidiaries.
(h) Brokerage Commissions. Except as disclosed in the
Prospectus, a Selling Stockholder will not pay unusual or special brokerage
commissions (other than ordinary brokerage arrangements) on any sales effected
through a broker, and no selling arrangement will have been entered into
between a Selling Stockholder and any securities dealer or broker.
8. Indemnification; Contribution.
(a) Indemnification by Company. The Company shall
indemnify and hold harmless, to the extent permitted by law, each Selling
Stockholder, its officers and directors, partners and stockholders, and each
person, if any, who controls such Selling Stockholder (within the meaning of
the Securities Act) against all losses, claims, damages, liabilities and
expenses (including without limitation reasonable attorneys' fees) insofar as
such losses, claims, damages, liabilities and expenses arise out of or are
based on (i) any untrue or alleged untrue statement of a material fact
contained in any Registration Statement under which Shares owned by such
Selling Stockholder were registered under the Securities Act, any Prospectus or
preliminary prospectus or any amendment thereof or supplement thereto or any
documents filed under state securities or "Blue Sky" laws in connection
therewith, (ii) any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein
(in the case of a Prospectus, in the light of the circumstances under which
they were made) not misleading or (iii) any violations or alleged violation of
the Securities Act, the Exchange Act, any applicable state securities law or
any rule or regulation promulgated under the Securities Act, the Exchange Act
or any applicable state securities law in connection with the offering covered
by such Registration Statement (items (i), (ii) and (iii) are collectively
referred to herein as "Violations"); and the Company will reimburse each such
Selling Stockholder, its officers and directors, partners and stockholders and
each person, if any, who controls such Selling Stockholder for reasonable legal
or other expenses reasonably incurred by them in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the indemnity agreement contained in this Section 8(a) shall not
apply to amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of the Company,
which consent shall not be unreasonably withheld, nor shall the Company be
liable in any such case for any loss, claim, damage, liability or action to the
extent that it arises out of or is based on a Violation that occurs in reliance
upon and
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<PAGE> 13
in conformity with written information furnished expressly for use in
connection with such registration by any Selling Stockholder, officer,
director, or controlling person of any Selling Stockholder; and provided
further, however, that the foregoing indemnity shall not inure to the benefit
of any Selling Stockholder to the extent such loss, liability claim, damage or
expense occurred as a result of any Selling Stockholder's breach of this
Agreement.
(b) Indemnification by Each Selling Stockholder. In
connection with any Registration Statement, the Selling Stockholders shall
jointly and severally indemnify and hold harmless, to the extent permitted by
law, the Company, the Company's directors and officers, partners and
stockholders and each person, if any, who controls (within the meaning of the
Securities Act) the Company against any losses, claims, damages, liabilities
and expenses (including without limitation reasonable attorneys' fees) insofar
as such losses, claims, damages, liabilities and expenses arise out of or are
based on a Violation which occurs (i) in reliance upon and in conformity with
written information furnished expressly for use in connection with such
registration by any Selling Stockholder, officer, director, or controlling
person of any Selling Stockholder or (ii) in connection with any Selling
Stockholder's breach of this Agreement; and the Selling Stockholders will
reimburse the Company, its officers and directors, partners and stockholders
and each person, if any, who controls the Company for reasonable legal or other
expenses reasonably incurred by the Company in connection with investigating or
defending any such loss, claim, damage, liability or action.
(c) Indemnification Procedures. Any person entitled to
indemnification hereunder shall give prompt written notice to the indemnifying
party after the receipt by such person of any written notice of the
commencement of any action, suit, proceeding or investigation or threat thereof
made in writing for which such person will claim indemnification or
contribution pursuant hereto and permit the indemnifying party to participate
therein and, to the extent that it desires, jointly with any other indemnifying
party similarly situated, to assume the defense of such claim with counsel
reasonably satisfactory to such indemnified party. If the indemnifying party
elects to assume the defense of a claim, it shall not be liable to such
indemnified party for legal expenses subsequently incurred by such indemnified
party in connection with the defense thereof other than reasonable costs of
investigation and except as otherwise provided below; provided, however, that
such indemnified party shall, at all times, cooperate in the defense of the
indemnified party. The indemnifying party shall be liable to the indemnified
party for legal or other expenses incurred by the indemnified party even if the
indemnifying party has offered to assume the defense thereof if (i) the
employment of counsel by the indemnified party has been authorized in writing
by the indemnifying party, (ii) the indemnified party shall have reasonably
concluded that there may be a conflict of interest between the indemnified
party and the indemnifying party in conduct of the defense of such action or
(iii) the indemnifying party shall not in fact have employed counsel to assume
the defense of such action. If the indemnifying party is not entitled to, or
elects not to, assume the defense of a claim, then it will not be obligated to
pay the fees and expenses of more than one counsel with respect to such claim.
The indemnifying party will not be subject to any liability for any settlement
made without its consent. If the failure of any person to give prompt notice
to the indemnifying party of any claim with respect to which it seeks
indemnification prejudices such indemnifying party, such indemnifying party
shall be relieved of its obligation to indemnify such person to the extent that
such indemnifying party has been prejudiced; provided, however, that the
indemnifying party shall not be so relieved if the failure to give
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<PAGE> 14
prompt notice to the indemnifying party was beyond the control of the
indemnified party. No indemnifying party will consent to entry of any judgment
or enter into any settlement agreement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect of such claim or
litigation.
(d) Contribution. If the indemnification provided for in
this Section from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
(including without limitation reasonable attorneys' fees) referred to therein,
then the indemnifying party, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses (including
without limitation reasonable attorneys' fees) in such proportion as is
appropriate to reflect not only the relative benefits received by the
indemnifying party on the one hand and the indemnified party on the other, but
also the relative fault of the indemnifying party and the indemnified party as
well as any other relevant equitable considerations. The relative fault of
such indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statements of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified parties, and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a result of the
losses, claims, damages, liabilities and expenses (including without limitation
reasonable attorneys' fees) referred to above shall be deemed to include,
subject to the limitations set forth in Section 7(c), any legal or other fees
or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto acknowledge that it would not be just and
equitable if contribution pursuant to this Section 8(d) were determined by pro
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately-preceding
paragraph. No person guilty of fraudulent misrepresentation (within the
meaning of Paragraph 11(f) of the Securities Act) shall be entitled to
contribution from any person who is not guilty of such fraudulent
misrepresentation.
9. Termination. This Agreement and the obligations of the
Company hereunder shall terminate on the earliest of (a) the first date on
which no shares of Common Stock held by any Stockholder constitute Shares
hereunder, (b) sixty (60) days after no further Shares are issuable under the
Notes or Warrants and (c) the date on which each party hereto agrees in writing
to such termination.
10. Rule 144 Reporting. With a view to making available to the
Stockholders the benefits of certain rules and regulations of the SEC that may
permit the sale of the Shares to the public without registration, the Company
agrees to use commercially reasonable efforts during the term of this Agreement
to (a) make and keep public information available, as those terms are
understood and defined in Rule 144, (b) file with the SEC, in a timely manner,
all reports and other documents required of the Company under the Exchange Act
and (c) so long as any Stockholder owns any Shares, furnish to such Stockholder
upon written request a written statement by the Company as to the Company's
compliance with the
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<PAGE> 15
reporting requirements of Rule 144, a copy of the most recent annual or
quarterly report of the Company and such other reports, documents and
information as a Stockholder may reasonably request in availing himself or
itself of any rule or regulation of the SEC allowing it to sell any such
securities without registration.
11. Miscellaneous.
(a) Successors and Assigns. The registration rights
provided hereunder are transferable only to permitted transferees of the Notes
and the Warrants as set forth in the terms thereof. Any transfer or assignment
in contravention of this Section shall be null and void.
(b) Entire Agreement; Amendment. This Agreement and the
other documents delivered pursuant hereto and referenced herein constitute the
full and entire understanding and agreement between the parties and supersede
any other agreement, written or oral, with regard to the subject matter hereof.
Except as expressly provided herein, neither this Agreement nor any term hereof
may be amended, waived, discharged or terminated, except by a written
instrument signed by the parties hereto.
(c) Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
certified or registered mail, postage prepaid with return receipt requested,
telecopy (with hardcopy delivered by overnight courier service), or delivered
by hand, messenger or overnight courier service, and shall be deemed given when
received at the addresses of the parties set forth below, or at such other
address furnished in writing to the other parties hereto.
If to the Company: SUNSHINE MINING AND REFINING COMPANY
877 W. Main Street, Suite 600
Boise, Idaho 83702
Attention: John S. Simko, President
(208) 342-0004 (fax)
with a copy to: Haynes and Boone, LLP
Suite 3100
901 Main Street
Dallas, Texas 75202
Attention: Janice V. Sharry
(214) 651-5940 (fax)
If to the Stockholders: c/o Stonehill Investment Corp.
110 E. 59th Street
30th Floor
New York, New York 10022
Attention: John Motulsky
(212) 355-5200 (fax)
with a copy to: Proskauer Rose Goetz & Mendelsohn, LLP
1585 Broadway
New York, New York 10036
Attention: Lawrence H. Budish
(212) 969-2900 (fax)
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<PAGE> 16
(d) No Third Party Beneficiary, Etc. There shall be no
third party beneficiary hereof. Neither the availability of, nor any limit on,
any remedy hereunder shall limit the remedies of any party hereto against third
parties.
(e) Reformation; Severability. In case any provision
hereof shall be invalid, illegal or unenforceable, such provision shall be
reformed to best effectuate the intent of the parties and permit enforcement
thereof, and the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby. If such
provision is not capable of reformation, it shall be severed from this
agreement and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
(f) Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be an original, but all of which
together shall constitute one and the same instrument. Any counterpart may be
delivered by facsimile; provided, however, that attachment thereof shall
constitute the representation and warranty of the person delivering such
signature that such person has full power and authority to attach such
signature and to deliver this Agreement. Any facsimile signature shall be
replaced with an original signature as promptly as practicable.
(g) Titles and Subtitles. The titles of the paragraphs
and subparagraphs hereof are for convenience of reference only and are not to
be considered in construing this Agreement. References to "Sections" herein
are references to sections of this Agreement. The words "herein," "hereof,"
"hereto" and "hereunder" and other words of similar import refer to this
Agreement as a whole and not to any particular Article, Section or other
subdivision.
(h) Governing Law; Attorneys' Fees. This Agreement shall
be governed by, construed, interpreted and applied in accordance with the laws
of the State of New York, without giving effect to any conflict of laws rules
that would refer the matter to the laws of another jurisdiction.
* * * * *
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<PAGE> 17
This Agreement has been executed and delivered as of the date first
written above.
The Company:
SUNSHINE MINING AND REFINING COMPANY
By: /s/ WILLIAM W. DAVIS
----------------------------------
William W. Davis, Executive Vice
President and Chief Financial Officer
The Stockholders:
STONEHILL PARTNERS, L.P.
By: /s/ JOHN MOTULSKY
----------------------------------
John Motulsky, General Partner
STONEHILL INVESTMENT CORP., for and on
behalf of GRS PARTNERS and
AURORA LIMITED PARTNERSHIP
By: /s/ JOHN MOTULSKY
----------------------------------
John Motulsky, Vice President
STONEHILL OFFSHORE PARTNERS LIMITED
By: STONEHILL ADVISORS, LLC
By: /s/ JOHN MOTULSKY
--------------------------------
John Motulsky, Managing Member
- 17 -
<PAGE> 1
EXHIBIT 10.12
NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND, UNLESS REGISTERED, MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS.
WARRANT TO PURCHASE SHARES OF COMMON
STOCK OF SUNSHINE MINING AND REFINING COMPANY
This certifies that Neuberger & Berman, LLC, as nominee (the
"Holder"), for value received, is entitled to purchase from Sunshine Mining and
Refining Company, a Delaware corporation (the "Company"), seven hundred
ninety-five thousand (795,000) fully paid and nonassessable shares of the
Company's Common Stock, par value $.01 per share (the "Stock"), at the Stock
Purchase Price (as defined herein) at any time or from time to time on or after
the Commencement Date (as defined below) but not later than 5:00 p.m. (New York
time) on the Expiration Date (as defined below), upon surrender to the Company
at its principal office at 5956 Sherry Lane, Suite #1621, Dallas, Texas 75202
(or at such other location as the Company may advise Holder in writing) of this
Warrant with the Form of Subscription attached hereto duly filled in and signed
and upon payment by cash, certified or bank check or wire transfer of the
aggregate Stock Purchase Price for the number of shares for which this Warrant
is being exercised determined in accordance with the provisions hereof. The
Stock Purchase Price and, in certain instances, the number of shares
purchasable hereunder are subject to adjustment as provided in Section 3 of
this Warrant. "Commencement Date" means the date on which none of the Senior
Convertible Promissory Notes (the "Notes") issued pursuant to the Purchase
Agreement referred to below remain outstanding. "Expiration Date" means the
earlier of (i) November 24, 2002, or (ii) the occurrence of an event which
causes termination of this Warrant under clause (d) of Section 3.6; provided,
however, if for the 90 days prior to November 24, 2002 the Registration
Statement (as defined in the Registration Rights Agreement referred to below)
was not continuously effective (other than black-outs not exceeding 10 days in
the aggregate and other than the last three business days prior to November 24,
2002), then the November 24, 2002 date shall be extended until such
Registration Statement has been continuously effective for 90 days (other than
such black-outs). This Warrant is issued pursuant to the Purchase Agreement,
dated as of November 24, 1997, among the Company, the Holder and certain other
persons (the "Purchase Agreement").
This Warrant is subject to the following terms and conditions:
1. Exercise; Issuance of Certificates; Payment for
Shares. Subject to compliance with the conditions set forth herein, this
Warrant is exercisable at the option of Holder at any time or from time to time
on or after the Commencement Date but not later than the Expiration Date for
all or a portion of the shares of Stock which may be purchased
<PAGE> 2
hereunder. The Company agrees that the shares of Stock purchased under this
Warrant shall be and are deemed to be issued to Holder as the record owner of
such shares as of the close of business on the date on which this Warrant shall
have been surrendered and payment made for such shares. Subject to the
provisions of Section 2, certificates for the shares of Stock so purchased,
together with any other securities or property to which Holder is entitled upon
such exercise, shall be delivered to Holder by the Company's transfer agent at
the Company's expense within a reasonable time (but in no event more than ten
days) after the rights represented by this Warrant have been exercised. Each
stock certificate so delivered shall be in such denominations of Stock as may
be requested by Holder and shall be registered in the name of Holder or such
other name as shall be designated by Holder, subject to the limitations
contained in Section 6. If, upon exercise of this Warrant, fewer than all of
the shares of Stock evidenced by this Warrant are purchased prior to the
Expiration Date, one or more new warrants substantially in the form of, and on
the terms in, this Warrant will be issued for the remaining number of shares of
Stock not purchased upon exercise of this Warrant.
2. Shares to be Fully Paid: Reservation of Shares. The
Company covenants and agrees that all shares of Stock which may be issued upon
the exercise of the rights represented by this Warrant (the "Warrant Shares")
will, upon issuance, be duly authorized, validly issued, fully paid and
nonassessable and free from all preemptive rights of any stockholder and free
of all taxes, liens and charges with respect to the issue thereof. The Company
further covenants and agrees that during the period within which the rights
represented by this Warrant may be exercised, the Company will at all times
have authorized and reserved, for the purpose of issue or transfer upon
exercise of the subscription rights evidenced by this Warrant, a sufficient
number of shares of authorized but unissued Stock for such exercise.
Notwithstanding anything to the contrary in this Warrant, in the event that the
shares of Stock to be issued upon exercise of this Warrant, in whole or in
part, would, upon issuance, exceed the Maximum Number (as defined in the
Notes), the Company shall, in lieu of issuing such shares, pay to the Holder an
amount equal to the difference between the Stock Purchase Price and the Closing
Bid Price (as defined in the Notes) on the date of exercise for each share that
would otherwise be issuable upon such exercise.
3. Adjustment of Stock Purchase Price; Number of Shares.
The Stock Purchase Price shall be equal to 110% of the Conversion Price last
in effect under the Notes. If, as a result of an adjustment pursuant to
Section 6.1(a) of the Notes or otherwise, there are different Conversion Prices
in effect for different portions of the Notes, then the Stock Purchase Price
shall be 110% of the lowest Conversion Price pursuant to the Notes.
Upon any adjustments of the Stock Purchase Price based on any
adjustment to the Conversion Price of the Notes pursuant to Section 6.2 of the
Notes only, the holder of this Warrant shall thereafter be entitled to
purchase, at the Stock Purchase Price resulting from such adjustments, the
number of shares obtained by multiplying the Stock Purchase Price without
giving effect to such adjustment by the number of shares purchasable pursuant
hereto immediately prior to such adjustments, and dividing the product thereof
by the Stock Purchase Price resulting from such adjustments.
In case of any consolidation or merger of the Company with or
into another corporation (other than a consolidation or merger in which the
Company is the surviving corporation) or the sale of all or substantially all
of the assets of the Company to another
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<PAGE> 3
corporation, this Warrant thereafter shall be exercisable into the kind and
amount of shares of stock or other securities or property to which a Holder of
the number of shares of the Company's Common Stock issuable upon exercise of
this Warrant would have been entitled upon such consolidation, merger or sale;
and, in such case, appropriate adjustment (as determined in good faith by the
Board of Directors of the Company) shall be made in the application of the
provisions in this Section 3, to the end that the provisions set forth in this
Section 3 (including provisions with respect to changes in and adjustments of
the number of shares of Common Stock into which this Warrant is exercisable)
shall thereafter be applicable, as nearly as reasonably may be, in relation to
any shares of stock or other securities or property thereafter deliverable upon
the exercise of this Warrant.
3.1 Notice of Adjustment. On or immediately
after the Commencement Date, the Company shall give written notice thereof and
of the Stock Purchase Price then in effect, by first class mail, postage
prepaid, addressed to the registered holder of this Warrant at the address of
such holder as shown on the books of the Company. The notice shall be signed
by the Company's chief financial officer and shall state the Commencement Date
and the Stock Purchase Price resulting from any adjustment of the Stock
Purchase Price and, if applicable, the increase or decrease in the number of
shares purchasable at such price upon the exercise of this Warrant, setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.
3.2 Other Notices. If at any time:
(a) the Company shall propose to declare any cash
dividend upon its Stock;
(b) the Company shall propose to declare or make
any dividend or other distribution to the holders of its Stock, whether in
cash, property or other securities;
(c) the Company shall propose to effect any
reorganization or reclassification of the capital stock of the Company or any
consolidation or merger of the Company with or into another corporation or any
sale, lease or conveyance of all or substantially all of the assets of the
Company; or
(d) the Company shall propose to effect a
voluntary or involuntary dissolution, liquidation or winding-up of the Company;
then, in any one or more of said cases, the Company shall give, by certified or
registered mail, postage prepaid, addressed to the holder of this Warrant at
the address of such holder as shown on the books of the Company, (i) at least
30 days' prior written notice of the date on which the books of the Company
shall close or a record shall be taken for such dividend or distribution or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, lease, conveyance, dissolution,
liquidation or winding-up, and (ii) in the case of any such reorganization,
reclassification, consolidation, merger, sale, lease, conveyance, dissolution,
liquidation or winding- up, at least 30 days' written notice of the date when
the same shall take place. Upon the occurrence of an event described in clause
(c), the holder of this Warrant shall be entitled thereafter to receive upon
exercise of this Warrant the kind and amount of shares of stock or other
securities or assets which the holder would have been entitled to receive after
the occurrence of such event had
- 3 -
<PAGE> 4
this Warrant been exercised immediately prior to such event; and in any such
case, appropriate provision shall be made with respect to the rights and
interests of the holder to the end that the provisions of this Warrant
(including, without limitation, provisions with respect to changes in and
adjustments of the Stock Purchase Price and the number of shares purchasable
upon the exercise of this Warrant) shall thereafter be applicable, as nearly as
may be, in relation to any shares of stock, or other securities or assets,
thereafter deliverable upon the exercise of this Warrant. The Company will not
effect any of the transactions described in clause (c) above unless, prior to
the consummation thereof, each person (other than the Company) that may be
required to deliver any cash, stock, securities or other assets upon the
exercise of this Warrant as provided herein shall assume, by written instrument
delivered to, and reasonably satisfactory to, the holder of this Warrant, (x)
the obligations of the Company under this Warrant (and if the Company shall
survive the consummation of any such transaction, such assumption shall be in
addition to, and shall not release the Company from, any continuing obligations
of the Company under this Warrant) and (y) the obligation to deliver to such
holder such cash, stock, securities or other assets as such holder may be
entitled to receive in accordance with the provisions of this Section 3. Upon
the occurrence of an event described in clause (d), this Warrant shall
terminate. The provisions of this Section 3.2 shall similarly apply to
successive transactions.
4. Issue Tax. The issuance of certificates for shares
of Stock upon the exercise of this Warrant shall be made without charge to the
holder of this Warrant for any issue tax in respect thereof; provided, however,
that the Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the then holder of the Warrant being
exercised.
5. No Voting Rights; Limitation of Liability. Nothing
contained in this Warrant shall be construed as conferring upon the Holder
hereof the right to vote or to consent or to receive notice as a stockholder in
respect of meetings of stockholders for the election of directors of the
Company or any other matters or any rights whatsoever as a stockholder of the
Company. No provisions hereof, in the absence of affirmative action by the
Holder to purchase shares of Stock, and no mere enumeration herein of the
rights or privileges of the Holder hereof, shall give rise to any liability of
such Holder for the Stock Purchase Price or as a stockholder of the Company
whether such liability is asserted by the Company or by its creditors.
6. Restrictions on Transferability of Securities;
Compliance With Securities Act.
6.1 Restrictions on Transferability.
Notwithstanding anything in this Warrant to the contrary, neither any of the
Warrants nor any of the shares of Stock issuable upon exercise of any of the
Warrants shall be transferable, except upon compliance by the Holder with any
applicable provisions of the Securities Act and any applicable state securities
or blue sky laws.
6.2 Restrictive Legend. Each certificate
representing the Securities or any other securities issued in respect of the
Securities upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (except with respect to the Warrant
Shares only until such Shares are registered pursuant to the Registration
Rights Agreement executed and delivered pursuant to the Purchase Agreement) be
stamped or
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<PAGE> 5
otherwise imprinted with a legend substantially in the following form (in
addition to any legend required under applicable state securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED ("ACT"), OR ANY
STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY
INTEREST THEREIN MAY BE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH ACT OR SUCH
LAWS AND RULES AND REGULATIONS THEREUNDER.
6.3 Effect of Transfer. Subject to the
provisions of Section 6.1 hereof and this section 6.3, the Holder may transfer
all or any portion of this Warrant by surrendering this Warrant to the Company
together with a completed assignment in the form attached hereto as Exhibit B.
Upon such surrender, the Company shall deliver a new Warrant or Warrants to the
person or persons entitled thereto and, if applicable, shall deliver to the
Holder a new Warrant evidencing the right of the Holder to purchase the balance
of the Warrant Shares subject to purchase hereunder. The term "Holder" as used
herein shall include any transferee to whom this Warrant has been transferred
in accordance with this Section 6.3. The Holder may assign this Warrant to any
other Holder of the Warrants or to any affiliate (as defined under the
Securities Exchange Act of 1934) of the Holder, but shall not assign this
Warrant to any other person without the consent of the Company, which consent
shall not be unreasonably withheld and which consent shall be deemed given if
not denied within three (3) business days of receipt of a notice requesting
consent. Notwithstanding the foregoing, this Warrant may not be assigned or
transferred, in whole or in part, if as a result of such assignment or
transfer, there would be more than an aggregate of 10 Holders of this Warrant
(or portions hereof) and the other Warrants (or portions thereof) issued
pursuant to the Purchase Agreement. Any transfer or assignment in
contravention of this Section shall be null and void.
7. Registration Procedures. The Warrant Shares
constitute "Registrable Securities" as defined in Section 1 of the Registration
Rights Agreement and shall be entitled to registration rights in accordance
with such Agreement.
8. Modification and Waiver. This Warrant and any
provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the same
is sought.
9. Notices. Any notice, request or other document
required or permitted to be given or delivered to the Holder hereof or the
Company shall be personally delivered or shall be sent by certified or
registered mail, postage prepaid, to the Holder at its address as shown on the
books of the Company or to the Company at the address indicated therefor in the
first paragraph of this Warrant. Any notice given by personal delivery shall
be deemed given upon receipt, and any notice given by certified or registered
mail shall be deemed given five days after registration or certification
thereof, as the case may be.
10. Descriptive Headings and Governing Law. The
descriptive headings of the several sections and paragraphs of this Warrant are
inserted for convenience only and
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<PAGE> 6
do not constitute a part of this Warrant. This Warrant shall be construed and
enforced in accordance with, and the rights of the parties shall be governed
by, the laws of the State of New York, without giving effect to rules governing
conflicts of law.
11. Lost Warrants or Stock Certificates. The Company
represents and warrants to, and agrees with, the Holder that upon receipt of
evidence reasonably satisfactory to the Company of the loss, theft,
destruction, or mutilation of any Warrant or stock certificate and, in the case
of any such loss, theft or destruction, upon receipt of an indemnity, or in the
case of any such mutilation, upon surrender and cancellation of such Warrant or
stock certificate, the Company at its expense will make and deliver a new
Warrant or stock certificate, of like tenor, in lieu of the lost, stolen,
destroyed or mutilated Warrant or stock certificate.
12. Fractional Shares. No fractional shares shall be
issued upon exercise of this Warrant.
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<PAGE> 7
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by an officer, thereunto duly authorized this 24th day of November,
1997.
SUNSHINE MINING AND REFINING COMPANY
By: /s/ WILLIAM W. DAVIS
---------------------------------
Name: William W. Davis
Title: Executive Vice President
and Chief Financial Officer
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<PAGE> 8
FORM OF SUBSCRIPTION
(To be signed only upon exercise of Warrant)
To: ___________________________
The undersigned, the holder of the within Warrant, hereby
irrevocably elects to exercise the purchase right represented by such Warrant
for, and to purchase thereunder, _____________________ (_______) shares of
Common Stock, par value $.01 per share (the "Stock"), of Sunshine Mining and
Refining Company (the "Company") and herewith makes payment of _________________
_____________________________ Dollars ($__________) therefor and requests that
the certificates for such shares be issued in the name of, and delivered to,
____________________________________________________________________, whose
address is ____________________________________________________________________.
The undersigned represents, unless the exercise of this
Warrant has been registered under the Securities Act of 1933, as amended (the
"Securities Act"), that the undersigned is acquiring such Stock for his own
account for investment and not with a view to or for sale in connection with
any distribution thereof (except for any resale pursuant to a Registration
Statement under the Securities Act).
DATED:
---------------
---------------------------------------
(Signature must conform in all
respects to name of holder as specified
on the face of the Warrant)
---------------------------------------
---------------------------------------
(Address)
<PAGE> 9
EXHIBIT B
FORM OF ASSIGNMENT
(To be executed by the registered Holder if such Holder desires to transfer the
attached Warrant.)
FOR VALUE RECEIVED, ____________________________ hereby sells,
assigns, and transfers unto ___________________________ a Warrant to Purchase
____________ shares of Common Stock, par value $.01 per share, of Sunshine
Mining and Refining Company (the "Company"), together with all right, title,
and interest therein, and does hereby irrevocably constitute and appoint
___________ attorney to transfer such Warrant on the books of the Company, with
full power of substitution.
DATED:
---------------
Signature:
----------------------------
NOTICE
This signature on the foregoing Assignment must correspond to
the name as written upon the face of this Warrant in every particular, without
alteration or enlargement or any change whatsoever.
<PAGE> 1
EXHIBIT 10.13
NEITHER THIS NOTE NOR THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION
HEREOF HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND, UNLESS REGISTERED, MAY NOT BE SOLD OR OFFERED FOR SALE EXCEPT
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS.
SUNSHINE MINING AND REFINING COMPANY
SENIOR CONVERTIBLE PROMISSORY NOTE
$7,950,000 New York, New York
November 24, 1997
SUNSHINE MINING AND REFINING COMPANY, a corporation duly
organized and validly existing under the laws of the State of Delaware (the
"Company"), for value received, hereby promises to pay to Neuberger & Berman,
LLC, as nominee, or its permitted assigns (the "Holder"), the principal sum of
Seven Million Nine Hundred Fifty Thousand ($7,950,000) together with interest
thereon from the date hereof (computed on the basis of a 360-day year and
actual days elapsed) at the initial rate of ten percent (10%) per annum,
subject to adjustment as provided in Sections 2.1 and 2.3 hereof, and
additional interest as provided in Section 3 hereof. Interest on this Note
shall be payable semi-annually on each April 1 and October 1, commencing April
1, 1998 (an "Interest Payment Date"). Subject to the provisions of Section 1.2
hereof with respect to mandatory prepayments on this Note and Section 5 hereof
relating to conversion of this Note, the principal on this Note and any accrued
and unpaid interest shall be due and payable on the earlier to occur of (i)
November 24, 2002 (the "Maturity Date") and (ii) when declared due and payable
by the Holder upon the occurrence of an Event of Default (as defined below).
The payment of principal and interest on this Note shall be made either in
shares of the Company's Common Stock valued as provided in Sections 1.3, 2.2 or
3.1 hereof or in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts. Principal and interest on this Note payable in cash shall be paid by
wire transfer of federal funds in accordance with the written instructions of
the Holder or, in the absence of such instructions, by check of the Company
mailed to the Holder's address set forth in Section 9.10. Principal and
interest on this Note payable in shares of the Company's Common Stock shall be
paid as provided in Sections 1.3, 2.2 or 3.1 hereof.
<PAGE> 2
The Company's obligations under this Note are guaranteed by
certain subsidiaries of the Company as provided pursuant to a separate
Guaranty dated the date hereof, and the Holder of this Note is entitled to the
benefits of the Guaranty.
This Note is subject to the terms and provisions of the
Purchase Agreement (the "Purchase Agreement") dated as of the date hereof by
and between the Company and the initial Holders, including the right of the
Company to offset in certain circumstances certain amounts due on this Note
against damages incurred in connection therewith.
This Note is one of a series of Notes (collectively, the
"Notes") issued by the Company on the date hereof in the aggregate principal
amount of $15,000,000. The holders of all of the Notes are collectively
referred to herein as the "Holders" and individually as a "Holder".
1. Prepayments.
1.1 No Optional Prepayments. No prepayments may be made
on principal of this Note, except as provided in Section 1.2 hereof.
1.2 Mandatory Prepayments. Commencing on February 24,
2000, and quarterly thereafter on each May 24, August 24, November 24 and
February 24 up to and including through August 24, 2002 (each a "Mandatory
Prepayment Date"), the Company shall make mandatory prepayments ("Mandatory
Prepayments") on the Notes in the aggregate amount of $1,250,000 (or such
lesser amount of Notes then outstanding) each, in shares of the Company's
Common Stock valued as provided in Section 1.3 hereof, unless the Company
elects to make such payment in cash as set forth below. Notwithstanding the
foregoing, a Mandatory Prepayment shall not be made on any Mandatory Prepayment
Date if (a) the average (the "Average Bid Price") of the closing bid price (the
"Closing Bid Price") of the Company's Common Stock on the New York Stock
Exchange for the 15 Trading Days (as defined below) preceding the Mandatory
Prepayment Date equals or exceeds 106% of the Conversion Price (as defined in
Section 5.1 hereof) in effect on that Mandatory Prepayment Date (or if there
are two Conversion Prices in effect on Notes on that Date, the lower Conversion
Price), (b) the number of shares of the Company's Common Stock into which all
of the Notes were converted during the 30 Trading Days immediately preceding
the Mandatory Prepayment Date exceeded 5% of the aggregate number of shares of
the Company's Common Stock traded on those days during that 30 Trading Day
period on which the Registration Statement (as defined in Section 3.2) was
effective except that this clause (b) shall not be applicable if the
Registration Statement was not effective for 15 or more Trading Days in that
30-Day period, and (c) the sum of the aggregate amount of Mandatory Prepayments
made prior to that date and the
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<PAGE> 3
aggregate principal amount of the Notes converted into shares of the Company's
Common Stock prior to that Mandatory Prepayment Date exceeded the aggregate
amount of Mandatory Prepayments due through and including that Mandatory
Prepayment Date. Any Mandatory Prepayment on the Notes shall be applied pro
rata to all of the Notes, except that if on any Mandatory Prepayment Date, as a
result of a reset of the Conversion Price pursuant to Section 6.1(a), some of
the Notes are convertible at a Conversion Price higher than the Conversion
Price of the other Notes, the Mandatory Prepayment of $1,250,000 (or such
lesser amount) payable on that Date shall be applied first pro rata to the
Notes with the higher Conversion Price, and the remainder, if any, of the
Mandatory Prepayment shall then be applied pro rata to the Notes with the lower
Conversion Price. As used in this Note, "Trading Days" means any day (other
than a Saturday or Sunday) on which the New York Stock Exchange or the
Alternative Stock Exchange (as defined in Section 6.3(a)(vi)), as the case may
be, is open for business.
1.3 Mandatory Prepayment in Common Stock. The Company
may elect, at its sole option, by notice to the Holders of the Notes given at
any time prior to the 15 Trading Day period referred to below in accordance
with Section 9.10 below, to pay any Mandatory Prepayment in whole or in part in
cash. To the extent the Company does not elect to make any Mandatory
Prepayment in cash within such specified time period, the Company shall pay
that Mandatory Prepayment by issuing that number of shares of the Company's
Common Stock (rounded to the nearest whole number), valued as provided below,
with an aggregate value equal to the aggregate amount of the Mandatory
Prepayments on all of the Notes to be paid in shares. For this purpose, the
shares of the Company's Common Stock shall be valued at the Average Bid Price
for the 15 Trading Days immediately preceding the Mandatory Prepayment Date,
less a discount of 6% of such Average Bid Price, or if the Conversion Price is
then being determined pursuant to the Issuer's Election (as defined in Section
6.1(d)), less a discount of 14% of such Average Bid Price. In that event, the
Company shall, as soon as practicable after the Mandatory Prepayment Date,
issue and deliver to the Holder at its address set forth in Section 9.10 hereof
a share certificate or certificates for the number of shares of Common Stock
(rounded to the nearest whole number) issuable to the Holder in payment of the
Mandatory Prepayment or shall issue and deliver such shares as otherwise agreed
to by the Company and the Holder.
1.4 Issuance of New Note upon Mandatory Prepayment. Upon
any Mandatory Prepayment of this Note pursuant to Section 1.2, this Note shall
be cancelled and a new note for the unpaid portion of the principal amount
bearing the date of original issue and having the same rights and privileges as
this Note shall be delivered to the Holder.
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<PAGE> 4
2. Interest.
2.1 Adjustment of Interest Rate. The Notes shall bear
interest initially at a rate per annum equal to 10%; provided, however, that
(i) if the Closing Bid Price has been at least 125% but less than 133% of the
Conversion Price then in effect on each of the 120 Trading Days ending five
Trading Days prior to any Interest Payment Date, then the annual interest rate
on the Notes for the period ending on that Interest Payment Date shall be
reduced to 8%; (ii) if the Closing Bid Price has been at least 133% but less
than 150% of the Conversion Price then in effect on each of the 120 Trading
Days ending five Trading Days prior to any Interest Payment Date, then the
annual interest rate on the Notes for the period ending on that Interest
Payment Date shall be reduced to 6%; (iii) if the Closing Bid Price has been at
least 150% but less than 175% of the Conversion Price then in effect on each of
the 120 Trading Days ending five Trading Days prior to any Interest Payment
Date, then the annual interest rate on the Notes for the period ending on that
Interest Payment Date shall be reduced to 3%; or (iv) if the Closing Bid Price
has been at least 175% of the Conversion Price then in effect on each of the
120 Trading Days ending five Trading Days prior to any Interest Payment Date,
then there shall be no interest due and payable for the period ending on that
Interest Payment Date. For purposes of determining if the Closing Bid Price
exceeded a specified level for 120 consecutive Trading Days, any trading day
for which a Registration Statement was not effective shall not be deemed a
Trading Day. Together with any interest payment at a rate reduced pursuant to
this Section 2.1, the Company shall deliver to the Holder an officer's
certificate certifying to the Closing Bid Price of the Company's Common Stock
during such 120 Trading Day period.
2.2 Interest Payment in Common Stock. The Company may
elect, at its sole option, by notice to the Holders of the Notes given at any
time prior to the 15 Trading Day period referred to below in accordance with
Section 9.10 below, to make any interest payment in whole or in part in cash.
To the extent the Company does not elect to make any interest payment in cash
within such specified time period, the Company shall pay the interest payable,
in whole or in part, by issuing that number of shares (rounded to the nearest
whole number) of the Company's Common Stock, valued as provided below, with an
aggregate value equal to the aggregate amount of interest payable in shares on
that Interest Payment Date. For this purpose, the shares of the Company's
Common Stock shall be valued at the Average Bid Price for the 15 Trading Days
ending five Trading Days prior to the Interest Payment Date, less a discount of
5% of such Average Bid Price, or if the Conversion Price is then being
determined pursuant to the Issuer's Election, less a discount of 10% of such
Average Bid Price. In that event, the Company shall, as soon as practicable
after the Interest Payment Date, issue and deliver to the Holder at its address
set forth in Section 9.10 hereof a share certificate or certificates for the
number of shares of Common Stock (rounded to the nearest whole number) issuable
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<PAGE> 5
in payment of the interest payable to the Holder on that date or shall issue
and deliver such shares as otherwise agreed to by the Company and the Holder.
2.3 Default. Notwithstanding anything to the contrary in
this Note, upon the occurrence and during the continuance of an Event of
Default pursuant to Section 4(i), the annual interest rate shall be 18% per
annum, and upon the occurrence and during the continuance of any other Event of
Default (other than an Event of Default under Section 4(ii), (iii) or (x)
hereof), the annual interest rate shall be 12%, without, in either case,
reduction pursuant to Section 2.1.
3. Additional Interest.
3.1 Payments with respect to Eurobonds. If prior to
maturity on March 21, 2000 the entire $30,000,000 principal amount of Senior
Exchangeable Notes due 2000 (the "Eurobonds") issued by Sunshine Precious
Metals, Inc., a wholly-owned subsidiary of the Company ("SPMI"), has neither
been converted into shares of the Company's Common Stock or refinanced with
Junior Debt (as defined below), then on March 21, 2000, the Company shall pay
to each Holder of the Notes, as additional interest on the Notes, an amount
equal to 10% of the then outstanding principal amount of the Notes held by such
Holder. The Company may elect, at its sole option, by notice to the Holders of
the Notes given at any time prior to the 15 Trading Day period referred to
below, to make the additional payment payable pursuant to this Section 3.1, in
whole or in part, in cash. To the extent the Company does not elect to make
any additional payment in cash within such specified time period, the Company
shall make the additional payment by issuing that number of shares of the
Company's Common Stock (rounded to the nearest whole number), valued as
provided below, with an aggregate value equal to the aggregate amount of the
additional interest payable in shares. For this purpose, the shares of the
Company's Common Stock shall be valued at the Average Bid Price for the 15
Trading Days prior to March 21, 2000, less a discount of 5% of such Average Bid
Price, or if the Conversion Price is then being determined pursuant to the
Issuer's Election, less a discount of 10% of such Average Bid Price. In that
event, the Company shall, as soon as practicable after March 21, 2000, issue
and deliver to the Holder at its address set forth in Section 9.10 hereof a
share certificate or certificates for the number of shares of Common Stock
(rounded to the nearest whole number) issuable to the Holder as payment of the
additional interest or shall issue and deliver such shares as otherwise agreed
by the Company and the Holder.
Additional interest is also payable as provided in Section 4.2
of the Purchase Agreement.
As used in this Agreement, Junior Debt means Indebtedness of
the Company which is subordinated to the Notes or Indebtedness of SPMI which is
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<PAGE> 6
subordinated to the Guaranty to be delivered by SPMI to the Holders pursuant to
Section 8.2.
4. Events of Default. If any of the events specified in this
Section 4 shall occur (herein individually referred to as an "Event of
Default"), the Holder of this Note may, so long as such condition exists,
declare the entire principal and unpaid accrued interest hereon immediately due
and payable, by notice in writing to the Company:
(i) Default is made for a period of five (5) business
days or more in the payment of any principal or accrued interest due
in respect of this Note or in the issuance of shares of Common Stock
to be issued as payment hereunder;
(ii) Any representation or warranty made by the Company in
this Note or the Note Purchase Agreement shall have been false in any
material respect when made;
(iii) The Company shall default in the performance or
observance of any covenant or agreement contained in this Note and, if
capable of being remedied, such default shall continue unremedied for
a period of 10 days after written notice shall have been given by the
Holder to the Company;
(iv) If (i) any other Indebtedness (as defined below) of
the Company or any Principal Subsidiary (as defined below) becomes due
and repayable prior to its stated maturity by reason of an event of
default (howsoever described) or (ii) any such Indebtedness is not
paid when due or within any applicable grace period (as originally
provided) or (iii) the Company or any Principal Subsidiary fails to
pay when due (or, as the case may be, within any originally applicable
grace period) any amount payable by it under any present or future
guarantee for, or indemnity in respect of, any Indebtedness of any
Person (as defined in Section 6.2) or (iv) any security given by the
Company or any Principal Subsidiary for any Indebtedness or any
guarantee or indemnity of Indebtedness of any Person or any guarantee
or indemnity of such Indebtedness of any Person becomes enforceable by
reason of default in relation thereto and steps are taken to enforce
such security save in any such case where there is a bona fide dispute
as to whether the relevant Indebtedness or any such guarantee or
indemnity as aforesaid shall be due and payable; provided that in each
such case the Indebtedness exceeds in the aggregate $1,000,000 and in
each such case such event continues unremedied for a period of 30
calendar days (or such longer period as a Majority of the Holders (as
defined in Section 6.2) may in their sole discretion consent to in
writing upon receipt of written notice from the Company);
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<PAGE> 7
(v) If there is any final judgment or judgments for the
payment of money exceeding in the aggregate $1,000,000 outstanding
against the Company or any Principal Subsidiary which has been
outstanding for more than 60 calendar days from the date of its entry
and shall not have otherwise been discharged in full or stayed by
appeal, bond or otherwise;
(vi) If the Company or any Principal Subsidiary shall fail
to pay its debts as such debts become due (except debts which the
Company or such Principal Subsidiary, as the case may be, may contest
in good faith) generally or shall be declared or adjudicated by a
competent court to be insolvent or bankrupt, consents to the entry of
an order of relief against it in an involuntary bankruptcy case, shall
enter into any assignment or other similar arrangement for the benefit
of its creditors or consents to the appointment of a custodian
(including, without limitation, a receiver, liquidator or trustee);
(vii) If a receiver, administrative receiver, administrator
or other similar official shall be appointed in relation to the
Company or any Principal Subsidiary or in relation to the whole or a
substantial part of the undertaking or assets of any of them or a
distress, execution or other process shall be levied or enforced upon
or sued out against, or an encumbrancer shall take possession of, the
whole or a substantial part of the assets of any of them and in any of
the foregoing cases it or he shall not be paid out or discharged
within 90 calendar days (or such longer period as a Majority of the
Holders may in their absolute discretion consent to in writing upon
receipt of written notice from the Company);
(viii) If the Company or any Principal Subsidiary institutes
proceedings to be adjudicated a voluntary bankrupt, or shall consent
to the filing of a bankruptcy proceeding against it, or shall file a
petition or answer or consent seeking organization under the laws of
the Federal Bankruptcy Code or any similar applicable Federal or State
law, or shall consent to the filing of any such petition, or shall
consent to the appointment of a receiver or liquidator or trustee or
assignee (or other similar official) in bankruptcy or insolvency of it
or its property, or shall make an assignment for the benefit of
creditors, or shall admit in writing its inability to pay its debts
generally as they come due;
(ix) if a decree or order by a court having jurisdiction
in the premises shall have been entered adjudging the Company a
bankrupt or insolvent, or approving as properly filed a petition
seeking the reorganization of the Company under the Federal Bankruptcy
Code or any other similar applicable Federal or State law, and such
decree or order shall have continued undischarged or unstated for a
period of 90 calendar days; or a decree or order
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<PAGE> 8
of a court having jurisdiction in the premises for the appointment of
a receiver or liquidator or trustee or assignee (or other similar
official) in bankruptcy or insolvency of the Company or of all or
substantially all of its property, or for the winding up or
liquidation of its affairs, shall have been entered, and such decree
or order shall have continued undischarged and unstayed for a period
of 90 calendar days; or
(x) The Registration Statement has not been declared
effective by the Securities and Exchange Commission within 240 days
after the date hereof, or if, after the Registration Statement is
declared effective, the Registration Statement ceases to be effective
for 100 days within any 12-month period.
As used in this Note, "Indebtedness" of any Person, means any
present or future obligations, which shall include all (i) obligations which in
accordance with the generally accepted accounting principles, shall be
classified upon the balance sheet of such Person as liabilities, (ii)
obligations for borrowed money, (iii) obligations which have been incurred in
connection with the acquisition of any property (including without limitation,
all obligations evidenced by any indenture, bond, note, commercial paper or
other similar security, but excluding, in any case, obligations arising from
the endorsement in the ordinary course of business of negotiable instruments
for deposit or collection, (iv) obligations secured by any lien existing on
property owned, even though such Person has not assumed or become liable for
the payment of such obligations, (v) obligations created or arising under
conditional sale or other title retention agreement with respect to property
acquired by such Person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default
are limited to repossession or sale of such property, (vi) obligations for
capitalized leases, (vii) obligations for all guarantees, whether or not
reflected in the balance sheet of such Person, and (viii) reimbursement and
other payment obligations (whether contingent, mature or otherwise) of such
Person in respect of acceptance or documentary credit. Notwithstanding the
foregoing, Indebtedness shall not include (i) Indebtedness incidental to the
operation of the business of the Person in the ordinary course and in the
aggregate not to exceed $1,000,000 and (ii) Indebtedness represented by
purchase, rental or lease obligations which would cause the direct or
contingent liabilities of the Person and its subsidiaries on a consolidated
basis, in respect of all such obligations, not to exceed $1,000,000 in any
period of 12 months.
As used in this Note, a "Principal Subsidiary" at any time
means a subsidiary of the Company:
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<PAGE> 9
(A) whose gross assets represent 15 percent or more of the
consolidated gross assets of the Company and its subsidiaries as calculated by
reference to the then latest audited financial statements of the Company and
its subsidiaries; or
(B) to which is transferred all or substantially all of the
business, undertaking and assets of a subsidiary of the Company which
immediately prior to such transfer is a Principal Subsidiary, whereupon the
transferor Subsidiary shall immediately cease to be a Principal Subsidiary and
the transferee Subsidiary shall cease to be a Principal Subsidiary under the
provisions of this sub-paragraph (B) (but without prejudice to the provisions
of sub- paragraph (A) above), upon publication of its next audited financial
statements; or
(C) which owns at least 33-1/3% of the Company's interest in
the Pirquitas mine in Argentina.
A report by the Auditors that in their opinion a subsidiary of
the Company is or is not or was or was not at any particular time or throughout
any specified period a Principal Subsidiary pursuant to clause (A) or (B) above
shall, in the absence of manifest error, be conclusive and binding on all
parties.
The Company shall send to each Holder, within 14 days after
its annual audited consolidated balance sheet and profit and loss account being
made available to its shareholders, and also within 14 days after any request
by a Majority of the Holders, a certificate signed by two duly authorized
officers of the Company on behalf of the Company to the effect that, having
made all reasonable enquiries, to the best of the knowledge, information and
belief of the Company as at a date (the "Certification Date") being not more
than five days before the date of the certificate no Event of Default had
occurred since the date of this Note or the Certification Date of the last such
certificate (if any) or, if such an event had occurred, giving details of it
together with a list of subsidiaries which are Principal Subsidiaries of the
Company.
5. Conversion.
5.1 Optional Conversion. Subject to the terms and
provisions of this Section 5, the Holder shall have the right, at the Holder's
option, at any time and from time to time, to convert the principal amount of
this Note or such portion of such principal amount (but not any accrued and
unpaid interest thereon) as the Holder may elect into fully paid and
nonassessable shares of the Company's Common Stock . The number of shares of
Common Stock into which this Note may be converted shall be determined by
dividing the principal amount to be converted by the Conversion Price (as
defined below) in effect at the time of such conversion. The price at which
this Note may be converted into shares of the Company's Common Stock (the
"Conversion Price") shall initially be equal to $.95, subject to the
adjustments set forth
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<PAGE> 10
in Section 6 hereof. The accrued interest on any portion of the Note that is
converted shall be paid on the following Interest Payment Date in shares or
cash, at the Company's option, as provided in Section 2.2.
5.2 Partial Conversion. Upon any partial conversion of
this Note pursuant to Section 5.1 hereof, a new note for the unconverted
portion of the principal amount bearing the date of original issue and having
the same rights and privileges as this Note shall be delivered to the Holder.
5.3 Mechanics and Effect of Conversion. To optionally
convert this Note into Common Stock pursuant to Section 5.1 hereof, the Holder
shall surrender this Note at the principal offices of the Company (the date of
surrender being referred to as the "Conversion Date"), together with a written
notice (the "Conversion Notice") to the Company of the Holder's election to
convert. At its expense, the Company shall, as soon as practicable thereafter,
issue and deliver to such Holder at such principal office, a share certificate
or certificates for the number of shares of Common Stock to which such Holder
is entitled upon such conversion or shall issue and deliver such shares as
otherwise agreed by the Company and the Holder. Any conversion of this Note
pursuant to Section 5.1 hereof shall be deemed to have been made immediately
prior to the close of business on the date of the surrender and delivery of
this Note and the corresponding Conversion Notice.
6. Anti-Dilution and Other Provisions.
6.1 Reset of Conversion Price.
(a) If the Average Bid Price for the 15 Trading
Days immediately preceding May 1, 1999 is less than the Conversion Price then
in effect, then the Conversion Price for $7,500,000 of the Notes shall be reset
downward on May 1, 1999 to a Conversion Price equal to such Average Bid Price.
If the Average Bid Price for the 15 Trading Days immediately preceding April 1,
2000 is less than the Conversion Price then in effect, then the Conversion
Price for $7,500,000 of the Notes shall be reset downward on April 1, 2000 to a
Conversion Price equal to such Average Bid Price. If the Conversion Price is
reset on April 1, 2000, and, as a result of the reset on May 1, 1999, some of
the Notes are convertible at a Conversion Price higher than the Conversion
Price of other Notes, the Conversion Price of the Notes with the higher
Conversion Price shall be reset first and then the Conversion Price of the
Notes with the lower Conversion Price shall be reset, until the Conversion
Price of $7,500,000 of the Notes shall have been reset. If pursuant to this
Section 6.1(a) the Conversion Price is reset with respect to less than all of
the outstanding Notes, then the Conversion Price for this Note shall be reduced
with respect to that portion of the principal amount of this Note equal to the
principal amount of this Note times a fraction of which the numerator is
$7,500,000 and the denominator is the aggregate
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<PAGE> 11
principal amount of the Notes outstanding; provided, however, that if pursuant
to this Section 6.1(a) the Conversion Price is reset on May 1, 1999 and reset
again on April 1, 2000 with respect to less than all of the Notes with a lower
Conversion Price, then the Conversion Price for such Notes shall be reduced
with respect to that portion of each such Note equal to the principal amount of
that Note times a fraction of which the numerator is the remainder of the
$7,500,000 principal amount of Notes to be reset (after the Conversion Price of
the Notes with the higher Conversion Price has been reset) and the denominator
is the aggregate principal amount of the Notes with the lower Conversion Price.
In each such event, the Company shall issue and deliver to the Holder two new
Notes in exchange for this Note, each bearing the date of original issue and
having the same rights and privileges as this Note, one in the principal amount
for which the Conversion Price is not changing reflecting the Conversion Price
prior to the reset pursuant to this Section 6.1(a) and the other in the
principal amount for which the Conversion Price is changing and reflecting the
reset Conversion Price.
(b) If after the later of the date hereof or the
last date on which the Conversion Price had been reset pursuant to this Section
6.1, (1) the Company shall issue more than 12 million shares of the Company's
Common Stock (excluding shares issued pursuant to this Note but including
shares issuable upon exercise or conversion of any rights, options, warrants or
convertible or exchangeable securities referred to in clause (2) below), or (2)
the Company shall issue rights, options or warrants to purchase, or securities
convertible or exchangeable into, an aggregate of more than 12 million shares
of the Company's Common Stock, then on the 210th day after the last such
issuance which resulted in the aggregate exceeding 12 million shares, if the
Average Bid Price for the 15 Trading Days immediately preceding such day is
less than the Conversion Price as then in effect, then the Conversion Price
shall be reset to equal such Average Bid Price.
(c) If after the date hereof there is a reverse
stock split of shares of the Company's Common Stock into a lesser number of
shares, then on the 90th day after such split, if the Average Bid Price for the
15 Trading Days immediately preceding such day is less than the Conversion
Price as then in effect, then the Conversion Price shall be reset to equal such
Average Bid Price.
(d) Notwithstanding anything to the contrary in
this Note, the Company may elect, by notice to the Holders of the Notes (the
"Issuer's Election") given on or before any date on which the Conversion Price
would be reset pursuant to this Section 6.1, to set on such reset date the
Conversion Price instead at the lower of $.50 per share (subject to reduction
pursuant to the anti-dilution provisions of Section 6.2 hereof) or the lowest
price at which any shares of the Company's Common Stock were issued after the
date hereof.
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<PAGE> 12
6.2 Adjustment of Conversion Price.
(a) Definitions. As used in this Section 6, the
following terms have the following meanings:
(i) "Shares" means shares of the
Company's Common Stock (and any other shares of stock
resulting from any sub-division, consolidation or
reclassification of such shares).
(ii) "Stock Split" means any kind of
stock split in relation to the Shares and includes a free
share distribution, a stock dividend and a sub-division.
(iii) "Current Market Price" means the
closing bid price on the New York Stock Exchange.
(iv) "Auditors" means the Company's
independent public accountants.
(v) "Majority of the Holders" means the
Holders of more than 50% of the outstanding principal amount
of the Notes.
(vi) "Person" means any individual,
trust, corporation, partnership, limited liability company or
other entity or organization.
(b) Adjustment of Conversion Price. The
Conversion Price shall be adjusted as follows:
(i) If and whenever there shall be an
alteration to the number of Shares
as a result of consolidation,
reclassification or subdivision of
the Shares, the Conversion Price
shall be adjusted by multiplying the
Conversion Price in force
immediately before such alteration
by the following fraction:
A
--
B
where:
A is the number of Shares in issue
immediately before such alteration;
and
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<PAGE> 13
B is the number of Shares in issue
immediately after such alteration.
Such adjustment shall become effective on the
date the alteration takes effect.
(ii) If and whenever the Company shall
issue any Shares credited as fully
paid to its shareholders by way of
capitalization of profits or
reserves (including any share
premium account and capital
redemption reserve), or may make any
Stock Split the Conversion Price
shall be adjusted by multiplying the
Conversion Price in force
immediately before such issue by the
following fraction:
A
--
B
where:
A is the aggregate nominal amount of
the issued Shares immediately before
such issue; and
B is the aggregate nominal amount of
the issued Shares immediately after
such issue.
Such adjustment shall become effective on
the date of such issue.
(iii) If and whenever the Company shall
issue any Shares, or shall issue or
grant any securities (including
options, warrants and other rights)
carrying rights to subscribe for or
purchase any Shares, in each case at
a price per Share which is less than
the Current Market Price per Share
on the Trading Day last preceding
the date on which the terms of such
issue or grant are publicly
announced, the Conversion Price
shall be adjusted by multiplying the
Conversion Price in force
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<PAGE> 14
immediately before such issue or grant
by the following fraction:
A + B
-----
A + C
where:
A is the number of Shares in issue
immediately before such announcement;
B is the number of Shares which the
aggregate consideration receivable
for the Shares so issued, or for the
maximum number of Shares to be
issued upon exercise in full of such
rights, would purchase at such
Current Market Price per Share; and
C is the number of Shares so issued or
such maximum number of Shares.
Such adjustment shall become effective on the
date of such issue or grant.
(iv) If and whenever the Company shall
issue any securities (other than
Shares and any securities, options,
warrants or other rights referred to
in paragraph (iii) of this Section
6.2(b)) to its shareholders as a
class by way of rights, or shall
issue or grant to its shareholders
as a class by way of rights
securities (including options,
warrants and other rights) carrying
rights to subscribe for or purchase
any securities (other than Shares
and any securities, options,
warrants or other rights referred to
in such paragraph (iii) or shall
distribute assets, cash or other
property to its shareholders (other
than usual annual or interim
dividends in cash), the Conversion
Price shall be adjusted by
multiplying the Conversion
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<PAGE> 15
Price in force immediately before
such issue or grant or distribution
by the following fraction:
A - B
------
A
where:
A is the Current Market Price per
Share on the dealing day last
preceding the date on which the
terms of such issue or grant or
distribution are publicly announced;
and
B is the fair market value on the date
of such announcement, as determined
in good faith by an investment
banker of national repute, acting as
an expert, appointed by the Company
and approved in writing by a
Majority of the Holders or, in
default of such appointment or in
the absence of such approval,
appointed by a Majority of the
Holders, of the portion of the
rights attributable to one Share.
Such adjustment shall become effective on the
date of such issue or grant or distribution.
(v) If and whenever the Company or (at
the direction or request of or
pursuant to any arrangements with
the Company or any subsidiary) any
subsidiary or any other company,
Person or entity (otherwise than as
mentioned in paragraph (iii) or (iv)
of this Section 6.2(b)) shall issue
or grant wholly for cash or for no
consideration any securities (other
than the Notes but including
options, warrants and other rights)
carrying rights of conversion into,
or exchange or subscription for,
Shares, or securities which by their
terms might be redesignated as
Shares or so as to carry rights of
conversion into, or exchange or
subscription for, Shares, where the
consideration per Share receivable
upon exercise of such rights or upon
such redesignation is less than the
Current Market Price per Share on
the dealing day last
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<PAGE> 16
preceding the date on which the terms
of such issue or grant are publicly
announced, the Conversion Price
shall be adjusted by multiplying the
Conversion Price in force
immediately before such issue or
grant by the following fraction:
A + B
------
A + C
where:
A is the number of Shares in issue
immediately before such issue or
grant;
B is the number of Shares which the
aggregate consideration receivable
for the maximum number of Shares to
be issued upon exercise in full of
such rights, or arising from such
redesignation, would purchase at
such Current Market Price per Share;
and
C is the maximum number of Shares to
be issued upon exercise in full of
such rights at the initial
conversion, exchange or subscription
price or rate or to arise upon such
redesignation.
Such adjustment shall become effective on the
date of such issue or grant.
(vi) If the Company (after consultation
with a Majority of the Holders) or a
Majority of the Holders (after
consultation with the Company)
determines that an adjustment should
be made to the Conversion Price as a
result of one or more events or
circumstances not referred to in
paragraphs (i) to (v) of this
Section 6.2(b) (even if the relevant
event or circumstance is
specifically excluded from the
operation of those paragraphs or any
of them) the Company, shall, at its
own expense and acting reasonably,
request the Auditors, acting as
experts, to determine as soon as
practicable what adjustment (if any)
to the Conversion Price is fair and
reasonable to take
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<PAGE> 17
account of such event or circumstance
and the date on which such
adjustment should take effect, and
upon such determination such
adjustment (if any) shall be made
and shall take effect in accordance
with such determination, but so that
an adjustment shall be made pursuant
to this sub-paragraph (vi) if the
Auditors are so requested to make
such a determination not more than
21 days after the occurrence of the
relevant event or circumstance.
Provided that where the circumstances giving rise to
any adjustment pursuant to this Section 6.2(b) have
already resulted or will result in an adjustment to
the Conversion Price or where the circumstances
giving rise to any adjustment arise by virtue of any
other circumstances which have already given or will
give rise to an adjustment to the Conversion Price,
such modification (if any) shall be made to the
operation of the provisions of this Section 6.2(b) as
may be advised by the Auditors, acting as experts, to
be in their opinion appropriate in order to give the
intended effect.
(c) Calculation of Consideration Receivable. For
the purpose of any calculation of the consideration receivable pursuant to
Section 6.2(b) the following provisions shall apply:
(i) the aggregate consideration
receivable for Shares issued for
cash shall be the amount of such
cash received or receivable by the
Company, provided that in no case
shall any deduction be made for any
commission or any expenses paid or
incurred by the Company for any
underwriting of the issue or
otherwise in connection therewith;
(ii) the aggregate consideration
receivable for Shares to be issued
upon the exercise of rights of
exchange or subscription shall be
the consideration received or
receivable by the Company which is
attributed by the Company to such
rights or, if no part of such
consideration is so attributed or
the Majority of the Holders so
requires by notice in writing to the
Company, the fair market value of
such rights as at the date on
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<PAGE> 18
which the terms of issue of the
relevant securities (including
options, warrants and other rights)
are publicly announced (as
determined in good faith by an
investment banking firm of national
repute, acting as an expert,
appointed by the Company and
approved in writing by a Majority of
the Holders or, in default of such
appointment or in the absence of
such approval, appointed by a
Majority of the Holders) plus the
additional consideration to be
received by the Company as a
consequence of such exercise, such
additional consideration to be the
amount (including any premium) to be
treated by the Company as paid up on
the Shares or other securities
arising from such exercise (the
consideration in all such cases to
be determined subject to the proviso
in paragraph (i) of this Section
6.2(c));
(iii) the consideration per Share
receivable upon the exercise of
rights, exchange or subscription
shall be the aggregate consideration
referred to in paragraph (ii) of
this Section 6.2(c), converted into
dollars if such consideration is
expressed in a currency other than
dollars at such rate of exchange as
may be determined in good faith by
an investment banking firm of
national repute, acting as an
expert, appointed by the Company and
approved in writing by a Majority of
the Holders or, in default of such
appointment or in the absence of
such approval, appointed by a
Majority of the Holders, to be the
spot rate ruling at the close of
business on the date on which the
terms of issue of the relevant
securities (including options,
warrants and other rights) are
publicly announced, divided by the
number of Shares to be issued upon
such exercise at the initial
conversion, exchange or subscription
price or rate; and
(iv) if the consideration receivable for
Shares or upon the exercise of
rights, exchange or subscription is
property other than cash, then the
amount of the consideration
receivable shall be the fair market
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<PAGE> 19
value of such property as determined
in good faith by the chief financial
officer of the Company, except that
if the market value of the Shares
issued exceeds $10,000,000 and a
Majority of the Holders dispute the
determination by the chief financial
officer, then as determined in good
faith by an investment banking firm
of national repute, acting as an
expert, appointed by the Company and
approved in writing by a Majority of
the Holders; provided, however, that
if the Eurobonds are exchanged, the
fair market value of the Eurobonds
shall be deemed to be the face value
of the Eurobonds (regardless of any
price at which they may be traded).
(d) Post-record date Adjustments. If the
Conversion Date in relation to any Note shall be after the record date for any
such issue, grant or offer as is mentioned in Section 6.2(b), but before the
relevant adjustment becomes effective under Section 6.2(b), the Company shall
(conditional upon such adjustment becoming effective) procure that there shall
be issued to the converting Holder or in accordance with the instructions
contained in the Conversion Notice (subject to any applicable exchange control
or other laws or other regulations) such additional number of Shares as,
together with the Shares issued or to be issued on conversion of the relevant
Note, is equal to the number of Shares which would have been required to be
issued on conversion of such Note if the relevant adjustment (more particularly
referred to in such paragraphs) to the Conversion Price had in fact been made
and become effective immediately after the relevant record date. Such
additional Shares will be allotted as at, and within one month after, the
relevant Conversion Date or of the date of issue of Shares if the adjustment
results from the issue of Shares and certificates for such Shares will be
despatched within such period of one month.
(e) Other Provisions Relating to Adjustments.
The Company may at any time or from time to time reduce the Conversion Price
either permanently or temporarily (a "Voluntary Reduction"). Notwithstanding a
Voluntary Reduction, the determination of the interest rate payable pursuant to
Section 2.1 and the determination of whether a Mandatory Prepayment is due
pursuant to Section 1.2 shall be made without giving effect to the Voluntary
Reduction. Notwithstanding the provisions of this Section 6.2, the Conversion
Price will not be reduced as a result of any adjustment, and the Company
covenants not to take any action, if, after giving effect thereto, the
Conversion Price would be reduced to such an extent that, under applicable law
then in effect, Notes may not be converted at such reduced Conversion Price for
legally issued, fully paid and non-assessable Shares. The Conversion Price may
also not be reduced so that, on exchange of Notes, Shares would be issued at a
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<PAGE> 20
discount to their par value (the Company hereby agreeing not to take any action
to increase the par value of the shares of the Company's Common Stock). No
adjustment will be made where such adjustment would be less than 5 percent of
the Conversion Price then in effect. Any adjustment not so made will be
carried forward and taken into account in any subsequent adjustment. On any
adjustment, the resultant Conversion Price, if not an integral multiple of one
cent shall be rounded down to the nearest one cent.
Where more than one event which gives or may give rise to an
adjustment to the Conversion Price occurs within such a short period of time
that in the opinion of the Auditors the foregoing provisions would need to be
operated subject to some modification in order to give the intended result,
such modification shall be made to the operation of the foregoing provisions as
may be advised by the Auditors to be in their opinion appropriate in order to
give such intended result.
No adjustment will be made to the Conversion Price when Shares
or other securities (including rights or options) are issued, offered or
granted to employees (including directors holding executive office) of the
Company or any subsidiary or any associated company of the Company pursuant to
any employee benefit, compensation or profit sharing plan, whether now in
effect or hereafter created or amended.
6.3 Covenants Relating to Conversion.
(a) The Company hereby undertakes to and
covenants with the Holders of the Notes that so long as any Conversion Right
remains exercisable, it will, save with the prior written approval of all of
the Holders of the Notes:
(i) Issue and ensure sufficient share
capital: issue Shares to Holders of
the Notes on the exercise of
Conversion Rights in accordance with
the terms of the Notes and at all
times keep available for issue free
from pre-emptive rights out of its
authorized but unissued capital such
number of Shares as would enable the
Conversion Rights and all other
rights of subscription and exchange
for and exchange into Shares to be
satisfied in full;
(ii) Limited modification of rights: not
in any way modify the rights
attaching to the Shares with respect
to voting, dividends or liquidation
nor issue any other class of equity
share capital
- 20 -
<PAGE> 21
carrying any rights which are more
favorable than the rights attaching
to the Shares;
(iii) Restricted action: not make any
issue, grant or distribution or take
any other action if the effect
thereof would be that, on the
conversion of Notes, Shares would
have to be issued at a discount or
otherwise could not, under any
applicable law then in effect, be
legally issued as fully paid;
(iv) Officers' certificate on adjustment
of Conversion Price: upon the
happening of an event as a result of
which the Conversion Price will be
adjusted pursuant to the Notes, as
soon as reasonably practicable
deliver to the Holders of the Notes
a certificate signed by two duly
authorized officers of the Company
on behalf of the Company setting
forth brief particulars of the
event, the adjusted Conversion
Price, the date on which such
adjustment takes effect and such
other particulars and information as
the Holders may reasonably require;
and
(v) Maintain Listing: maintain a
listing for all the issued shares of
the Company's Common Stock on the
New York Stock Exchange, it being
understood that if the Company is
unable to obtain or maintain such
listing of the shares, it will seek
to obtain and maintain a listing for
all the shares issued on conversion
of the Notes on the American Stock
Exchange or the NASDAQ National
Market System, or if it is unable to
obtain a listing thereon, on any
other stock exchange or on NASDAQ or
on the National Quotation Bureau
Incorporated (each an "Alternative
Stock Exchange") as the Company may
from time to time (with the written
consent of a Majority of the Holders
which consent shall not be
unreasonably withheld and which
consent shall be deemed given if not
denied within three (3) business
days of receipt of a notice
requesting consent) determine and
will forthwith give notice to the
Holders of the listing, de-listing
or
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<PAGE> 22
quotation or lack of quotation of the
Shares (as a class) by any such
Alternative Stock Exchange.
6.4 Adjustment for Consolidations and Mergers.
In case of any consolidation or merger of the Company with or into
another corporation (other than a consolidation or merger in which the
Company is the surviving corporation) or the sale of all or
substantially all of the assets of the Company to another corporation,
this Note thereafter shall be convertible into the kind and amount of
shares of stock or other securities or property to which a Holder of
the number of shares of the Company's Common Stock issuable upon
conversion of this Note would have been entitled upon such
consolidation, merger or sale; and, in such case, appropriate
adjustment (as determined in good faith by the Board of Directors of
the Company) shall be made in the application of the provisions in
this Section 6, to the end that the provisions set forth in this
Section 6 (including provisions with respect to changes in and
adjustments of the number of shares of Common Stock into which this
Note is convertible) shall thereafter be applicable, as nearly as
reasonably may be, in relation to any shares of stock or other
securities or property thereafter deliverable upon the conversion of
this Note.
6.5 No Impairment. The Company will not, by amendment of
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 to be observed or performed hereunder by the Company but will
at all times in good faith assist in the carrying out of all the provisions of
this Section 6 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the Holder against
impairment.
6.6 Notices to Holder. If at any time,
(a) The Company shall take any action which would
require an adjustment pursuant to this Section 6 in the Conversion Price or in
the number of shares issuable upon conversion of this Note; or
(b) The Company shall issue any additional shares
of Common Stock or declare any dividend (or any other distribution) on its
Common Stock; or
(c) there shall be any capital reorganization or
reclassification of the Common Stock, or any consolidation or merger to which
the Company is a party, or any sale or transfer of all or substantially all of
the assets of the Company; or
- 22 -
<PAGE> 23
(d) there shall be a voluntary or involuntary
dissolution, liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give written notice
to the Holder, not less than 20 days before any record date or other date set
for definitive action, or of the date on which such reorganization,
reclassification, sale, consolidation, merger, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also set
forth such facts as shall indicate the effect of such action (to the extent
such effect may be known at the date of such notice) on the current Conversion
Price and the kind and amount of shares of the Company's Common Stock and other
securities and property deliverable upon conversion of this Note. Such notice
shall also specify the date as of which the holders of the Company's Common
Stock of record shall be entitled to exchange their shares of the Company's
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, sale, consolidation, merger, dissolution,
liquidation or winding up, as the case may be.
7. Put Upon Merger. In case of any consolidation or merger of
the Company with or into another corporation (other than a consolidation or
merger in which the Company is the surviving corporation) in which the
shareholders of the Company receive solely cash for their shares of the
Company's Common Stock, the Holder may elect, at its sole option, by notice to
the Company given at any time within 30 days after the notice from the Company
of the consummation of the consolidation or merger, to require the Company to
purchase the Note at a purchase price equal to 100% of the principal amount of
the Note, plus all accrued and unpaid interest. If the Holder so elects, a
closing shall be held at the principal offices of the Company on a date
determined by the Company not later than 30 days after the notice from the
Holder; at the closing, the Holder shall surrender the Note to the Company, and
the Company shall pay the purchase price for the Note in cash.
8. Covenants by the Company.
8.1 Ranking. The Notes are direct, unconditional and
unsecured obligations of the Company and rank, and will rank pari passu,
without any preference among themselves, and such obligations will rank senior
to all other outstanding and unsecured subordinated obligations of the Company,
present and future, but, in the event of bankruptcy or insolvency of the
Company, only to the extent permitted by the applicable laws relating to
creditors' rights.
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<PAGE> 24
8.2 Additional Guaranty. At such time as the Eurobonds
are repaid or converted into shares of the Company's Common Stock so that no
Eurobonds are outstanding or if the Eurobonds are refinanced with Junior Debt
or on a pari passu basis with the guaranty to be issued by SPMI as referred to
below, the Company shall cause SPMI to guaranty the Company's obligations
pursuant to the Notes pursuant to a Guaranty in the same form as the Guaranty
executed by the Company's other subsidiaries on the date hereof. If the
Eurobonds are refinanced on a basis that requires the Guaranty to be issued by
SPMI to be subordinated to such refinanced debt, then the Guaranty shall be so
subordinated to the refinanced indebtedness. At such time as the Company forms
any additional subsidiary, the Company shall cause the subsidiary to guaranty
the Company's obligations pursuant to the Notes pursuant to a Guaranty in the
same form as the Guaranty executed by the Company's other subsidiaries on the
date hereof.
8.3 Additional Debt. Except for Project Debt (as defined
in Section 8.3), neither the Company nor any of its subsidiaries shall issue or
incur any additional Indebtedness that is secured by any assets of the Company
or its subsidiaries unless the Notes are equally secured on a pari passu basis
by such assets. As used in this Note, Project Debt means Indebtedness incurred
by a subsidiary of the Company expressly to fund the construction or
development of a specific project by that subsidiary.
8.4 Federal Tax Matters. The Company shall deduct for
Federal income tax purposes the interest payable on the Notes only to the
extent of the interest paid or payable on the Notes in cash or shares of the
Company's Common Stock pursuant to Sections 2 and 3 hereof.
8.5 Financial Information. The Company shall deliver to
the Holder promptly, but in any event within 10 days, after any distribution to
its shareholders generally of an annual report, proxy statement, registration
statement or other similar report or communication, a copy of each such report,
proxy statement, registration statement or other similar report or
communication; and promptly, but in any event within 10 days after any filing
with the Securities and Exchange Commission or with any national securities
exchange or with the NASD of any publicly available annual or periodic or
special report or proxy statement or registration statement, a copy of such
report or statement; and promptly, but in any event within two business days,
after released, copies of all press releases and other statements made
available generally by the Company to the public concerning material
developments.
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<PAGE> 25
8.6 Merger. The Company shall not merge or consolidate
with or sell, convey or otherwise dispose of all or substantially all of its
assets to any other corporation, partnership or other legal entity unless (i)
the Company shall be the surviving corporation, partnership or other legal
entity in the case of a merger, or the surviving, resulting or transferee
corporation, partnership or other legal entity ("the successor corporation")
shall expressly assume the due and punctual payment of the principal of and
interest on all the Notes, according to their tenor, and due and punctual
performance of all of the covenants and obligations of the Company under the
Notes, and (ii) the Company or such successor corporation, as the case may be,
shall not immediately after such merger, consolidation, sale or conveyance be
in default in the performance of any covenants or obligations of the Company
under the Notes.
9. Miscellaneous.
9.1 Waiver. The Company hereby waives presentment for
payment, demand, notice of non-payment, protest and notice of protest.
9.2 Binding Effect. This Note shall be binding upon the
Company and its successors and assigns and shall inure to the benefit of the
Holder and its successors, assigns and transferees. The Holder may assign this
Note to any Investor (as defined in the Purchase Agreement) or to any affiliate
(within the meaning of the Securities Exchange Act of 1934) of any Investor,
but shall not assign this Note to any other Person without the consent of the
Company, which consent shall not be unreasonably withheld and which consent
shall be deemed given if not denied within three (3) business days of receipt
of a notice requesting consent. Notwithstanding the foregoing, this Note may
not be assigned or transferred in whole or in part, if as a result of such
transfer or assignment there would be more than an aggregate of 10 Holders.
Any such permitted assignee or transferee shall be bound by the terms and
provisions hereof and the Note Purchase Agreement. Any transfer or assignment
in contravention of this Section shall be null and void.
9.3 Legal Fees. The Company shall pay to the Holder all
costs of suit, including reasonable attorneys' fees, should legal proceedings
be instituted at any time to collect any amount due hereon or otherwise to
enforce this Note.
9.4 Governing Law. This Note shall be governed by and
construed in accordance with the internal laws of the State of New York
(without reference to its rules as to conflicts of law).
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<PAGE> 26
9.5 Headings. All headings used herein are for
convenience only and shall not be used to construe or interpret this Note.
9.6 Other Exchange. If the Company's Common Stock is not
traded on the New York Stock Exchange, any reference to the New York Stock
Exchange shall be deemed a reference to the principal exchange on which the
Company's Common Stock is traded.
9.7 Restriction on Right to Issue Common Stock.
Notwithstanding anything to the contrary in this Note, the Company shall have
no right to make any principal or interest payment or any payment pursuant to
Section 3.1 or 3.2 in shares of the Company's Common Stock at a time when no
Registration Statement is effective or at a time when the Company's Common
Stock is not traded on the New York Stock Exchange, the American Stock Exchange
or the NASDAQ National Market System, without the consent of a Majority of the
Holders.
9.8 Limit on Number of Shares. Notwithstanding anything
to the contrary in this Note, the Purchase Agreement or the Warrants, the
aggregate number of shares of the Company's Common Stock issuable pursuant to
the Notes and the Warrants shall not exceed the maximum number of shares of
the Company's Common Stock that can be issued without obtaining shareholder
approval under the rules of the New York Stock Exchange (the "Maximum Number").
The Company shall not make any principal or interest payment in shares of the
Company's Common Stock to the extent such issuance, together with all shares
previously issued pursuant to the Notes or the Warrants, would exceed the
Maximum Number. Notwithstanding anything to the contrary in the Notes, the
Purchase Agreement or the Warrants, in the event that the shares of the
Company's Common Stock to be issued upon conversion of this Note, in whole or
in part, would, upon issuance, exceed the Maximum Number, the Company shall, in
lieu of issuing such shares, pay to the Holder an amount equal to the
difference between the Conversion Price and the Closing Bid Price on the date
of conversion for each share that would otherwise be issuable upon such
conversion.
9.9 Limitation on Ownership. Notwithstanding anything to
the contrary in this Note, during the term of the Notes the Holder and its
affiliates (within the meaning of the Securities Exchange Act of 1934) shall
not have the right to convert this Note into shares of the Company's Common
Stock that would result in the Holder and its affiliates becoming, the
beneficial owners (as defined in Rule 13d-3 under that Exchange Act) of more
than 4.75% of the Company's Common Stock; provided that the Holders shall have
the right to waive this restriction upon 61 days prior notice to the Company.
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<PAGE> 27
9.10 Notices. Any notice or other communication under
this Note shall be in writing and shall be considered given when delivered
personally or by facsimile, one day after being sent by a reputable overnight
courier, or four days after being mailed by registered mail, return receipt
requested, to the Company or the Holder to the address set forth below (or at
such other address as the Company or the Holder may specify by notice to the
other):
If to the Holder, to it at:
c/o Stonehill Investment Corporation
110 East 5th Street - 30th Floor
New York, New York, 10022
Attn: John Motulsky
If to the Company, to it at:
Sunshine Mining and Refining Company
5956 Sherry Lane
Suite #1621
Dallas, Texas 75225
with a copy to:
Haynes and Boone, LLP
901 Main Street - Suite 3100
Dallas, Texas 75202
Attn: Janice V. Sharry, Esq.
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<PAGE> 28
IN WITNESS WHEREOF, the Company has caused this Note to be
signed by a duly authorized officer and has caused its corporate seal to be
affixed and attested by its secretary.
SUNSHINE MINING AND REFINING COMPANY
By: /s/ WILLIAM W. DAVIS
--------------------------------
Name: William W. Davis
Title: Executive Vice President
and Chief Financial
Officer
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<PAGE> 1
EXHIBIT 23.2
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Sunshine Mining and
Refining Company for the registration of 25,000,000 shares of its common stock
and to the incorporation by reference therein of our report dated February 21,
1997 (except Note 5, as to which the date is September 10, 1997), with respect
to the consolidated financial statements of Sunshine Mining and Refining
Company, as amended, included in its Form 10-K/A.
ERNST & YOUNG LLP
Dallas, Texas
December 3, 1997
