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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
JANUARY 28, 1999
SUNSHINE MINING AND REFINING COMPANY
<TABLE>
<S> <C> <C>
STATE OF DELAWARE 1-10012 75-2231378
(STATE OF ORGANIZATION) (COMMISSION FILE NO.) (IRS EMPLOYER IDENTIFICATION NO.)
</TABLE>
877 W. MAIN STREET, SUITE 600, BOISE, IDAHO 83702
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (208) 345-0660
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ITEM 5. OTHER EVENTS.
On January 28, 1999, Sunshine Mining and Refining Company, a Delaware
corporation (the "Company"), completed a private placement of $6,000,000
initial principal amount of its 5% Convertible Notes due January 28, 2001 (the
"Notes"). The Company has agreed to file a registration statement with the
Securities and Exchange Commission registering for resale the common stock
issuable upon conversion of the Notes. Copies of the principal documents
containing the terms of the Notes and certain obligations of the Company have
been filed as exhibits to this report and are incorporated by reference herein.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
4.1 Registration Rights Agreement, dated as of January 28, 1999, between
the Company, Westgate International, L.P. and Elliott Associates, L.P.
4.2 Form of 5% Convertible Note due January 28, 2001.
10.1 Convertible Note Investment Agreement, dated as of January 27, 1999,
between the Company, Westgate International, L.P. and Elliott
Associates, L.P.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SUNSHINE MINING AND REFINING COMPANY
February 4, 1999 By: /s/ John S. Simko
-------------------------------------
John S. Simko
President and Chief Executive Officer
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INDEX TO EXHIBITS
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Exhibit Description
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<C> <C>
4.1 Registration Rights Agreement, dated as of January
28, 1999, between the Company, Westgate
International, L.P. and Elliott Associates, L.P.
4.2 Form of 5% Convertible Note due January 28, 2001.
10.1 Convertible Note Investment Agreement, dated as of
January 27, 1999, between the Company, Westgate
International, L.P. and Elliott Associates, L.P.
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EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement ("Agreement") is
entered into as of January 28, 1999, between Sunshine Mining
and Refining Company, a Delaware corporation with offices at
877 West Main Street, Boise, Idaho 83702 (the "Company") and
each of the entities listed under "Investors" on the signature
page hereto (each an "Investor" and collectively the
"Investors"), each with offices at the address listed in
Section 13(c).
W I T N E S S E T H:
Whereas, pursuant to that certain Convertible Note
Investment Agreement, dated as of January 27, 1999 by and
between the Company and the Investors (the "Purchase
Agreement"), the Company has agreed to sell and issue to the
Investors, and the Investors have agreed to purchase from the
Company, $6,000,000 principal amount of Convertible Notes due
January 28, 2001 (the "Notes ") subject to the terms and
conditions set forth therein; and
Whereas, the Purchase Agreement contemplates that the
Notes will be convertible into shares (the "Common Shares") of
common stock, par value $0.01, of the Company ("Common Stock")
pursuant to the terms and conditions set forth in the Notes ;
Now, Therefore, in consideration of the mutual
promises, representations, warranties, covenants and
conditions set forth in the Purchase Agreement and this
Agreement, the Company and the Investors agree as follows:
1. Certain Definitions. Capitalized terms used herein and not
otherwise defined shall have the meaning ascribed thereto in the Purchase
Agreement or the Notes. As used in this Agreement, the following terms shall
have the following respective meanings:
"Closing" and "Closing Date" shall have the meanings
ascribed to such terms in the Purchase Agreement.
"Commission" or "SEC" shall mean the Securities and
Exchange Commission or any other federal agency at the time
administering the Securities Act.
"Holder" and "Holders" shall include an Investor or
the Investors, respectively, and any transferee of the Notes,
Common Shares or Registrable Securities which have not been
sold to the public to whom
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the registration rights conferred by this Agreement have been
transferred in compliance with this Agreement and the Purchase
Agreement.
The terms "register", "registered" and "registration"
shall refer to a registration effected by preparing and filing
a registration statement in compliance with the Securities Act
and applicable rules and regulations thereunder, and the
declaration or ordering of the effectiveness of such
registration statement.
"Registrable Securities" shall mean: (i) the Common
Shares (up to the Maximum Amount, as such term is defined in
the Notes) or other securities issued or issuable to each
Holder or its permitted transferee or designee upon conversion
of the Notes; (ii) securities issued or issuable upon any
stock split, stock dividend, recapitalization or similar event
with respect to such Common Shares; and (iii) any other
security issued as a dividend or other distribution with
respect to, in exchange for or in replacement of the
securities referred to in the preceding clauses.
"Registration Expenses" shall mean all expenses to be
incurred by the Company in connection with each Holder's
registration rights under this Agreement, including, without
limitation, all registration and filing fees, printing
expenses, fees and disbursements of counsel for the Company,
blue sky fees and expenses, reasonable fees and disbursements
of counsel to Holders (using a single counsel selected by a
majority in interest of the Holders) for a "due diligence"
examination of the Company and review of the Registration
Statement and related documents, and the expense of any
special audits incident to or required by any such
registration (but excluding the compensation of regular
employees of the Company, which shall be paid in any event by
the Company).
"Registration Statement" shall have the meaning set
forth in Section 2(a) herein.
"Securities Act" or "Act" shall mean the Securities
Act of 1933, as amended.
"Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of
Registrable Securities and all fees and disbursements of
counsel for Holders not included within "Registration
Expenses".
2. Registration Requirements. The Company shall use its best
efforts to effect the registration of the Registrable Securities (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act) as would permit or facilitate the
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sale or distribution of all the Registrable Securities in the manner (including
manner of sale) contemplated herein and in all states. Such best efforts by the
Company shall include, without limitation, the following:
(a) The Company shall, as expeditiously as possible
after the Closing Date:
i) But in any event within 45 days of the Closing,
prepare and file a registration statement with the Commission
pursuant to Rule 415 under the Securities Act on Form S-3
under the Securities Act (or in the event that the Company is
ineligible to use such form, such other form as the Company is
eligible to use under the Securities Act) covering resales by
the Holders of the Registrable Securities ("Registration
Statement"), which Registration Statement, to the extent
allowable under the Securities Act and the rules promulgated
thereunder (including Rule 416), shall state that such
Registration Statement also covers such indeterminate number
of additional shares of Common Stock as may become issuable
upon conversion of the Notes. The number of shares of Common
Stock initially included in such Registration Statement shall
be no less than the Maximum Amount (as defined in the Notes).
Nothing in the preceding sentence will limit the Company's
obligations to reserve shares of Common Stock pursuant to
Section 3.8 of the Purchase Agreement. Thereafter the Company
shall use its best efforts to cause such Registration
Statement and other filings to be declared effective as soon
as possible, and in any event prior to 90 days following the
Closing Date. Without limiting the foregoing, the Company will
promptly respond to all SEC comments, inquiries and requests,
and shall request acceleration of effectiveness at the
earliest possible date. The Company shall provide the Holders
reasonable opportunity to review any such Registration
Statement or amendment or supplement thereto prior to filing.
ii) Prepare and file with the SEC such amendments and
supplements to such Registration Statement and the prospectus
used in connection with such Registration Statement as may be
necessary to comply with the provisions of the Act with
respect to the disposition of all securities covered by such
Registration Statement in accordance with the intended method
or methods of distribution provided from time to time by
Holders for inclusion in the Registration Statement or
supplement to Prospectus and notify the Holders of the filing
and effectiveness of such Registration Statement and any
amendments or supplements.
iii) Furnish to each Holder such numbers of copies of
a current prospectus conforming with the requirements of the
Act, copies of the Registration Statement, any amendment or
supplement thereto and any documents incorporated by reference
therein and such other documents as such Holder may reasonably
require in order to facilitate the disposition of Registrable
Securities owned by such Holder in accordance with the
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intended method or methods of distribution provided by Holders
for inclusion in the Registration Statement or supplement to
the Prospectus.
iv) Register and qualify the securities covered by
such Registration Statement under the securities or "Blue Sky"
laws of all domestic jurisdictions provided that the Company
shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a
general consent to service of process in any such states or
jurisdictions.
v) Notify each Holder immediately of the happening of
any event (but not the substance or details of any such events
unless specifically requested by a Holder) as a result of
which the prospectus (including any supplements thereto or
thereof) included in such Registration Statement, as then in
effect, includes an untrue statement of material fact or omits
to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances then existing, and use its best
efforts to promptly update and/or correct such prospectus.
vi) Notify each Holder immediately of the issuance by
the Commission or any state securities commission or agency of
any stop order suspending the effectiveness of the
Registration Statement or the threat or initiation of any
proceedings for that purpose. The Company shall use its best
efforts to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the
earliest possible time.
vii) Permit counsel to the Holders to review the
Registration Statement and all amendments and supplements
thereto within a reasonable period of time (but not less than
5 business days) prior to each filing, and shall not file any
document in a form to which such counsel reasonably objects
and will not request acceleration of the Registration
Statement without prior notice to such counsel.
viii) List the Registrable Securities covered by such
Registration Statement with all securities exchange(s) and/or
markets on which the Common Stock is then listed and prepare
and file any required filings with the New York Stock Exchange
or any exchange or market where the Common Shares are traded.
ix) Take all steps necessary to enable Holders to
avail themselves of the prospectus delivery mechanism set
forth in Rule 153 (or successor thereto) under the Act.
(b) Set forth below in this Section 2(b) are (I)
events that may arise that the Investors consider will interfere with the full
enjoyment of their rights under
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this Agreement, the Purchase Agreement and the Notes (the "Interfering Events"),
and (II) certain remedies applicable in each of these events.
i) Delay in Effectiveness of Registration Statement.
(A) In the event that the Registration
Statement has not been declared effective within 90
days from the Closing Date, then the Company shall
pay each Holder Monthly Delay Payments (as defined
and described below).
(B) As used in this Agreement, a "Monthly
Delay Payment" shall be a cash payment equal to 1% of
the principal amount of the Notes held by a Holder
for the first 30 day period (or portion thereof) that
the specified condition in this Section 2(b) has not
been fulfilled or the specified deficiency has not
been remedied, 2% of such principal amount for the
next 30 day period (or portion thereof) that the
specified condition has not been fulfilled or the
specified deficiency has not been remedied, and 3% of
such principal amount for each subsequent 30 day
period (or portion thereof) that the specified
condition has not been fulfilled or the specified
deficiency has not been remedied. Payment of the
foregoing cash amounts shall be due and payable from
the Company to such Holder within 5 business days of
demand therefor. At the option of the Holder, Monthly
Delay Payments may be added to the principal amount
of the Notes held by it. If a Holder becomes entitled
to receive Monthly Delay Payments at any given time
under more than one provision of this Section 2(b),
the Company shall only be obligated to make Monthly
Delay Payments under one provision of this Section
2(b).
(C) Notwithstanding the foregoing, there
shall be excluded from the calculation of the number
of days that the Registration Statement has not been
declared effective the delays which are solely
attributable to delays in the Holders providing
Requisite Information required for the Registration
Statement.
ii) No Listing; Suspensions.
(A) In the event that the Company fails,
refuses or for any other reason is unable to cause:
(i) the Common Stock as a class to be listed with the
New York Stock Exchange or one of the other Approved
Markets (as defined in the Purchase Agreement) at all
times during the period following the Closing Date
until such time as all of the Notes shall have been
paid in full or subject to mandatory conversion
pursuant to the terms of the Notes (the "Listing
Period") and (ii) the Registrable Securities covered
by the Registration Statement to be listed with the
New York Stock
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Exchange or on another Approved Market at all times
during the period from the earlier of the 90th day
following the Closing Date (provided that if the
Registration Statement has not been declared
effective by such time, the Registrable Securities
shall have been listed, subject to such
effectiveness) or the effectiveness of the
Registration Statement until such time as all of the
Notes shall have been paid in full or subject to
mandatory conversion pursuant to the terms of the
Notes, then the Maximum Amount, as defined in Section
5(k)(ii) of the Notes, shall be increased by 75%,
subject to the adjustments set forth in such
provision.
(B) In the event that shares of Common Stock
are suspended from trading on an Approved Market at
any time then each Holder shall have the right to
Monthly Delay Payment(s) on the terms set forth in
Section 2(b)(i)(B) above. Notwithstanding the
foregoing, in the event that following such
suspension (i) the Common Stock shall be listed on an
Approved Market, the Nasdaq Small Cap Market or the
Nasdaq Bulletin Board; (ii) the Maximum Amount shall
have been increased pursuant to Section 2(b)(ii)(A)
above; and (iii) Effective Registration (as defined
in the Purchase Agreement) shall have otherwise
occurred, then the Monthly Delay Payments pursuant to
this Section 2(b)(ii)(B) shall cease to accrue.
iii) Blackout Periods. In the event any Holder's
ability to sell Registrable Securities under the Registration
Statement is suspended (without being succeeded on the same
day by a post-effective amendment to the Registration
Statement that is immediately declared effective by the
Commission) for more than (i) five (5) consecutive days or
(ii) twenty (20) days in any calendar year ("Suspension Grace
Period"), including without limitation by reason of any
suspension or stop order with respect to the Registration
Statement or the fact that an event has occurred as a result
of which the prospectus (including any supplements thereto)
included in such Registration Statement then in effect
includes an untrue statement of material fact or omits to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading in
light of the circumstances then existing (a "Blackout"), then
the Company shall provide to each Holder a Monthly Delay
Payment for each 30 day period or portion thereof from and
after the expiration of the Suspension Grace Period, on the
terms set forth in Section 2(b)(i)(B) above.
iv) Redemption for Conversion Deficiency. In the
event that the Company does not have a sufficient number of
Common Shares authorized and reserved for issuance to satisfy
the Company's obligations to any Holder upon receipt of a
Conversion Notice (as defined in the Notes) to issue up to the
Maximum Amount of Common Shares or is otherwise unable or
unwilling for any reason to issue such Common Shares (each, a
"Conversion Deficiency") in accordance with the terms of
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the Notes for any reason (other than failure of the Holder to
comply with the notice and delivery requirements of Section
5(a) of the Notes or because the Company has issued the
Maximum Amount of Common Shares upon conversion of Notes)
after receipt of a Conversion Notice from any Holder, then:
(A) The Company shall provide to each Holder
a Monthly Delay Payment for each 30 day period or
portion thereof following the Conversion Deficiency,
on the terms set forth in Section 2(b)(i)(B) above.
(B) At any time five days after the
commencement of the running of the first 30-day
period described above in clause (A) of this
paragraph (iv), at the request of any Holder, the
Company promptly shall purchase from such Holder, all
of such Holder's Notes, for consideration (the
"Mandatory Repurchase Price") equal to the greater of
(x) 120% of the principal amount of all such Notes
being sold to the Company, or (y) the principal
amount, together with all accrued interest under the
Notes being sold to the Company divided by the then
applicable Conversion Price multiplied by the last
closing price of the Common Stock on (i) the date a
Holder exercises its option pursuant to require
repurchase of Notes or (ii) the date on which the
event triggering Holder's remedies first occurred, in
each case payable in cash and on the terms set forth
in Section 2(b)(i)(B) above.
v) Mandatory Purchase Price for Defaults. In the
event that the Company fails to pay any Monthly Delay Payment
within 5 business days of written demand therefor, each Holder
shall have the right to sell to the Company any or all of its
Notes at the Mandatory Repurchase Price on the terms set forth
in Section 2(b)(iv)(B) above.
vi) Cumulative Remedies. The Monthly Delay Payments
and mandatory purchases provided for above are in addition to
and not in lieu or limitation of any other rights the Holders
may have at law, in equity or under the terms of the Notes,
the Purchase Agreement or this Agreement, including without
limitation the right to monetary contract damages and specific
performance. Each Holder shall be entitled to specific
performance of any and all obligations of the Company in
connection with the rights of the Holders hereunder.
Notwithstanding the foregoing, no Holder may sue the Company
for money damages in excess of the Monthly Delay Payments
unless: (i) the Holder shall have provided the Company written
notice of default or breach under this Agreement; and (ii)
such default or breach shall not have been cured within 15
(fifteen) days of the Company's receipt of such notice. The
foregoing sentence shall not apply to the rights of Holders to
have Notes repurchased at the Mandatory Repurchase Price.
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vii) Remedies for Registrable Securities. In any case
in which a Holder of Notes has the right to cause the purchase
of its Notes under this Section 2(b), such Holder shall also
have the right to cause the purchase of the Registrable
Securities that it owns as follows: such shares shall be
purchased at the Mandatory Repurchase Price of the Notes which
were converted into Common Shares. Notwithstanding the
foregoing, no Holder shall have the right to cause the
repurchase of Registrable Securities provided in this Section
2(b)(vii) if such Registrable Securities are subject to
Effective Registration (as defined in the Purchase Agreement).
In the case in which a Holder of Notes would have
the right to receive Monthly Delay Payments with respect to
Notes under Section 2(b), it shall also have the right to
receive payments with respect to Registrable Securities owned
by it in an amount at the rates set forth in Section 2(b)(i)
above on the principal amount of the Notes converted into
Common Shares.
(c) The Company shall take all such reasonable actions
reasonably requested by the Holders in connection therewith in order to expedite
or facilitate the disposition of such Registrable Securities and, subject to
Section 2(g) below, in such connection, if requested by the Holders:
i) cause to be delivered to the sellers of
Registrable Securities opinions of independent counsel to the
Company, on and dated as of the effective day of the
Registration Statement, and within ninety (90) days following
the end of each fiscal year thereafter, which counsel and
opinions (in form, scope and substance) shall be reasonably
satisfactory to the Holders, and their counsel and covering,
without limitation, such matters as the due authorization and
issuance of the securities being registered and compliance
with securities laws by the Company in connection with the
authorization, issuance and registration thereof and other
matters that are customarily given to underwriters in
underwritten offerings, addressed to the Holders;
ii) cause to be delivered, immediately prior to the
effectiveness of the Registration Statement, and at the
beginning of each fiscal year following a year during which
the Company's independent certified public accountants shall
have reviewed any of the Company's books or records, a
"comfort" letter from the Company's independent certified
public accountants addressed to the Holders, stating that such
accountants are independent public accountants within the
meaning of the Securities Act and the applicable published
rules and regulations thereunder, and otherwise in customary
form and covering such financial and accounting matters as are
customarily covered by letters of the independent certified
public accountants delivered in connection with secondary
offerings; such accountants shall have undertaken in each such
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letter to update the same during each such fiscal year in
which such books or records are being reviewed so that each
such letter shall remain current, correct and complete
throughout such fiscal year; and each such letter and update
thereof, if any, shall be reasonably satisfactory to the
Holders; and
iii) Upon the filing by the Company of any report
pursuant to the Exchange Act which is incorporated by
reference into the Registration Statement, cause to be
delivered, promptly following such filing: (i) an update to
the opinion referred to in Subsection 2(c)(i) above and (ii)
an update to the "comfort" letter referred to in Subsection
2(c)(ii) above.
(d) Subject to Section 2(g) below, the Company shall make
available for inspection by the Holders, representative(s) of all the Holders
together, and any attorney or accountant retained by any Holder, all financial
and other records customary for purposes of the Holders' due diligence
examination of the Company and review of any Registration Statement, all SEC
Documents (as defined in the Purchase Agreement) filed subsequent to the
Closing, pertinent corporate documents and properties of the Company, and cause
the Company's officers, directors and employees to supply all information
reasonably requested by any such representative, underwriter, attorney or
accountant in connection with such Registration Statement, provided that such
parties agree to keep such information confidential.
(e) Subject to Section 2(b) above, the Company may suspend the
use of any prospectus used in connection with the Registration Statement only in
the event, and for such period of time as, such a suspension is required by the
rules and regulations of the Commission. The Company will use its best efforts
to cause such suspension to terminate at the earliest possible date.
(f) Upon receipt by a Holder of any notice from the Company
under Section 2(a)(v) or of the suspension of the use of any prospectus used in
connection with the Registration Statement, such Holder shall stop selling or
offering for sale under the Registration Statement any Registrable Securities
until such Holder's receipt of the copies of an updated and/or corrected
prospectus as contemplated by Section 2(a)(v), or until it receives advice in
writing from the Company that the use of the prospectus used in connection with
the Registration Statement may be resumed.
(g) Notwithstanding the provisions of Sections 2(c) and 2(d)
above, the Holders shall not request that the Company cause to be delivered the
opinions of independent counsel to the Company or "comfort" letter from the
Company's independent certified public accountants described in Section 2(c) or
conduct the due diligence review contemplated by Section 2(d) unless the SEC has
indicated, whether pursuant to review of the Registration Statement or pursuant
to an interpretive release or no-action letter, that it considers any Holder to
be an underwriter for purposes of the Securities Act. Any delay in the
effectiveness of the Registration Statement occasioned by a request by the
Holders for due diligence materials under Section 2(d) above shall not be
counted for purposes of a deadline in Section 2(a)(i) or the Monthly Delay
Payments in Section 2(b)(i) provided that: (i) the Company shall have filed the
Registration
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Statement on or before the 45th day following the Closing Date; (ii) the Company
shall have complied with Sections 2(a)(i), 2(a)(ii), 2(a)(iii) and 2(a)(vii)
above; (iii) the Holders' due diligence request shall not have resulted in a
material change in the Registration Statement; and (iv) the Holders' due
diligence request shall not have been in response to a material change in the
text of the Registration Statement after it is initially filed (other than the
SEC determining that any Holder is an "underwriter" for purposes of the
Securities Act).
(h) The Company may require each Holder to furnish to the
Company within five business days after request therefrom and thereafter
promptly as any relevant additional information becomes known to such Holder,
such information regarding the Holder and the distribution of such Holder's
Registrable Securities as is required by law to be disclosed in the Registration
Statement (the "Requisite Information"). If any information furnished to the
Company by a Holder for inclusion in the Registration Statement or any
prospectus used thereunder becomes materially misleading, such Holder agrees:
(i) to furnish promptly to the Company all information required to be included
in the Registration Statement or such prospectus in order to make the
information previously furnished to the Company not materially misleading and
(ii) to stop selling or offering for sale under the Registration Statement any
Registrable Securities until such Holder's receipt of copies of a supplemented
or amended prospectus that contains the information described in clause (i). No
Holder shall be entitled to receive the payments provided for in Sections
2(b)(i)(A), 2(b)(ii) or 2(b)(iii) (but only to the extent that such Holder is
not included as a Selling Security Holder in the Registration Statement) for any
time period in which such Holder fails to supply the Company the information
required to be supplied by this Section 2(h).
(i) The Company shall file a Registration Statement with
respect to any newly authorized and/or reserved Registrable Securities
consisting of Common Shares described in clause (i) of the definition of
Registrable Securities within five (5) business days of any stockholders meeting
authorizing same and shall use its best efforts to cause such Registration
Statement to become effective within sixty (60) days of such stockholders
meeting. If the Holders become entitled, pursuant to an event described in
clause (ii) of the definition of Registrable Securities, to receive any
securities in respect of Registrable Securities that were already included in a
Registration Statement, subsequent to the date such Registration Statement is
declared effective, and the Company is unable under the securities laws to add
such securities to the then effective Registration Statement, the Company shall
promptly file, in accordance with the procedures set forth herein, an additional
Registration Statement with respect to such newly Registrable Securities. The
Company shall use its best efforts to (i) cause any such additional Registration
Statement, when filed, to become effective under the Securities Act, and (ii)
keep such additional Registration Statement effective during the period
described in Section 5 below and cause such Registration Statement to become
effective within 60 days of that date that the need to file the Registration
Statement arose. All of the registration rights and remedies under this
Agreement shall apply to the registration of such newly reserved shares and such
new Registrable Securities, including without limitation the provisions
providing for default payments and mandatory redemptions contained herein.
Without limiting the generality of the foregoing, in the event that
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pursuant to Section 2(b)(ii) herein, Section 3.15 of the Purchase Agreement or
otherwise pursuant to Section 5(k)(ii) of the Notes, the Maximum Amount is
increased, then, concurrently with effecting the action triggering such increase
in the Maximum Amount (A) the Company shall cause the additional number of
Common Shares represented by such increase (the "Additional Common Shares") to
be duly reserved for issuance; (B) the Company shall file a Registration
Statement covering such Additional Common Shares, which in the case of an
increase due to Section 3.15 of the Purchase Agreement or Section 5(k)(ii) of
the Notes shall be declared effective within 30 days of the date such increase
is effective and in the case of an increase due to Section 2(b)(ii) herein,
shall be declared effective within 60 days of the date such increase is
effective; and (C) the Company shall apply to have such Additional Common Shares
listed on the New York Stock Exchange (or other Approved Markets) and such
listing shall be effective within 30 days of such increase in the Maximum Amount
(provided that if the Registration Statement is not effective by such time, such
listing may be subject to such effectiveness). The Monthly Delay Payment
provisions of Section 2(b) herein shall apply, based on the value of the
securities that are not subject to Effective Registration, to the extent that
the action to be taken under paragraphs (B) and (C) above are not taken on a
timely basis
3. Expenses of Registration. All Registration Expenses in connection
with any registration, qualification or compliance with registration pursuant to
this Agreement shall be borne by the Company, and all Selling Expenses of a
Holder shall be borne by such Holder.
4. Registration on Form S-3. The Company shall use its best efforts to
remain qualified for registration on Form S-3 or any comparable or successor
form or forms, or in the event that the Company is ineligible to use such form,
such form as the Company is eligible to use under the Securities Act.
5. Registration Period. In the case of the registration effected by the
Company pursuant to this Agreement, the Company will use its best efforts to
keep such Registration Statement effective until all the Holders have completed
the sales or distribution described in the Registration Statement relating
thereto or, if earlier, until such Registrable Securities may be sold by Holders
that are not affiliates of the Company under Rule 144(k) (provided that the
Company's transfer agent has accepted an instruction from the Company to such
effect).
6. Holder Undertakings. Each Holder covenants with the Company as
follows:
(a) Prospectus Delivery. To the extent not exempted by Rule
153 under the Securities Act, each Holder shall comply with the prospectus
delivery requirement under the Securities Act.
(b) Transaction Information. Each Holder shall report promptly
to the Company upon completion of the distribution of such Holder's Registrable
Securities pursuant to any Registration Statement.
11
<PAGE> 12
(c) Exchange Act Compliance. Each Holder shall, at any time
such Holder is engaged in a distribution of the Registrable Securities under any
Registration Statement, comply to the extent required with Regulation M (as
currently in effect or as amended or any successor or similar provisions)
promulgated under the Exchange Act and shall distribute the Registrable
Securities solely in the manner described in any Registration Statement.
7. Indemnification.
(a) Company Indemnity. The Company will indemnify each Holder,
each of its officers, directors, agents and partners, and each person
controlling each of the foregoing (the "Holder Indemnified Parties"), within the
meaning of Section 15 of the Securities Act and the rules and regulations
thereunder against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus incident to any
Registration Statement prepared pursuant to the terms of this Agreement, or
based on any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading in light of the circumstances under which they were made, or any
violation by the Company of the Securities Act or any state securities law or in
either case, any rule or regulation thereunder applicable to the Company and
relating to action or inaction required of the Company in connection with any
such Registration Statement, qualification or compliance, and will reimburse
each Holder Indemnified Party, for any legal and any other expenses reasonably
incurred in connection with investigating and defending any such claim, loss,
damage, liability or action, provided that the Company will not be liable in any
such case to a Holder Indemnified Party to the extent that any such claim, loss,
damage, liability or expense arises out of or is based on any untrue statement
or omission based upon written information furnished to the Company by a Holder
and stated to be specifically for use therein and provided further that the
foregoing indemnity shall not inure to the benefit of any Holder Indemnified
Party if the person asserting such claim, loss, damage, liability or expense (i)
purchased a Registrable Security and the Holder Indemnified Party, or someone
acting on the Holder Indemnified Party's behalf, did not, to the extent
required, deliver to such person at or prior to the written confirmation of the
sale of such Registrable Security a prospectus prepared for use under the
Registration Statement (as then amended or supplemented, if the Company
furnishes any amendments or supplements thereto to the Holders) and if such
prospectus (as so amended or supplemented) would have cured the defect giving
rise to such claim, loss, damage, liability or expense; or (ii) received such a
prospectus or amendment or supplement thereto in violation of Section 2(f) of
this Agreement, if such violation caused such claim, loss, damage, liability or
expense. The indemnity agreement contained in this Section 7(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 will not be unreasonably withheld).
(b) Holder Indemnity. Each Holder will, severally and not
jointly, if Registrable Securities held by it are included in the securities as
to which such Registration Statement is being effected, indemnify the Company,
any person controlling
12
<PAGE> 13
the Company (within the meaning of Section 15 of the Securities Act or Section
20 of the Exchange Act) and the respective directors, officers, partners,
employees, representatives and agents of each such person (the "Company
Indemnified Parties"), each other Holder (if any), and each of their officers,
directors and partners, and each person controlling such other Holder(s) against
all claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue statement) of
a material fact contained in any prospectus incident to any Registration
Statement prepared pursuant to the terms of this Agreement, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances under which they were made, and will reimburse the
Company Indemnified Parties and such other Holder(s) and their directors,
officers and partners, underwriters or control persons for any legal or any
other expenses reasonably incurred in connection with investigating and
defending any such claim, loss, damage, liability or action, in each case to the
extent, but only to the extent, that such untrue statement (or alleged untrue
statement) or omission (or alleged omission) is made in such prospectus or
Registration Statement in reliance upon and in conformity with written
information furnished to the Company by such Holder for use therein, and
provided the maximum amount for which such Holder shall be liable under this
indemnity shall not exceed the net proceeds received by such Holder from the
sale of the Registrable Securities pursuant to the Registration Statement in
question. The indemnity agreement contained in this Section 7(b) shall not apply
to amounts paid in settlement of any such claims, losses, damages or liabilities
if such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld).
(c) Procedure. Each party entitled to indemnification under
this Section 7 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim in any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified Party
may participate in such defense at its own expense, and provided further that
the failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 7 except to
the extent that the Indemnifying Party is materially and adversely affected by
such failure to provide notice. No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement 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
to such claim or litigation. Each Indemnified Party shall furnish such
non-privileged information regarding itself or the claim in question as an
Indemnifying Party may reasonably request in writing and as shall be reasonably
required in connection with the defense of such claim and litigation resulting
therefrom.
13
<PAGE> 14
8. Contribution. If the indemnification provided for in Section 7
herein is unavailable to the Indemnified Parties in respect of any losses,
claims, damages or liabilities referred to herein (other than by reason of the
exceptions provided therein), then each such 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 or
liabilities as between the Company on the one hand and any Holder on the other,
in such proportion as is appropriate to reflect the relative fault of the
Company and of such Holder in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative fault of the Company on the one
hand and of any Holder on the other shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by such Holder.
In no event shall the obligation of any Indemnifying Party to
contribute under this Section 8 exceed the amount that such Indemnifying Party
would have been obligated to pay by way of indemnification if the
indemnification provided for under Section 7(a) or 7(b) hereof had been
available under the circumstances.
The Company and the Holders agree that it would not be just
and equitable if contribution pursuant to this Section 8 were determined by pro
rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraphs.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraphs shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this section, no Holder shall be required to
contribute any amount in excess of the amount by which the net proceeds received
by such Holder from the sale of Registrable Securities pursuant to the
Registration Statement in question exceeds the amount of any damages that such
Holder or underwriter has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation.
9. Survival. The indemnity and contribution agreements contained in
Sections 7 and 8 shall remain operative and in full force and effect regardless
of (i) any termination of this Agreement or the Purchase Agreement, (ii) any
investigation made by or on behalf of any Indemnified Party or by or on behalf
of the Company, and (iii) the consummation of the sale or successive resales of
the Registrable Securities.
10. Information by Holders. Each Holder shall furnish to the Company
such information regarding such Holder and the distribution and/or sale proposed
by such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance
14
<PAGE> 15
referred to in this Agreement. The intended method or methods of disposition
and/or sale ("Plan of Distribution") of such securities as so provided by such
Investor shall be included without alteration in the Registration Statement
covering the Registrable Securities and shall not be changed without written
consent of such Holder.
11. Replacement Certificates. The certificate(s) representing the
Common Shares held by any Investor (or then Holder) may be exchanged by such
Investor (or such Holder) at any time and from time to time for certificates
with different denominations representing an equal aggregate number of Common
Shares, as reasonably requested by such Investor (or such Holder) upon
surrendering the same. No service charge will be made for such registration or
transfer or exchange.
12. Transfer or Assignment. Except as otherwise provided herein, this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The rights granted to the Investors by
the Company under this Agreement to cause the Company to register Registrable
Securities may be transferred or assigned (in whole or in part) to a transferee
or assignee of Notes or Registrable Securities and all other rights granted to
the Investors by the Company hereunder may be transferred or assigned to any
transferee or assignee of any Notes or Registrable Securities; provided that (i)
such transfer or assignment, if not to an affiliate of an Investor, shall be
subject to the written consent of the Company (which shall not be unreasonably
withheld) and (ii) such transfer or assignment shall be subject to compliance
with applicable law and provided further that the transferee or assignee of such
rights agrees in writing to be bound by the registration provisions of this
Agreement.
13. Miscellaneous.
(a) Remedies. The Company and the Investors acknowledge and
agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent or cure
breaches of the provisions of this Agreement and to enforce specifically the
terms and provisions hereof, this being in addition to any other remedy to which
any of them may be entitled by law or equity.
(b) Jurisdiction. The Company and each of the Investors (i)
hereby irrevocably submits to the exclusive jurisdiction of the State and
federal courts in the State of Delaware for the purposes of any suit, action or
proceeding arising out of or relating to this Agreement and (ii) hereby waives,
and agrees not to assert in any such suit action or proceeding, any claim that
it is not personally subject to the jurisdiction of such court, that the suit,
action or proceeding is brought in an inconvenient forum or that the venue of
the suit, action or proceeding is improper. The Company and each of the
Investors consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address in effect for
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing in this
paragraph shall affect or limit any right to serve process in any other manner
permitted by law.
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<PAGE> 16
(c) Notices. Any notice or other communication required or
permitted to be given hereunder shall be in writing by facsimile, mail or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be: to the Company:
Sunshine Mining and Refining Company
877 West Main Street
Suite 600
Boise, Idaho 83702
Facsimile: (208) 342-0004
Attention: John Simko
with copies to:
Haynes and Boone, LLP
901 Main Street
Suite 3100
Dallas, Texas 75202
Facsimile: (214) 651-5940
Attention: Janice V. Sharry, Esq.
to the Investors:
c/o Stonington Management Corporation
712 Fifth Avenue
New York, New York 10019
Facsimile: (212) 974-2092
Attention: Paul E. Singer
with copies to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue
New York, New York 10176
Facsimile: (212) 986-8866
Attention: Stephen M. Schultz, Esq.
Any party hereto may from time to time change its address for notices by giving
written notice of such changed address to the other parties hereto.
(d) Indemnity. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement.
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<PAGE> 17
(e) Waivers. No waiver by any party of any default with
respect to any provision, condition or requirement of this Agreement shall be
deemed to be a continuing waiver in the future or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
any party to exercise any right hereunder in any manner impair the exercise of
any such right accruing to it thereafter.
(f) Execution in Counterpart. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement, it being understood that all parties need not sign the same
counterpart.
(g) Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Investor
without its consent, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement. The
Company agrees to deliver a copy of any public announcement regarding the
matters covered by this Agreement or any agreement or document executed herewith
to each Investor and any public announcement including the name of an Investor
to such Investor, prior to the publication of such announcements.
(h) Entire Agreement; Amendment. This Agreement, together with
the Purchase Agreement, the Notes and the agreements and documents contemplated
hereby and thereby, contains the entire understanding and agreement of the
parties, and this Agreement may not be amended, modified or terminated except by
a written agreement signed by the Company plus the Holders of two-thirds of the
principal amount of Notes issued under the Purchase Agreement to that date;
provided that for the purposes of this Section 13(h) the Holders of Common
Shares still entitled to registration rights under this Agreement will be deemed
to still be Holders of that number of Notes which were converted into such
number of Common Shares issued upon conversion which are then held by them.
(i) Governing Law. This Agreement and the validity and
performance of the terms hereof shall be governed by and construed in accordance
with the laws of the State of New York applicable to contracts executed and to
be performed entirely within such state, except to the extent that the law of
the State of Delaware regulates the Company's issuance of securities.
(j) Severability. The parties acknowledge and agree that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warranties, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
(k) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL
BY JURY.
17
<PAGE> 18
(l) Titles. The titles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
(m) No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rule of strict construction will be applied against
any party.
[Signature page follows]
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<PAGE> 19
In Witness Whereof, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SUNSHINE MINING AND REFINING COMPANY
By: /s/ William W. Davis
---------------------------------------------
William W. Davis
Executive Vice President
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc.
Attorney-In-Fact
By: /s/ Paul E. Singer
------------------------------------------
Paul E. Singer
President
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul E. Singer
-------------------------------------------
Paul E. Singer
General Partner
19
<PAGE> 1
EXHIBIT 4.2
[NOTE WILL INDICATE WHETHER SUBJECT TO FLOATING CONVERSION PRICE OR CAPPED
CONVERSION PRICE]
[FORM OF NOTE]
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD OR OFFERED
FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
NO. $[ ]
-------- NEW YORK, NEW YORK
JANUARY __, 1999
SUNSHINE MINING AND REFINING COMPANY
5% CONVERTIBLE NOTE DUE JANUARY 28, 2001
THIS NOTE (the "Note") is one of a duly authorized issue of
Notes of SUNSHINE MINING AND REFINING COMPANY, a Delaware corporation (the
"Corporation") designated as the Corporation's 5% Convertible Notes due January
28, 2001, in an aggregate principal amount of SIX MILLION U.S. DOLLARS (U.S.
$6,000,000) (the "Notes").
FOR VALUE RECEIVED, the Corporation promises to pay to the
order of ELLIOTT ASSOCIATES, L.P. and its successors and assigns (the "Holder"),
the Principal Amount (as defined in Section 3 hereof) on January 28, 2001 (the
"Maturity Date") in the manner and amount provided in Section 3 hereof and to
pay interest at the rate of 5% per annum due, payable and accruing on a
quarterly basis on March 31, June 30, September 30 and December 31 of each year
(each an "Interest Payment Date"), in the manner set forth in Section 2 herein.
In no event shall the amount of interest paid hereunder exceed the maximum rate
of interest on the unpaid principal balance hereof allowable by applicable law.
If any sum is collected in excess of the applicable maximum rate, the excess
collected shall be applied to reduce the principal debt. If the interest
actually collected hereunder is still in excess of the applicable maximum rate,
the interest rate shall be reduced so as not to exceed the maximum allowable
under law.
1. RANKING. The Notes are direct, unconditional and unsecured
obligations of the Corporation and rank, and will rank pari passu, without any
preference among themselves, and will rank senior to all subordinated
obligations of the Corporation, including, without limitation, the Company's 8
7/8% Convertible Subordinated Debentures due July 15, 2008 (the 8 7/8%
Debentures") but, in the event of bankruptcy or insolvency of the Corporation,
only to the extent permitted by the applicable laws relating to creditors'
rights and will rank pari passu to all other obligations.
<PAGE> 2
2. INTEREST PAYMENTS. Any interest payment on this Note shall be made
by adding the amount thereof to the Principal Amount (as defined below) of this
Note.
Not later than 10 business days prior to each Interest Payment Date,
the Corporation shall send written notice to Holder of the amount of interest to
be added to the Principal Amount and such determination shall be conclusive
unless Holder shall have objected within 5 business days of receipt thereof.
3. PRINCIPAL AMOUNT. The principal amount of this Note (the "Principal
Amount") shall be equal to the sum of: (i) [Amount of Purchase Price]; (ii) all
interest payments added thereto as provided by Section 2 above; and (iii) all
"Monthly Delay Payments" payable under the Registration Rights Agreement (as
defined below), which Holder has elected to add to the Principal Amount.
4. ISSUANCE OF NOTES. This Note is being issued by the Corporation
pursuant to a Convertible Note Investment Agreement, dated as of January 27,
1999 ("Investment Agreement") between the Corporation and the initial
subscribers for the Notes thereunder, and the Holder of this Note shall enjoy
the benefits of the Registration Rights Agreement, dated January 28, 1999
("Registration Rights Agreement") between such parties in connection with the
Investment Agreement.
5. CONVERSION. The Holder of this Note shall have the right at any time
and from time to time prior to payment in full of this Note, at the option of
Holder, to convert any or all of this Note for such number of fully paid,
validly issued and nonassessable shares ("Common Shares") of common stock, par
value $0.01, of the Corporation ("Common Stock"), free and clear of any liens,
claims or encumbrances, as is determined by dividing (i) the portion of
Principal Amount to be converted (the "Conversion Amount"), by (ii) the
applicable Conversion Price determined as hereinafter provided in effect on the
Conversion Date. Immediately following such conversion, the rights of the Holder
with respect to the Conversion Amount shall cease and the persons entitled to
receive the Common Shares upon the conversion of such Conversion Amount shall be
treated for all purposes as having become the owners of such Common Shares,
subject to the rights provided herein to rescind such conversion, if Common
Shares are not delivered on a timely basis.
(a) Mechanics of Conversion. To convert this Note into Common
Shares, the Holder shall give written notice ("Conversion Notice") to the
Corporation in the form of page 1 of Exhibit A hereto (which Conversion Notice
will be given by facsimile transmission and sent via overnight delivery no later
than one Trading Day (as defined below) after the Conversion Date) stating that
Holder elects to convert the same and shall state therein the portion of
Principal Amount to be converted and the name or names in which Holder wishes
the certificate or certificates for Common Shares to be issued (the date of such
Conversion Notice shall be referred to herein as the "Conversion Date"). Either
simultaneously with the delivery of the Conversion Notice, or within one (1)
Trading Day thereafter, Holder shall deliver (which also will be given by
facsimile transmission) page 2 to Exhibit A hereto indicating the computation of
the number of Common Shares to be received. As soon as possible after delivery
of the
2
<PAGE> 3
Conversion Notice, Holder shall surrender this Note, at the office of the
Corporation or, if identified in writing to all the holders of Notes by the
Corporation, at the offices of any transfer agent for the Common Stock, provided
that the Corporation shall at all times maintain an office or agency in New
York, New York for such purposes. The Corporation shall, immediately upon
receipt of such Conversion Notice, issue and deliver to or upon the order of
Holder, against delivery of this Note, a certificate or certificates for the
number of Common Shares to which Holder shall be entitled (with the number of
and denomination of such certificates designated by Holder, and the Corporation
shall immediately issue and deliver to Holder a new Note or Notes for the
aggregate Principal Amount which Holder has not yet elected to convert hereunder
but which are evidenced in part by the Note delivered to the Corporation in
connection with such Conversion Notice. The Corporation shall effect such
issuance of Common Shares (and Note(s) for unconverted Principal Amount) within
three (3) Trading Days of the Conversion Date and shall transmit the
certificates by messenger or overnight delivery service to reach the address
designated by Holder within three (3) Trading Days after the receipt of such
Conversion Notice ("T+3"); provided that prior to such date, the Corporation
shall have received this Note (or an affidavit of lost note). If this Note or
affidavit are not received by such date, the Corporation will deliver
certificates for Common Shares within one Trading Day of receipt of this Note or
affidavit of lost note. Notwithstanding the foregoing, the Corporation shall not
be required to honor the Conversion Notice unless it shall have received this
Note (or lost note affidavit) within 5 Trading Days of receipt of the Conversion
Notice. If certificates representing Common Shares are not received by the
Holder within five (5) Trading Days of the Conversion Notice, then the Holder
will be entitled to revoke and withdraw its Conversion Notice, in whole or in
part, at any time prior to its receipt of those certificates. In lieu of
delivering physical certificates representing the Common Shares issuable upon
conversion of this Note, provided the Corporation's transfer agent is
participating in the Depository Trust Company ("DTC") Fast Automated Securities
Transfer ("FAST") program, upon request of the Holder, the Corporation shall use
its best efforts to cause its transfer agent to electronically transmit the
Common Shares issuable upon conversion or exercise to the Holder, by crediting
the account of the Holder's prime broker with DTC through its Deposit Withdrawal
Agent Commission ("DWAC") system. The time periods for delivery described above
shall apply to the electronic transmittals through the DWAC system. The parties
agree to coordinate with DTC to accomplish this objective. The conversion
pursuant to this Section 5 shall be deemed to have been made immediately prior
to the close of business on the Conversion Date. The person or persons entitled
to receive the Common Shares issuable upon such conversion shall be treated for
all purposes as the record holder or holders of such Common Shares at the close
of business on the Conversion Date.
The term "Trading Day" means a day on which there is trading
on the New York Stock Exchange or such other market or exchange on which the
Common Stock is then principally traded.
If Holder converts any of this Note, the Corporation shall pay
any documentary or stamp or similar issue or transfer tax due on the issue of
shares of Common Stock upon the conversion. However, Holder shall pay any such
tax that is due because the shares of Common Stock are issued in a name other
than Holder's name.
THE CORPORATION'S OBLIGATION TO ISSUE COMMON SHARES UPON
CONVERSION OF THIS NOTE SHALL, EXCEPT AS SET FORTH BELOW, BE ABSOLUTE, IS
INDEPENDENT OF ANY
3
<PAGE> 4
COVENANT OF THE HOLDER, AND SHALL NOT BE SUBJECT TO: (I) ANY OFFSET OR DEFENSE;
OR (II) ANY CLAIMS AGAINST THE HOLDER WHETHER PURSUANT TO THIS NOTE, THE
INVESTMENT AGREEMENT, THE REGISTRATION RIGHTS AGREEMENT OR OTHERWISE, INCLUDING,
WITHOUT LIMITATION, ANY CLAIMS ARISING OUT OF ANY SELLING OR SHORT-SELLING
ACTIVITY BY THE HOLDER. NOTWITHSTANDING THE FOREGOING, SUCH OBLIGATION SHALL BE
SUBJECT TO (1) THE HOLDER'S COMPLIANCE WITH THE NOTICE AND DELIVERY REQUIREMENTS
SET FORTH ABOVE IN THIS SECTION 5(A); (2) COMPLIANCE, WHERE REQUIRED BY LAW,
WITH THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED (THE
"HSR ACT"); AND (3) THE RESTRICTION AGAINST ISSUING A NUMBER OF COMMON SHARES IN
EXCESS OF THE MAXIMUM AMOUNT (AS DEFINED IN SECTION 5(K)(II)) PURSUANT TO THE
PROVISIONS IN SECTION 5(K)(II) BELOW .
(b) Determination of Conversion Price.
(i) The Conversion Price applicable with respect to Notes
marked as subject to the "Floating Conversion Price" (the "Floating
Conversion Price"), shall be the product of:
The Applicable Discount (as defined below) multiplied
by the Formula Price (as defined below).
As used herein, the "Applicable Discount" shall mean 97% for
the first 30 days after the issuance date of the Notes (the "Issuance Date"),
and thereafter shall be reduced by 1% for the next and each subsequent 30 day
period until it is 92%.
As used herein, the "Formula Price" shall be equal to the
average of the 5 lowest Daily Average Prices for the Common Stock on the New
York Stock Exchange or such other principal market on which the Common Stock is
traded ("Principal Market") (as reported on the Bloomberg financial network)
occurring during the 20 consecutive Trading Days immediately preceding the
Conversion Date.
As used herein "Daily Average Price" shall refer to the
average of the highest and lowest reported sales prices on a given Trading Day.
(ii) The Conversion Price applicable with respect to Notes
marked as subject to the "Capped Conversion Price" (the "Capped
Conversion Price") shall be equal to the lesser of:
(A) The Floating Conversion Price; and
(B) 110% of the closing sales price for the Common
Stock on the Principal Market (as reported on the Bloomberg
financial network) on the day before the issuance date of the
Notes (the "Maximum Conversion Price").
(c) [INTENTIONALLY LEFT BLANK].
(d) Stock Splits; Dividends; Adjustments.
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<PAGE> 5
(i) If the Corporation, at any time while this Note is
outstanding, (A) shall pay a stock dividend or otherwise make a
distribution or distributions on any equity securities (including
instruments or securities convertible into or exchangeable for such
equity securities) in shares of Common Stock, (B) subdivide outstanding
shares of Common Stock into a larger number of shares, or (C) combine
outstanding Common Stock into a smaller number of shares, then each
Affected Conversion Price (as defined below) shall be multiplied by a
fraction, the numerator of which shall be the number of shares of
Common Stock outstanding before such event and the denominator of which
shall be the number of shares of Common Stock outstanding after such
event. Any adjustment made pursuant to this Section 5(d)(i) shall
become effective immediately after the record date for the
determination of stockholders entitled to receive such dividend or
distribution and shall become effective immediately after the effective
date in the case of a subdivision or combination.
As used herein, the Affected Conversion Prices (each an
"Affected Conversion Price") shall refer to: (i) the Maximum Conversion
Price; and (ii) each reported price for the Common Stock on the
Principal Market occurring on any Trading Day included in the period
used for determining the Formula Price, which Trading Day occurred
before the record date in the case of events referred to in clause (A)
of this subparagraph 5(d)(i) and the effective date, in the case of the
events referred to in clauses (B) and (C) of this subparagraph 5(d)(i).
(ii) In the event that the Corporation issues or sells any
Common Stock or securities which are convertible into or exchangeable
for its Common Stock (other than the Notes), or any warrants or other
rights to subscribe for or to purchase or any options for the purchase
of its Common Stock (other than shares or options issued pursuant to
the Corporation's employee or director option plans or shares issued
upon exercise of convertible securities, options, warrants or rights
outstanding on the date of the Investment Agreement and described in
the Company's most recent annual report filed under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") at an effective
purchase price per share which is less than the closing market price
per share of the Common Stock on the Principal Market on the Trading
Day next preceding such issue or sale or, in the case of issuances to
holders of its Common stock, the date fixed for the determination of
stockholders entitled to receive such warrants, rights, or options
("Fair Market Price"), then in each such case, the Maximum Conversion
Price in effect immediately prior to such issue or sale or record date,
as applicable, shall be reduced effective concurrently with such issue
or sale to an amount determined by multiplying the Maximum Conversion
Price then in effect by a fraction, (x) the numerator of which shall be
the sum of (1) the number of shares of Common Stock outstanding
immediately prior to such issue or sale, plus (2) the number of shares
of Common Stock which the aggregate consideration received by the
Corporation for such additional shares would purchase at such Fair
Market Price; and (y) the denominator of which shall be the number of
shares of Common Stock of the Company outstanding immediately after
such issue or
5
<PAGE> 6
sale. [THE FOREGOING ADJUSTMENT SHALL APPLY ONLY TO NOTES SUBJECT TO
THE CAPPED CONVERSION PRICE]
For the purposes of the foregoing adjustment, in the case of
the issuance of any convertible securities, warrants, options or other
rights to subscribe for or to purchase or exchange for, shares of
Common Stock ("Convertible Securities"), the maximum number of shares
of Common Stock issuable upon exercise, exchange or conversion of such
Convertible Securities shall be deemed to be outstanding, and the
aggregate consideration received by the Corporation for the issuance or
sale of such Convertible Securities shall be deemed to include any
consideration that would be received by the Company in connection with
the exercise, exchange or conversion of such Convertible Securities,
provided that no further adjustment shall be made upon the actual
issuance of Common Stock upon exercise, exchange or conversion of such
Convertible Securities. Convertible Securities not exercisable or
convertible because they are unvested shall not be deemed outstanding
until they become vested in accordance with their terms, via
acceleration or otherwise.
(iii) If the Corporation, at any time while this Note is
outstanding, shall distribute to all holders of Common Stock evidences
of its indebtedness or assets or cash or rights or warrants to
subscribe for or purchase any security of the Corporation or any of its
subsidiaries (excluding those referred to in Sections 5(d)(i) or
5(d)(ii) above), then the Conversion Price in effect at the opening of
business on the day following the date fixed for the determination of
holders of Common Stock entitled to receive such distribution shall be
adjusted by multiplying such Conversion Price by a fraction, the
numerator of which shall be the Fair Market Price per share of the
Common Stock less the then fair market value as reasonably determined
by the Board of Directors of the portion of the evidences of
indebtedness or assets or rights or warrants so distributed (and for
which an adjustment to the Conversion Price has not previously been
made pursuant to the terms of this Section 5(d)) applicable to one
share of Common Stock, and the denominator of which shall be such Fair
Market Price per share of the Common Stock, such adjustment to become
effective immediately after the opening of business on the day
following the date fixed for the determination of holders of Common
Stock entitled to receive such distribution. In the event that the
Conversion Price shall change by more than 10%, the holders of the
Notes shall have the right to have the fair market value determined by
an independent investment banker, at the Corporation's expense.
(iv) Whenever the Conversion Price is adjusted pursuant to
Sections 5(d)(i), (ii) or (iii), the Corporation shall promptly mail to
the Holder a notice setting forth the Conversion Price after such
adjustment and setting forth a brief statement of the facts requiring
such adjustment.
(v) All calculations under this Section 5(d) shall be made to
the nearest cent or to the nearest 1/100th of a share, as the case may
be.
6
<PAGE> 7
(vi) No adjustment in the Conversion Price shall reduce the
Conversion Price below the then par value of the Common Stock; provided
that the Corporation shall not increase the par value of the Common
Stock without the prior written of consent a majority in Principal
Amount of outstanding Notes.
(vii) The Corporation from time to time may reduce the
Conversion Price by any amount for any period of time if the period is
at least 20 Trading Days and if the reduction is irrevocable during the
period. Whenever the Conversion Price is reduced, the Corporation shall
mail to the holders of the Notes a notice of the reduction. The
Corporation shall mail, first class, postage prepaid, the notice at
least 15 days before the date the reduced Conversion Price takes
effect. The notice shall state the reduced Conversion Price and the
period it will be in effect. A reduction of the Conversion Price does
not change or adjust the Conversion Price otherwise in effect for
purposes of Sections 5(d)(i), (ii), or (iii).
(e) Notice of Record Date. In the event of any taking by the
Corporation of a record date of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
entitling the holder thereof to receive additional Common Shares, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any class
or any other securities or property, or to receive any other right, the
Corporation shall deliver to each holder of the Notes at least 20 days prior to
the date specified therein, a notice specifying the date on which any such
record is to be taken for the purpose of such dividend, distribution, security
or right and the amount and character of such dividend, distribution, security
or right.
(f) Issue Taxes. The Corporation shall pay any and all issue and
other taxes, excluding any income, franchise or similar taxes, that may be
payable in respect of any issue or delivery of Common Shares on conversion of
this Note pursuant hereto. However, the Holder shall pay any tax that is due
because the Common Shares issuable upon conversion of this Note are issued in a
name other than Holder's name.
(g) Reservation of Stock Issuable Upon Conversion. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
Common Stock, solely for the purposes of effecting the conversion of the Notes,
the Maximum Amount (as defined herein). The Corporation promptly will take such
corporate action as may, in the opinion of its outside counsel, be necessary to
increase its authorized but unissued shares of Common Stock to such number of
shares as shall be sufficient for such purpose, including without limitation
engaging in best efforts to obtain the requisite stockholder approval.
(h) Fractional Shares. No fractional shares shall be issued upon the
conversion of this Note. If, after conversion of this Note, the conversion
and/or purchase would result in the issuance of a fraction of a share of Common
Stock, the Corporation shall, in lieu of issuing any fractional share, either
round up the number of shares to the next highest whole number or, at the
Corporation's option, pay Holder a sum in cash equal to the fair market value of
such fraction on the Conversion Date (as determined in good faith by the Board
of Directors of the Corporation).
7
<PAGE> 8
(i) Reorganization, Merger or Going Private. In case of any
reorganization or any reclassification of the capital stock of the Corporation
or any consolidation or merger of the Corporation with or into any other
corporation or corporations or a sale or transfer of all or substantially all of
the assets of the Corporation to any other person or a "going private"
transaction under Rule 13e-3 promulgated pursuant to the Exchange Act, then, as
part of such reorganization, consolidation, merger, or transfer if the holders
of shares of Common Stock receive any publicly traded securities as part or all
of the consideration for such reorganization, consolidation, merger or sale,
then it shall be a condition precedent of any such event or transaction that
provision shall be made such that the Notes shall thereafter be convertible into
such new securities at a conversion price and pricing formula which places the
holders of the Notes in an economically equivalent position as they would have
been if not for such event. In addition to the foregoing, if the holders of
shares of Common Stock receive any non-publicly traded securities or other
property or cash as part or all of the consideration for such reorganization,
consolidation, merger or sale, then such distribution shall be treated to the
extent thereof as a distribution under Section 5(d) above and such Section shall
also apply to such distribution.
(j) Mandatory Conversion. This Note is due and payable in cash on
the Maturity Date. However, to the extent that the Corporation complies with the
conditions set forth in this Section 5(j), it shall have the option to convert
this Note into Common Shares on the Maturity Date as set forth below:
(i) Subject to subsection (j)(ii) below, on the Maturity Date,
this Note shall be converted upon written notice (the "Mandatory
Conversion Notice") to the Holder at least twenty (20) Trading Days
prior to the Maturity Date, provided that such conversion shall be
deferred, at the sole option of the holders of the Notes, for such
number of days as is equal to the number of days (A) there is not
Effective Registration (as defined in the Investment Agreement), but
not including the first 90 days after the Closing; (B) subject to
Section 5(k)(ii) below, there is not a sufficient amount of Common
Stock available for conversion of all outstanding Notes; (C) for any
other reason the Corporation refuses or announces its refusal to honor
conversion of the Notes, other than for failure to comply with the
notice and delivery requirements of Section 5(a) above and compliance
with the HSR Act; or (D) there is a suspension, restriction or
limitation (other than the permitted "blackout periods" specified in
Section 2(b)(iii) of the Registration Rights Agreement) in the ability
of holders of Notes to sell Common Shares received upon conversion of
the Notes or under the Registration Statement and prospectus for any
reason.
(ii) Notwithstanding the preceding subsection (j)(i), the
Holder shall not be obligated to convert this Note on the Maturity Date
unless and until each of the following conditions has been satisfied or
exists, each of which shall be a condition precedent to any such forced
conversion:
(A) no material default or breach exists which has
not been cured, and no event shall have occurred which
constitutes (or would constitute with notice or the passage of
time or both) a
8
<PAGE> 9
material default or breach of the Investment Agreement, the
Registration Rights Agreement, or the Notes, which has not
been cured;
(B) none of the events described in clauses (i)
through (iv) of Section 2(b) of the Registration Rights
Agreement shall have occurred and be continuing;
(C) Effective Registration (as defined in the
Investment Agreement) has occurred and the holders of the
Notes have received unlegended certificates representing
Common Shares with respect to all conversions for which
Conversion Notices have been given;
(D) the Corporation and its subsidiaries on a
consolidated basis has assets with a net realizable fair
market value exceeding its liabilities and is able to pay all
its debts as they become due in the ordinary course of
business, and the Corporation is not subject to any
liquidation, dissolution or winding up of its affairs;
(E) each holder of the Notes shall have received a
certificate from an appropriate executive officer of the
Corporation certifying that each of the foregoing conditions
precedent exist or has been satisfied.
Such forced conversion shall be subject to and governed by all
the provisions relating to voluntary conversion of the Notes contained herein.
(iii) The conversion rights provided for in Section 5 will
terminate at the close of business on the business day preceding the
Maturity Date. Immediately following such conversion, the rights of
Holder under this Note shall cease and the persons entitled to receive
the Common Stock upon the conversion of this Note shall be treated for
all purposes as having become the owners of such Common Stock.
(iv) The Holder shall surrender this Note to the Corporation,
duly endorsed, in the manner and at the place designated in the
Mandatory Conversion Notice. On the later of the Maturity Date or the
date on which the Holder has surrendered this Note, the Corporation
shall issue the number of shares of Common Stock that the Holder shall
be entitled to receive upon conversion of this Note (subject to
Sections 5(j)(vii) and 5(k)(ii)) and this Note shall be cancelled and
retired.
(v) Interest on this Note shall cease to accrue on the
Maturity Date and all rights of the Holder under this Note shall
terminate, except for the right to receive the number of shares of
Common Stock into which the Note shall be converted.
9
<PAGE> 10
(vi) The provisions set forth in Sections 5(j)(iii), 5(j)(iv)
and 5(j)(v) above and 5(j)(vii) below are all subject to compliance by
the Corporation with all provisions of Section 5(j)(ii).
(vii) To the extent that (a) the aggregate Principal Amount of
all outstanding Notes on the Maturity Date divided by (b) the
applicable Conversion Price exceeds (x) the Maximum Amount less (y) the
number of Common Shares previously delivered pursuant to conversion of
Notes (the result of (x) less (y) is the "Remaining Maximum Amount),
then the Holder of this Note shall be entitled to receive pursuant to
Section 5(j)(iv) in full satisfaction of the Company's obligations
under Section 5(j)(iv) that number of Common Shares equal to (a) the
Remaining Maximum Amount multiplied by (b) a fraction, the numerator of
which is the Principal Amount of this Note and the denominator of which
is the aggregate Principal Amount of all Notes outstanding.
(k) Limitations on Holder's Right to Convert.
(i) Notwithstanding anything to the contrary contained herein,
no Principal Amount of this Note may be converted, other than pursuant
to Section 5(j), to the extent that, after giving effect to Common
Shares to be issued pursuant to a Conversion Notice, the total number
of shares of Common Stock deemed beneficially owned by Holder (other
than by virtue of the ownership of the Notes or ownership of other
securities that have limitations on a holder's rights to convert or
exercise similar to those limitations set forth herein), together with
all shares of Common Stock deemed beneficially owned by the Holder's
"affiliates" (as defined in Rule 144 of the Act) that would be
aggregated for purposes of determining whether a group under Section
13(d) of the Exchange Act exists, would exceed the Restricted Ownership
Percentage for Holder specified on Schedule I to the Investment
Agreement of the total issued and outstanding shares of the
Corporation's Common Stock; provided -------- that (w) Holder shall
have the right at any time and from time to time to reduce its
Restricted Ownership Percentage immediately upon notice to the
Corporation, (x) Holder shall have the right at any time and from time
to time, to increase its Restricted Ownership Percentage and otherwise
waive in whole or in part the restrictions of this Section 5(k) upon 61
days' prior notice to the Corporation or immediately in the event of a
Change in Control
10
<PAGE> 11
Transaction (as defined below), (y) Holder can make subsequent
adjustments pursuant to (w) or (x) any number of times from time to
time (which adjustment shall be effective immediately if it results in
a decrease in the percentage or shall be effective upon 61 days' prior
written notice or immediately in the event of a Change in Control
Transaction if it results in an increase in the percentage) and (z)
Holder may eliminate or reinstate this limitation at any time and from
time to time (which elimination will be effective upon 61 days' prior
notice and which reinstatement will be effective immediately). Without
limiting the foregoing, in the event of a Change in Control
Transaction, Holder may reinstate immediately (in whole or in part) the
requirement that any increase in its Restricted Ownership Percentage be
subject to 61 days' prior written notice, notwithstanding such Change
in Control Transaction, without imposing such requirement on, or
otherwise changing Holder's rights with respect to, any other Change in
Control Transaction. For this purpose, any material modification of the
terms of a Change in Control Transaction will be deemed to result in a
new Change in Control Transaction. The delivery of a Conversion Notice
by Holder shall be deemed a representation by Holder that it is in
compliance with this paragraph. The term "deemed beneficially owned" as
used in this Note shall exclude shares that might otherwise be deemed
beneficially owned by reason of the convertibility of this Note. The
Corporation shall provide all holders of Notes with the earlier of (i)
20 days' prior written notice of any such Change in Control
Transaction, to the extent the Corporation has prior knowledge of a
Change in Control Transaction; or (ii) notice on the day immediately
following the Corporation's learning of any such transaction, but only
after, in the case of (i) and (ii), such Change in Control Transaction
has been publicly disclosed.
(ii) The aggregate Principal Amount of the Notes may not be
converted into more than 19,000,000 Common Shares, which number of
shares shall be appropriately adjusted for (1) any stock split, stock
dividend or reclassification of Common Stock and (2) a decrease in the
Conversion Price pursuant to Section 5(d)(iii) above (the "Maximum
Amount"). The Maximum Amount is also subject to adjustment pursuant to
Section 3.15 of the Investment Agreement and Section 2(b) of the
Registration Rights Agreement.
(l) Certificate for Conversion Price Adjustment. The Corporation
shall promptly furnish or cause to be furnished to each holder of the Notes a
certificate prepared by the Corporation setting forth any adjustments or
readjustments of the Conversion Price pursuant to this Section 5.
(m) Specific Enforcement. The Corporation agrees that irreparable
damage would occur in the event that any of the provisions of this Note were not
performed in accordance with their specific terms or were otherwise breached. It
is accordingly agreed that the Holder shall be entitled to specific performance,
injunctive relief or other equitable remedies to prevent or cure breaches of the
provisions of this Note and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which any of them may be
entitled under agreement, at law or in equity.
(n) Mandatory Prepayment. Holder shall have the unilateral option
and right to compel the Corporation, upon written notice, to repurchase, in
cash, all or any part of this Note, at a price equal to 115% of Principal Amount
in the event that any of the following events shall have been announced as
pending or planned:
(i) A Change in Control Transaction (as defined below);
(ii) A "going private" transaction under Rule 13e-3
promulgated pursuant to the Exchange Act;
11
<PAGE> 12
(iii) A tender offer by the Corporation under Rule 13e-4
promulgated pursuant to the Exchange Act;
(iv) any default (including without limitation, any failure to
honor a put exercise) by Sunshine Argentina, Inc. ("Sunshine
Argentina") or Sunshine Exploration, Inc. ("Sunshine Exploration")
under the terms of the Put Option Agreements, dated the date hereof, by
and between Sunshine Argentina, Sunshine Exploration and each of the
holders of the Notes; or
(v) (a) a sale or transfer of all or substantially all of the
Pirquitas Mine (as defined in the Investment Agreement) or a
controlling interest therein in one or more transactions from Sunshine
Argentina to one or more persons or entities or (b) the sale or
issuance of any preferred stock, senior security, equity security or
capital stock in one or more transactions which results in another
person obtaining control of Sunshine Argentina.
The repayment will be made within 3 business days of the
written notice described above or, if the event that triggered the repayment
option is an event that involves payment primarily in cash to the Corporation,
its stockholders or any subsidiary, the prepayment may be made, at the
Corporation's option, simultaneously with the consummation or occurrence of the
event that triggered the repayment option.
A "Change in Control Transaction" will be deemed to exist if
(i) there occurs any consolidation or merger of the Corporation with or into any
other corporation or other entity or person (whether or not the Corporation is
the surviving corporation) in which in excess of 50% of the Corporation's voting
power is transferred, or any other corporate reorganization or transaction or
series of related transactions in which in excess of 50% of the Corporation's
voting power is transferred through a merger, consolidation, tender offer or
similar transaction, (ii) any person (as defined in Section 13(d) of the
Exchange Act, together with its affiliates and associates (as such terms are
defined in Rule 405 under the Securities Act of 1933, as amended (the "Act")),
beneficially owns or is deemed to beneficially own (as described in Rule 13d-3
under the Exchange Act without regard to the 60-day exercise period) in excess
of 50% of the Corporation's voting power, (iii) more than one-half of the
members of the Corporation's Board of Directors on the date hereof are replaced
by individuals, whose nomination or election to the Corporation's Board of
Directors was not approved by those individuals who are members of the
Corporation's Board of Directors on the date thereof, in one or a series of
related transactions or (iv) a sale or transfer of all or substantially all of
the assets of the Corporation, determined on a consolidated basis.
With respect to the foregoing mandatory repurchases, the
Holder shall have the right to have any Common Shares owned by it which were
issued upon conversion of any Notes included in such repurchases, at 115% of
Principal Amount of the Notes from which such Common Shares were converted;
provided, that such Common Shares are not subject to Effective Registration.
(o) Optional Payment. The Corporation shall have the right to prepay
all or any part of the Notes at any time (provided that all Notes are
to be prepaid pro-rata as set forth below), upon 20 business days
written notice to all holders of Notes, at a price equal
12
<PAGE> 13
to 115% of the Principal Amount being prepaid (the "Prepayment
Amount"), to be applied pro-rata to the Notes; provided that the
conditions set forth in Section 5(j)(ii) above shall be satisfied: (i)
on the date of such notice; (ii) on the date set forth in such notice
for the prepayment (the "Voluntary Prepayment Date"); and (iii) at all
times between such dates. The Prepayment Amount shall be applied first
to the Notes subject to the Floating Conversion Price on a pro-rata
basis, until paid in full and then to the Notes subject to the Capped
Conversion Price, on a pro-rata basis. On the Voluntary Prepayment Date
for making the prepayment, interest on the Principal Amount being
prepaid shall cease to accrue and all rights of the Holder under this
Note with respect to the Principal Amount being prepaid shall
terminate, except for the right to receive the Holder's pro-rata
portion of the Prepayment Amount. The Prepayment Amount shall be paid
in full to holders of the Notes on the Voluntary Prepayment Date. In
the event that such payment is not paid in full on such date, then at
the option of the Holder: (i) the prepayment may be rescinded and the
rights of Holders under this Note shall continue; or (ii) all Notes
shall become due and payable in full; provided that in the event the
Corporation gives notice of a prepayment to the holders of the Notes
and such prepayment must be subsequently rescinded because the
conditions in Section 5(j)(ii) cease to be met on or before the
Voluntary Prepayment Date, then the Corporation's right and obligation
to pay the Prepayment Amount on the Voluntary Prepayment Date shall
cease and the rights of the Holder under this Note shall immediately
continue. In the event that the Corporation fails to make a timely
payment of a Prepayment Amount, it shall no longer have the right to
prepay the Notes.
6. EVENTS OF DEFAULT. If one or more of the following described "Events
of Default" shall occur:
(a) The Company shall default in payment of (i) any Principal Amount
when due in respect to this Note or (ii) accrued interest due in respect of this
Note, which default shall continue for five (5) business days after the due date
thereof;
(b) If any Indebtedness (as defined in the Investment Agreement) of
the Company or any subsidiary of the Company, which is incurred after the
issuance of the Notes, becomes due and repayable in an amount in excess of
$1,000,000 prior to its stated maturity by reason of any event of default
(howsoever described) or any such Indebtedness in an amount in excess of
$1,000,000 is not paid when due or within any applicable grace period (as
originally provided);
(c) The Corporation shall (A) be or become insolvent; (B) admit in
writing its inability to pay its debts generally as they mature; (C) make an
assignment for the benefit of creditors or commence proceedings for its
dissolution; or (D) apply for or consent to the appointment of a trustee,
liquidator or receiver for it or for a substantial part of its property or
business; or
(d) Bankruptcy, reorganization, insolvency or liquidation
proceedings or other proceedings, or relief under any bankruptcy law or any law
for the relief of debt shall be instituted by or against the Corporation (except
for such proceedings that the Corporation in
13
<PAGE> 14
good faith believes are without basis, actively contests and is successful in
having dismissed with prejudice within 30 days), or the Corporation shall by any
action or answer approve of, consent to, or acquiesce in any such proceedings or
admit to any material allegations of, or default in answering a petition filed
in any such proceedings.
then, or at any time thereafter, and in each and every such case, unless such
Event of Default shall have been waived in writing by the Holder (which waiver
shall not be deemed to be a waiver of any subsequent default) at the option of
the Holder and in the Holder's sole discretion, the Holder may consider this
Note immediately due and payable, without presentment, demand, protest or notice
of any kind, all of which are hereby expressly waived, anything herein or in any
other instruments contained to the contrary notwithstanding, and the Holder may
immediately, and without expiration of any period of grace, enforce any and all
of the Holder's rights and remedies provided herein or any other rights or
remedies afforded by law. In such event, this Note shall be redeemed, in cash,
at a redemption price equal to the Principal Amount of this Note, plus accrued
but unpaid interest on this Note.
7. NOTICES. The Corporation shall distribute to the Holder copies of
all notices, materials, annual and quarterly reports, proxy statements,
information statements and any other documents distributed generally to the
holders of shares of Common Stock of the Corporation, at such times and by such
method as such documents are distributed to such holders of such Common Stock.
8. REPLACEMENT NOTES. This Note may be exchanged by Holder at any time
and from time to time for a Note or Notes with different denominations
representing an equal aggregate Principal Amount, as reasonably requested by
Holder, upon surrendering the same. No service charge will be made for such
registration or transfer or exchange. In the event that Holder notifies the
Corporation that the Note has been lost, stolen or destroyed, a replacement Note
identical in all respects to the original Note (except for registration number
and Principal Amount, if different than that shown on the original Note), shall
be issued to the Holder, provided that the Holder executes and delivers to the
Corporation an agreement reasonably satisfactory to the Corporation to indemnify
the Corporation from any loss incurred by it in connection with the Note.
9. ATTORNEYS' FEES. In connection with enforcement by the Holder of any
obligation of the Corporation hereunder, the prevailing party shall be entitled
to recovery of reasonable attorneys' fees and expenses incurred.
10. NO REISSUANCE. If acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise, this Note shall not be reissued.
11. SEVERABILITY OF PROVISIONS. If any provision of this Note is
invalid, unlawful or incapable of being enforced by reason of any rule or law or
public policy, all other provisions set forth in this Note, which can be given
effect without the invalid, unlawful or unenforceable
14
<PAGE> 15
provision shall nevertheless remain in full force and effect, and no provision
herein set forth be deemed dependent upon any such other provision unless so
expressed herein.
12. ASSIGNMENT. Holder may not assign this Note or any interest herein
and may not mortgage, encumber or transfer any of its rights or interest herein
without the prior written consent of the Corporation (which shall not be
unreasonably withheld) except that Holder may assign this Note to any affiliate
of Holder as of the date hereof without such consent. This Note shall be binding
upon the Corporation and its successors and shall inure to the benefit of Holder
and its successors and assigns. Assignment of this Note is subject to compliance
with the Act, applicable state securities laws or applicable exemptions
therefrom.
IN WITNESS WHEREOF, the Corporation has caused this instrument to be
duly executed by an officer thereunto duly authorized.
SUNSHINE MINING AND REFINING COMPANY
By:
--------------------------------------
Name:
Title:
15
<PAGE> 16
EXHIBIT A
(To be Executed by Holder
in order to Convert Notes
CONVERSION NOTICE
FOR
5% CONVERTIBLE NOTE
The undersigned, as a holder ("Holder") of a 5% Convertible Note (the "Note") of
Sunshine Mining and Refining Company (the "Corporation"), hereby irrevocably
elects to convert _____________ Principal Amount for shares ("Common Shares") of
common stock, par value $0.01 per share (the "Common Stock"), of the Corporation
according to the terms and conditions of the Note as of the date written below.
The undersigned hereby requests that share certificates for the Common Stock to
be issued to the undersigned pursuant to this Conversion Notice be issued in the
name of, and delivered to, the undersigned or its designee as indicated below.
No fee will be charged to the Holder for any conversion. Capitalized terms used
herein and not otherwise defined shall have the meanings ascribed thereto in the
Note.
The undersigned certifies that in calculating the Conversion Price, it has
complied with the requirements of Section 5(b) of the Note.
Conversion Date:
------------------------------
Conversion Information: NAME OF HOLDER:
By:
Print Name:
Print Title:
Print Address of Holder:
-----------------------------------------------
-----------------------------------------------
Issue Common Stock to:
-------------------------
at:
--------------------------------------------
-----------------------------------------------
If Common Stock is to be issued to a person other than Holder,
Holder's signature must be guaranteed below:
SIGNATURE GUARANTEED BY:
THE COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED IS SET FORTH ON PAGE 2
OF THE CONVERSION NOTICE.
PAGE 1 OF CONVERSION NOTICE
<PAGE> 17
PAGE 2 TO CONVERSION NOTICE DATED FOR:
----------------- -------------------------
(CONVERSION DATE) (NAME OF HOLDER)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
<TABLE>
<S> <C>
Principal Amount converted $
TOTAL DOLLAR AMOUNT CONVERTED $
========
CONVERSION PRICE $
-- Floating Conversion Price
-- Capped Conversion Price
Number of Common Shares = Total dollar amount converted =
----------------------------- -------
Conversion Price
NUMBER OF COMMON SHARES =
</TABLE>
If the conversion is not being settled by DTC, please issue and deliver _____
certificate(s) for Common Shares in the following amount(s):
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
If the Holder is receiving Note(s) upon the conversion, please issue and deliver
_____ Note(s) in the following amounts:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
17
<PAGE> 1
EXHIBIT 10.1
CONVERTIBLE NOTE INVESTMENT AGREEMENT
CONVERTIBLE NOTE INVESTMENT AGREEMENT ("AGREEMENT") dated as of January
27, 1999, between Sunshine Mining and Refining Company, a Delaware corporation
(the "COMPANY"), and each person or entity listed as an investor on Schedule I
attached to this Agreement (each individually an "INVESTOR" and collectively the
"INVESTORS").
W I T N E S S E T H:
WHEREAS, the Company desires to sell and issue to the Investors, and
the Investors wish to purchase from the Company, an aggregate of $6,000,000
principal amount of the Company's 5% Convertible Notes due January 28, 2001 in
the form of Exhibit 1.1A attached hereto (the "Notes"), on the terms and
conditions set forth herein; and
WHEREAS, the Notes will be convertible into shares ("COMMON SHARES") of
common stock, par value $0.01, of the Company ("COMMON STOCK"), pursuant to the
terms thereof, and the Investors will have registration rights with respect to
such Common Shares, pursuant to the terms of that certain Registration Rights
Agreement to be entered into between the Company and the Investors substantially
in the form of Exhibit 5.2(f) hereto ("REGISTRATION RIGHTS AGREEMENT");
NOW, THEREFORE, in consideration of the foregoing premises and the
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
PURCHASE AND SALE OF NOTES
Section 1.1 Issuance of Notes. Upon the following terms and conditions,
the Company shall issue and sell to each Investor severally, and each Investor
severally shall purchase from the Company, the principal amount of Notes
indicated next to such Investor's name on Schedule I attached hereto. With
respect to the Notes issued to each Investor, 50% of the principal amount shall
be convertible into Common Shares at the Floating Conversion Price (as defined
in the Notes) and 50% of the principal amount shall be convertible into Common
Shares at the Capped Conversion Price (as defined in the Notes). In addition,
Schedule I shall also indicate the Restricted Ownership Percentage (as defined
in the Notes) applicable to the Notes purchased by each Investor. Each Note
shall indicate whether it is convertible at the Floating Conversion Price or the
Capped Conversion Price.
(a) Purchase Price. The purchase price for the Notes to be
acquired by each Investor (the "PURCHASE PRICE") shall be the Purchase Price set
forth next to such Investor's name on Schedule I.
<PAGE> 2
(b) The Closing.
(i) Subject to the fulfillment or waiver of the conditions set
forth in Article V hereof, the closing of the purchase and sale of the
Notes (the "Closing") shall take place at the offices of Kleinberg,
Kaplan, Wolff & Cohen, P.C., on or about January 28, 1999, or earlier
if the Investors so determine, or such other date as the Investors and
the Company may agree upon (the "Closing Date").
(ii) On the Closing Date, the Company shall deliver to each
Investor the Notes purchased by it (with the aggregate principal amount
of such Notes as requested by such Investor) at the Closing registered
in the name of such Investor or its nominee. The delivery of payment by
each Investor of the Purchase Price applicable to it as set forth in
Section 1.1 and Schedule I shall constitute a payment delivered to the
Company in satisfaction of such Investor's obligation to pay the
Purchase Price hereunder. At the option of the Investors, the Purchase
Price may be delivered net of the expenses of the Investors incurred
pursuant to Section 3.4. In addition, each party shall deliver all
documents, instruments and writings required to be delivered by such
party pursuant to this Agreement at or prior to the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1 Representations and Warranties of the Company. The Company
hereby makes the following representations and warranties to each of the
Investors as of the date hereof and on the Closing Date:
(a) Organization and Qualification; Material Adverse Effect. The
Company is a corporation duly incorporated and existing in good standing under
the laws of the State of Delaware and has the requisite corporate power to own
its properties and to carry on its business as now being conducted. The Company
does not have any subsidiaries other than the subsidiaries listed on Schedule
2.1 attached hereto. Except where specifically indicated to the contrary, all
references in this Agreement to subsidiaries shall be deemed to refer to all
direct and indirect subsidiaries of the Company. The Company is duly qualified
as a foreign corporation to do business and is in good standing in every
jurisdiction in which the nature of the business conducted or property owned by
it makes such qualification necessary other than those in which the failure so
to qualify would not have a Material Adverse Effect. "MATERIAL ADVERSE EFFECT"
means any adverse effect on the business, operations, properties, or financial
condition of the entity or any subsidiary thereof with respect to which such
term is used and which is (either alone or together with all other adverse
effects) material to such entity, and any material adverse
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<PAGE> 3
effect on the transactions contemplated under this Agreement, the Notes and the
Registration Rights Agreement (as defined below), the Put Agreements (as defined
below) or any other agreement or document contemplated hereby or thereby.
(b) Authorization; Enforcement. (i) The Company has all requisite
corporate power and authority to enter into and perform this Agreement, the
Notes and the Registration Rights Agreement and to issue the Notes in accordance
with the terms hereof, (ii) the execution and delivery of this Agreement, the
Notes and the Registration Rights Agreement by the Company and the consummation
by it of the transactions contemplated hereby and thereby, including the
issuance of the Notes, have been duly authorized by all necessary corporate
action, and no further consent or authorization of the Company or its Board of
Directors (or any committee or subcommittee thereof) or stockholders is
required, (iii) this Agreement, the Notes and the Registration Rights Agreement
have been duly executed and delivered by the Company, (iv) this Agreement, the
Notes and the Registration Rights Agreement constitute valid and binding
obligations of the Company enforceable against the Company in accordance with
their terms, except (A) as such enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally the enforcement of creditors' rights and
remedies or by other equitable principles of general application, and (B) to the
extent the indemnification provisions contained in this Agreement and the
Registration Rights Agreement may be limited by applicable federal or state
securities laws.
(c) Capitalization.
(i) As of the date of this Agreement, the authorized capital
stock of the Company consists of 600,000,000 shares of Common
Stock and 20,000,000 shares of Preferred Stock, par value $0.01;
there are 259,408,558 shares of Common Stock and no shares of
Preferred Stock currently issued and outstanding.
(ii) After the Closing, 69,740,502 shares of Common Stock
and no shares of Preferred Stock will be reserved for issuance to
persons other than the Investors. All of the outstanding shares
of the Company's Common Stock have been validly issued and are
fully paid and nonassessable. No shares of capital stock are
entitled to preemptive rights; and there are as of the date
hereof outstanding options for 4,849,000 shares of Common Stock
and 7,084,500 shares of Common Stock available for future option
grants. Except as set forth in Schedule 2.1, there are no other
scrip, rights to subscribe to, calls or commitments of any
character whatsoever relating to, or securities or rights
exchangeable or convertible into, any shares of capital stock of
the Company, or contracts, commitments, understandings, or
arrangements by which the Company is or may become bound to issue
additional shares of capital stock of the Company or options,
scrip, rights to subscribe to, or commitments to purchase or
acquire, any shares, or securities or rights convertible into
shares, of capital stock of the Company.
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<PAGE> 4
(iii) Attached hereto as Exhibit 2.1(c) is (A) a true and
correct copy of the Company's Certificate of Incorporation (the
"CHARTER"), as in effect on the date hereof, and (B) a true and
correct copy of the Company's By-Laws, as in effect on the date
hereof (the "BY-LAWS").
(d) Issuance of Common Shares. The Common Shares are duly
authorized and reserved for issuance and, upon conversion of Notes in accordance
with their terms (including receipt by the Company of the Notes being converted
or a lost bond affidavit), such Common Shares, will be validly issued, fully
paid and non-assessable, free and clear of any and all liens, claims and
encumbrances, and entitled to be traded on the New York Stock Exchange ("NYSE")
(or the American Stock Exchange, or the Nasdaq National Market System,
collectively with the NYSE, the "APPROVED MARKETS"), and the holders of such
Common Shares shall be entitled to all rights and preferences accorded to a
holder of Common Stock. As of the date of this Agreement, the outstanding shares
of Common Stock are currently listed on the NYSE.
(e) No Conflicts. The execution, delivery and performance of this
Agreement, the Notes and the Registration Rights Agreement by the Company and
the consummation by the Company of the transactions contemplated hereby and
thereby do not and will not (i) result in a violation of the Company's Charter
or By-Laws or (ii) conflict with, or constitute a default (or an event which
with notice or lapse of time or both would become a default) under, or give to
others any rights of termination, amendment, acceleration or cancellation of,
any material agreement, indenture, patent, patent license or instrument to which
the Company or any of its subsidiaries is a party, or (iii) except as would not
reasonably be expected to have a Material Adverse Effect on the Company and its
subsidiaries, taken as a whole, result in a violation of any federal, state,
local or foreign law, rule, regulation, order, judgment or decree (including
Federal and state securities laws and regulations) applicable to the Company or
any of its subsidiaries or by which any property or asset of the Company or any
of its subsidiaries is bound or affected. The business of the Company and its
subsidiaries is being conducted in material compliance with all applicable laws,
ordinances or regulations of all governmental entities. The Company is not
required under Federal, state, local or foreign law, rule or regulation to
obtain any consent, authorization or order of, or make any filing or
registration with, any court or governmental agency in order for it to execute,
deliver or perform any of its obligations under this Agreement, the Registration
Rights Agreement and the Notes or issue and sell the Notes in accordance with
the terms hereof and issue the Common Shares upon conversion thereof, except for
(i) the registration provisions provided in the Registration Rights Agreement;
(ii) possible filing requirements under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended; and (iii) filing requirements under
applicable state securities or blue sky laws, provided that, for purposes of the
representation made in this sentence, the Company is assuming and relying upon
the accuracy of the relevant representations and agreements of the Investors
herein.
(f) SEC Documents; Financial Statements. The Common Stock of the
Company is registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), and the Company has filed all reports,
schedules, forms, statements and other documents required to be filed by it with
the Securities and Exchange
4
<PAGE> 5
Commission ("SEC") pursuant to the reporting requirements of the Exchange Act,
including material filed pursuant to Section 13(a) or 15(d), in addition to one
or more registration statements and amendments thereto heretofore filed by the
Company with the SEC (all of the foregoing including filings incorporated by
reference therein being referred to herein as the "SEC DOCUMENTS"). The Company
has delivered or made available to the Investors true and complete copies of all
SEC Documents (including, without limitation, proxy information and solicitation
materials and registration statements) filed with the SEC since December 31,
1996 and all annual SEC Documents filed with the SEC since December 31, 1995 and
prior to the date of this Agreement (the "Pre-Agreement SEC Documents"). The
Company has not provided to the Investors any material non-public information or
any information which, according to applicable law, rule or regulation, should
have been disclosed publicly by the Company but which has not been so disclosed.
As of their respective dates, the SEC Documents (as amended or supplemented to
this date, if applicable) complied in all material respects with the
requirements of the Exchange Act and the rules and regulations of the SEC
promulgated thereunder and other federal, state and local laws, rules and
regulations applicable to such SEC Documents, and none of the SEC Documents (as
amended or supplemented to this date, if applicable) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the SEC Documents (as amended or
supplemented to this date, if applicable) comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC or other applicable rules and regulations with respect
thereto. Such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except (i) as may be otherwise indicated in such financial
statements or the notes thereto or (ii) in the case of unaudited interim
statements, to the extent they may not include footnotes or may be condensed or
summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of operations
and cash flows for the periods then ended (subject, in the case of unaudited
statements, to normal year-end audit adjustments).
(g) Principal Exchange/Market. As of the date of this Agreement,
the principal market on which the Common Stock is currently listed for trading
is the NYSE.
(h) No Material Adverse Change. Since January 1, 1998, except as
disclosed in the Pre-Agreement SEC Documents, no Material Adverse Effect has
occurred or exists, and no event or circumstance has occurred that with notice
or the passage of time or both is reasonably likely to result in a Material
Adverse Effect with respect to the Company and its subsidiaries, taken as a
whole.
(i) No Undisclosed Liabilities. The Company and its subsidiaries
have no liabilities or obligations not disclosed in the Pre-Agreement SEC
Documents or on Schedule 2.1, other than those liabilities incurred in the
ordinary course of the Company's or its subsidiaries' respective businesses
since September 30, 1998, which liabilities, individually or in the aggregate,
do not or would not have a Material Adverse Effect on the Company or its
subsidiaries.
5
<PAGE> 6
(j) No Undisclosed Events or Circumstances. No event or
circumstance has occurred or exists with respect to the Company or its
subsidiaries or their respective businesses, properties, prospects, operations
or financial condition, which, under applicable law, rule or regulation,
requires public disclosure or announcement by the Company but which has not been
so publicly announced or disclosed.
(k) No General Solicitation. Neither the Company, nor any of its
affiliates, or, to its knowledge, any person acting on its or their behalf has
engaged in any form of general solicitation or general advertising (within the
meaning of Regulation D under the Securities Act of 1933, as amended (the
"ACT")), in connection with the offer or sale of the Notes or Common Shares.
(l) No Integrated Offering. Neither the Company, nor any of its
affiliates, nor to its knowledge any person acting on its or their behalf has,
directly or indirectly, made any offers or sales of any security or solicited
any offers to buy any security, under circumstances that (i) would require
registration of the Notes or the Common Shares under the Act; and (ii) would be
integrated with the offering of the Notes under either the Act or the Rules of
any Approved Market limiting the amount of capital stock that may be issued
without stockholder approval.
(m) Form S-3. The Company is eligible to file the Registration
Statement (as defined in the Registration Rights Agreement) for secondary
offerings on Form S-3 (as in effect on the date of this Agreement) under the Act
and rules promulgated thereunder, and Form S-3 (as in effect on the date of this
Agreement) is permitted to be used under the Act and rules promulgated
thereunder for the contemplated resale of the Common Shares by the Investors.
(n) No Shareholder Rights Plan. The Company has no stockholders
rights plan or plan or agreement with similar effect outstanding.
(o) No Litigation. Except as set forth in the Pre-Agreement SEC
Documents, no litigation or claim (including those for unpaid taxes) against the
Company or any of its subsidiaries is pending or, to the Company's knowledge,
threatened, which if determined adversely would reasonably be expected to have a
Material Adverse Effect on the Company and its subsidiaries, taken as a whole.
The legal proceedings described in the Pre-Agreement SEC Documents would not
reasonably be expected to have a Material Adverse Effect on the Company.
(p) Brokers. The Company has taken no action which would give rise
to any claim by any person for brokerage commissions, finder's fees or similar
payments by the Company or any Investor relating to this Agreement or the
transactions contemplated hereby.
(q) No Reliance. The Company has independently and without
reliance on Investors and based upon such information as it has deemed
appropriate, made its own analysis and decision to issue the Notes. Without
limiting the generality of the foregoing, the Company has not relied upon any
advice or representation of the Investors with respect to the effect of the
Notes on the price of the Common Stock.
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<PAGE> 7
(r) Other Investors. Except as set forth on Schedule 2.1, there
are no outstanding securities issued by the Company that are entitled to
registration rights under the Act. Except as set forth in Schedule 2.1, there
are no outstanding securities issued by the Company that are directly or
indirectly convertible into, exercisable into, or exchangeable for, shares of
Common Stock of the Company, that have anti-dilution or similar rights that
would be affected by the issuance of the Notes or the Common Shares.
(s) Certain Transactions. Except as disclosed in the Pre-Agreement
SEC Documents and on Schedule 2.1 and except as would not be required to be
disclosed pursuant to Item 404 of Regulation S-K promulgated under the Act, none
of the officers, directors, or employees of the Company is presently a party to
any transaction with the Company or any of its subsidiaries (other than for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
knowledge of the Company, any corporation, partnership, trust or other entity in
which any officer, director, or any such employee has a substantial interest or
is an officer, director, trustee or partner.
(t) Permits; Compliance. The Company and each of its subsidiaries
is in possession of all franchises, grants, authorizations, licenses, permits,
easements, variances, exemptions, consents, certificates, approvals and orders
necessary to own, lease and operate its properties and to carry on its business
as it is now being conducted, the failure of which to obtain would be likely to
have a Material Adverse Effect on the Company and its subsidiaries, taken as a
whole (collectively, the "COMPANY PERMITS"), and there is no action pending or,
to the knowledge of the Company, threatened regarding suspension or cancellation
of any of the Company Permits except for such Company Permits the failure of
which to possess, or the cancellation or suspension of which, would not,
individually or in the aggregate, have a Material Adverse Effect on the Company.
Neither the Company nor any of its subsidiaries is in material conflict with, or
in material default or material violation of, any of the Company Permits. Since
January 1, 1997, except as disclosed on Schedule 2.1, neither the Company nor
any of its subsidiaries has received any notification with respect to possible
material conflicts, material defaults or material violations of applicable laws.
(u) NYSE Contacts. The Company has not been contacted by the NYSE
since January 1, 1998, either orally or in writing, concerning potential
suspension or delisting of the Common Stock from the NYSE.
(v) Pirquitas Mine. With respect to the Pirquitas Mine located in
the Jujuy Province of Northwest Argentina (the "Pirquitas Mine") none of the
information received to date by the Company in connection with a feasibility
study or otherwise, would lead it to believe that the Company's publicly
announced pre-feasibility study estimates of operating costs, average annual
production, and useful life will not be materially accurate.
Section 2.2 Representations and Warranties of the Investors. Each of
the Investors, severally (as to itself) and not jointly, hereby makes the
following representations and warranties to the Company as of the date hereof
and on the Closing Date:
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<PAGE> 8
(a) Due Organization; Authorization; Enforcement. (i) Such
Investor has been duly organized and is validly existing and in good standing in
the jurisdiction of its formation, (ii) Such Investor has the requisite power
and authority to enter into and perform this Agreement and the Registration
Rights Agreement and to purchase the Notes being sold hereunder, (iii) the
execution and delivery of this Agreement and the Registration Rights Agreement
by such Investor and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate or
partnership action, and (iv) this Agreement and the Registration Rights
Agreement have been duly executed and delivered by such Investor and constitute
valid and binding obligations of such Investor enforceable against such Investor
in accordance with their terms, except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or
similar laws relating to, or affecting generally the enforcement of creditors'
rights and remedies or by other equitable principles of general application.
(b) No Conflicts. The execution, delivery and performance of this
Agreement and the Registration Rights Agreement and the consummation by such
Investor of the transactions contemplated hereby and thereby do not and will not
(i) result in a violation of such Investor's organizational documents, or (ii)
conflict with any agreement, indenture or instrument to which such Investor is a
party, or (iii) result in a material violation of any law, rule, or regulation,
or any order, judgment or decree of any court or governmental agency applicable
to such Investor. Such Investor is not required to obtain any consent or
authorization of any governmental agency in order for it to perform its
obligations under this Agreement or the Registration Rights Agreement.
(c) Investment Representation. Such Investor is purchasing the
Notes for its own account and not with a view to distribution in violation of
any securities laws. Each Investor has been advised and understands that neither
the Notes nor the shares of Common Stock issuable upon conversion thereof have
been registered under the Act or under the "blue sky" laws of any jurisdiction
and may be resold only if registered pursuant to the provisions of the Act or if
an exemption from registration is available, except under circumstances where
neither such registration nor such an exemption is required by law. Each
Investor has been advised and understands that the Company in issuing the Notes
is relying upon, among other things, the representations and warranties of the
Investors contained in this Section 2.2 in concluding that such issuance is a
"private offering" and is exempt from the registration provisions of the Act.
(d) Accredited Investor. Such Investor is an institutional
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) promulgated
under the Act. The Investor has such knowledge and experience in financial and
business matters in general and investments in particular, so that such Investor
is able to evaluate the merits and risks of an investment in the Notes and to
protect its own interests in connection with such investment. In addition (but
without limiting the effect of the Company's representations and warranties
contained herein), such Investor has been given the opportunity to request and
has received such information as it considers necessary or appropriate for
evaluating the merits and risks of the purchase of the Notes and deciding
whether to purchase the Notes pursuant hereto. Each Investor acknowledges that
its investment in the Notes involves a high degree of risk. In the normal course
of its
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<PAGE> 9
business, each Investor invests in securities similar to the Notes. Each
Investor has sought such accounting, legal and tax advice as it has considered
necessary to make an informed investment decision with respect to the Notes.
Each Investor acknowledges that it is able to bear the economic risk of loss of
its investment in the Notes.
(e) Rule 144. Such Investor understands that there is no public
trading market for the Notes, that none is expected to develop, and that the
Notes must be held indefinitely unless and until such Notes, or Common Shares
received upon conversion thereof are registered under the Act or an exemption
from registration is available. Such Investor has been advised or is aware of
the provisions of Rule 144 promulgated under the Act.
(f) Brokers. Such Investor has taken no action which would give
rise to any claim by any person for brokerage commissions, finder's fees or
similar payments by the Company or such Investor relating to this Agreement or
the transactions contemplated hereby.
(g) Reliance by the Company. Such Investor understands that the
Notes are being offered and sold in reliance on a transactional exemption from
the registration requirements of Federal and state securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgments and understandings of such Investor set
forth herein in order to determine the applicability of such exemptions and the
suitability of such Investor to acquire the Notes.
ARTICLE III
COVENANTS
Section 3.1 Registration and Listing; Effective Registration. Until
such time as no Notes are outstanding, the Company will cause the Common Stock
to continue at all times to be registered under Sections 12(b) or (g) of the
Exchange Act, will comply in all material respects with its reporting and filing
obligations under the Exchange Act, and will not take any action or file any
document (whether or not permitted by the Exchange Act or the rules thereunder)
to terminate or suspend such reporting and filing obligations. Until such time
as no Notes are outstanding, the Company shall continue the listing or trading
of the Common Stock on the NYSE or one of the other Approved Markets and comply
in all material respects with the Company's reporting, filing and other
obligations under the bylaws or rules of the Approved Market on which the Common
Stock is listed. The Company shall cause the Common Shares to be listed on the
NYSE or one of the other Approved Markets no later than the effectiveness of the
registration of the Common Shares under the Act, and shall continue such
listing(s) on one of the Approved Markets, for so long as any Notes are
outstanding. As used herein and in the Registration Rights Agreement and the
Notes, the term "EFFECTIVE REGISTRATION" shall mean that all registration
obligations of the Company pursuant to the Registration Rights Agreement and
this Agreement have been satisfied in all material respects, such registration
is not subject to any suspension or stop order (other than suspensions or stop
orders limited to a Suspension Grace Period (as defined in the Registration
Rights Agreement), which shall be excluded from this definition solely for
purposes of determining the number of days by which the mandatory conversion of
the Notes will be deferred), the prospectus for the Common Shares issuable upon
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<PAGE> 10
conversion of the Notes is current and deliverable and such Common Shares are
listed for trading on one of the Approved Markets and such trading has not been
suspended for any reason, and none of the Company or any direct or indirect
subsidiary of the Company is subject to any bankruptcy, insolvency or similar
proceeding.
Section 3.2 New Notes on Conversion. Upon any conversion by an Investor
(or then holder of Notes) of the Notes pursuant to the terms thereof, the
Company shall issue and deliver to such Investor (or holder) within three (3)
Trading Days (as defined in the Notes) of the Conversion Date (as defined in the
Notes) a new Note or Notes for the principal amount of Notes which such Investor
(or holder) has not yet elected to convert but which are evidenced in part by
the Note(s) submitted to the Company in connection with such conversion (with
the principal amounts of such new Note(s) designated by such Investor or
holder).
Section 3.3 Replacement Notes. The Notes held by any Investor (or then
holder) may be exchanged by such Investor (or such holder) at any time and from
time to time for Notes with different principal amounts representing an equal
aggregate principal amount of Notes, as requested by such Investor (or such
holder) upon surrendering the same. No service charge will be made for such
registration or transfer or exchange.
Section 3.4 Expenses. The Company shall pay, at the Closing and
promptly upon receipt of any further invoices relating to same, all reasonable
due diligence fees and expenses and reasonable attorneys' fees and expenses of
the Investors' Counsel, up to a maximum amount of $40,000, incurred by the
Investors in connection with the preparation, negotiation, execution and
delivery of this Agreement, the Registration Rights Agreement, the Notes and the
related agreements and documents and the transactions contemplated hereunder and
thereunder. At the Closing, the Company shall pay the amount due for such fees
and expenses (which may include fees and expenses estimated to be incurred for
completion of the transaction including post-closing matters). In the event such
amount is ultimately less than the actual fees and expenses, in each case up to
the applicable maximum amounts provided in this Section 3.4, the Company shall
promptly pay such deficiency upon receipt of an invoice regarding same. Section
3.5 Securities Compliance. The Company shall notify the SEC and the
NYSE, in accordance with their requirements, of the transactions contemplated by
this Agreement, the Notes and the Registration Rights Agreement, and shall take
all other necessary action and proceedings as may be required and permitted by
applicable law, rule and regulation, for the legal and valid issuance of the
Notes hereunder and the Common Shares issuable upon conversion thereof.
Section 3.6 Notices. The Company agrees to provide all holders of Notes
with copies of all notices and information, including without limitation notices
and proxy statements in connection with any meetings, that are provided to the
holders of shares of Common Stock, contemporaneously with the delivery of such
notices or information to such Common Share holders.
Section 3.7 Use of Proceeds. The Company agrees that the net proceeds
received by the Company from the sale of the Notes hereunder shall be used for
working capital purposes and that a material portion of such proceeds shall be
applied to the operations of Sunshine
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Argentina, Inc., a wholly-owned subsidiary of the Company ("Sunshine Argentina")
and the Company reserves the right to apply a portion of such proceeds to the
operations of Sunshine Exploration, Inc., a wholly-owned subsidiary of the
Company ("Sunshine Exploration").
Section 3.8 Reservation of Stock Issuable Upon Conversion. The Company
agrees to reserve and at all times keep available solely for purposes of
conversion of the Notes, such number of authorized but unissued shares of Common
Stock that is at least equal to the Maximum Amount (as defined in the Notes),
which number may be reduced by the number of Common Shares actually delivered
pursuant to conversion of the Notes under the terms thereof and shall be
appropriately adjusted for any stock split, reverse split, stock dividend or
reclassification of the Common Stock. If at any time the number of authorized
but unissued shares of Common Stock shall not be sufficient to effect the
conversion of all the then outstanding Notes into the Maximum Amount of shares
of Common Stock (as so reduced and adjusted), the Company will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including without limitation engaging in
best efforts to obtain the requisite shareholder approval. If at any time the
number of authorized but unissued shares of Common Stock is not sufficient to
effect the conversion of outstanding Notes into the Maximum Amount of Common
Shares, the Investors shall be entitled to, inter alia, the premium price
redemption rights provided in the Registration Rights Agreement.
Section 3.9 Best Efforts. The parties shall use their best efforts to
satisfy timely each of the conditions described in Article V of this Agreement.
Section 3.10 Form D; Blue Sky Laws. The Company agrees to file a Form D
with respect to the Notes and Common Shares, as required under Regulation D and
to provide a copy thereof to each Investor promptly after such filing. The
Company shall, on or before the Closing Date, take such action as the Company
shall have reasonably determined is necessary to qualify the Notes and Common
Shares for sale to the Investors under applicable securities or "blue sky" laws
of the states of the United States (or to obtain an exemption from such
qualification), and shall provide evidence of any such action so taken to each
Investor on or prior to the Closing Date; provided, however, that the Company
shall not be required in connection therewith to register or qualify as a
foreign corporation in any jurisdiction where it is not now so qualified or to
take any action that would subject it to service of process in suits or
taxation, in each case, in any jurisdiction where it is not now so subject.
Section 3.11 No Additional Issuances of Equity Securities;
Modifications of Other Notes. For so long as at least $2 million in Principal
Amount (as defined in the Notes) of Notes remains outstanding, the Company shall
not: (A) sell or otherwise dispose of any shares of its capital stock or issue
any additional shares of its capital stock or securities convertible,
exchangeable or exercisable into shares of its capital stock other than pursuant
to: (i) conversion of Notes; (ii) the exercise, conversion or exchange, on a
voluntary basis by the holders thereof and not upon demand or request of the
Company, of any warrants or options or other convertible or exchangeable
securities outstanding on the date hereof; and (iii) the future issuance of
employee and director stock options, not to exceed 7,084,500 shares of Common
Stock in the aggregate or; (B) make any amendments or modifications to the terms
or agree to any waivers of (i) the Company's 10% Senior Convertible Debentures
due November 24, 2002 (the "10%
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Debentures") or (ii) the Company's 8 7/8% Convertible Subordinated Debentures
due July 15, 2008 (the "8 7/8% Debentures").
Section 3.12 Press Release. Immediately following the Closing, the
Company shall issue a press release, in accordance with NYSE rules (or the rules
of such other Approved Market on which the Common Stock is traded) and the
Securities Act. Investors shall have the opportunity to review such press
release prior to its issuance. No press release shall name the Investors except
as shall be required by law. If the Company fails to issue a press release
within 5 business days of the Closing, the Investors may issue a press release
covering the Closing and complying with any legal requirement applicable to the
Investors.
Section 3.13 Shareholder Rights Plan. None of the acquisitions of Notes
or Common Shares nor the deemed beneficial ownership of shares of Common Stock
prior to, or the acquisition of such shares pursuant to, the conversion of Notes
will in any event under any circumstances trigger the poison pill provisions of
any stockholders' rights or similar agreements, or plan having a similar effect.
Section 3.14 Indebtedness. For so long as any Notes remain outstanding,
neither the Company nor any of its subsidiaries shall incur any new Indebtedness
(as defined below) or refinance existing Indebtedness, without the prior written
consent of the holders of the Notes, other than: (i) Indebtedness (including
refinanced Indebtedness) which is pari passu to the Notes; (ii) Indebtedness
(including refinanced Indebtedness) which by its terms is subordinated in right
of payment to the Notes; and (iii) Indebtedness incurred by a subsidiary of the
Company for the express purpose of funding the exploration, construction or
development of a specific project by such subsidiary; provided that, none of the
Indebtedness referred to in clauses (i), (ii) and (iii) above shall mature and
no principal payments shall be made with respect to such Indebtedness , prior to
the payment in full of the Notes.
As used herein, "Indebtedness" of any person, means any present or
future obligations, which shall include all obligations (i) which in accordance
with the generally accepted accounting principles in the U.S., shall be
classified upon the balance sheet of such person as liabilities, (ii) for
borrowed money, (iii) 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) for capitalized leases, (vii) for all guarantees,
whether or not reflected in the balance sheet of such person, and (viii) all
reimbursement and other payment obligations (whether contingent mature or
otherwise) of such person in respect of acceptance or documentary credit.
Notwithstanding the foregoing, the definition of the term Indebtedness will not
apply to any of the following:
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(i) trade debt incurred in the ordinary course of business;
(ii) hedging obligations incurred in connection with the
ordinary course of business to protect against currency exchange rate
risks or precious metal price risks;
(iii) the entry into or performance by Sunshine Argentina,
Inc. and Sunshine Exploration, Inc. of Indebtedness pursuant to the Put
Agreements (as defined below);
(iv) performance bonds or surety or appeal bonds entered into
in the ordinary course of business; (v) intercompany indebtedness
between or among the Company and any of its subsidiaries; provided that
if the Company is the obligor on such Indebtedness, such Indebtedness
is expressly subordinated to the satisfaction in full of all
obligations under the Notes;
(vi) Indebtedness represented by lease obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvements of property used in the business of the
Company or such subsidiary in an outstanding aggregate principal amount
not to exceed $2,000,000; and
(vii) the incurrence by the Company or any of its subsidiaries
of additional Indebtedness in an aggregate principal amount at any time
outstanding not to exceed $1,000,000.
Section 3.15 Reverse Stock Splits. Prior to Effective Registration, the
Company shall not combine its outstanding Common Stock into a smaller number of
shares (a "Reverse Split"). Subsequent to Effective Registration, if the Company
shall effect a Reverse Split, then the Maximum Amount (as defined in the Notes)
shall be increased by 50%.
Section 3.16 Certain Mergers and Consolidations. For so long as any
Notes remain outstanding, the Company shall not enter into any merger,
consolidation or reorganization, which transaction does not constitute a "Change
of Control Transaction" (as defined in the Notes), without the prior written
consent of two-thirds of the principal amount of Notes outstanding, if the
transaction would, in the reasonable judgment of the Investors, be likely to
have a material adverse effect on the rights of Investors hereunder or under the
Notes or the Registration Rights Agreement.
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ARTICLE IV
EUROBOND COVENANTS
Section 4.1 Payment of Additional Amount on Eurobonds. With respect to
the 8% Senior Exchangeable Notes due March 21, 2000, issued pursuant to the
Trust Deed by and among Sunshine Precious Metals, Inc., the Company and Marine
Midland Bank (the "Eurobonds"), the Company covenants that, pursuant to Section
6(B) of the Terms of the Eurobonds, it will cause the additional payment
required with respect to all Eurobonds pursuant to Sections 6(B)(i) or 6(B)(ii)
of the Terms of the Eurobonds (the "Additional Amount") to be paid in shares of
Common Stock; provided that such payment in shares shall be under circumstances
where such payment is permitted pursuant to the terms of the Eurobonds.
Section 4.2 Certificates of Common Stock Delivered in Satisfaction of
Additional Amount. The Company covenants that upon receipt, at any time and from
time to time, from the Investor of (A) a certificate, substantially in the form
of Exhibit 4.2 A representing (i) that such Investor is not, and has not been
for the prior three months, an "affiliate" of the Company (within the meaning to
Rule 144 under the Act) and (ii) that such Investor has held its Eurobonds for
more than 2 years, or a certificate, substantially in the form of Exhibit 4.2B,
representing (x) that such Investor has held its Eurobonds for more than 1 year
and (y) shall sell any shares of stock received as payment of the Additional
Amount only upon compliance with the requirements of Rule 144, and (B) an
opinion of the Investor's counsel, substantially in the form of Exhibit 4.2C, to
the effect that, for purposes of Rule 144, the Investor's holding period for the
Additional Amount payable on the Eurobonds held by the Investor may be "tacked"
to the Investor's holding period of such Eurobonds, it shall issue unlegended
certificates to such Investor representing the shares of Common Stock issued
pursuant to Section 4.1 above.
Section 4.3 Payment of Note Indebtedness. The Company covenants that if
it shall, directly or indirectly (including through a subsidiary or affiliate),
redeem, retire, repurchase or make any payments, in any medium other than shares
of the Company's capital stock, of any amounts under any Note Indebtedness (as
defined below), other than regularly scheduled interest payments pursuant to the
terms thereof, whether pursuant to the terms thereof or otherwise, prior to the
maturity or stated maturity of the Eurobonds, then concurrently with such
redemption, retirement, repurchase or payment, (A) it shall, as to the 10%
Debentures and at the option of the Investors, also repurchase or cause to be
repurchased in cash, the Eurobonds held by the Investors on a pari passu basis
(i.e., the same percentage of the amounts outstanding on the Eurobonds held by
the Investors is paid as is paid on the 10% Debentures being paid down, so if
33% of the amounts owing on the 10% Debentures is being paid down, then 33% of
the amounts owing on the Eurobonds held by the Investors must be paid down) and
(B) the Company shall, at the option of the Investors, repurchase or cause to be
repurchased in cash, the Eurobonds held by the Investors in full prior to any
payment of principal on the 8 7/8% Debentures.
As used herein "Note Indebtedness" means the 10% Debentures and
the 8 7/8% Debentures.
Section 4.4 Notice of Default or Acceleration under Indebtedness. In
the event that the Company receives any notice of default under (i) any Note
Indebtedness or (ii) any
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Indebtedness incurred after the issuance of the Notes that exceeds in the
aggregate $1,000,000, or other notice that could reasonably be expected to
result in the principal amount of such Note Indebtedness or Indebtedness being
accelerated or paid prior to maturity (a "Debt Notice"), then the Company shall
within 3 business days of the receipt of such Debt Notice, transmit a copy of
such notice to the Investors by facsimile pursuant to Section 8.4. The Company
shall publicly disclose such Debt Notice within 5 business days of the receipt
thereof. If the Company fails to make such public disclosure within such time
frame, the Investors may issue a press release disclosing such Debt Notice and
complying with any legal requirement applicable to the Investors.
Section 4.5 Existing Indebtedness. For so long as the Investors hold
any Eurobonds:
(a) If the Company or any of its subsidiaries or affiliates shall
enhance the credit of any Note Indebtedness, which shall include, without
limitation, the granting of any liens on assets, and the issuance of any
guarantees, capital contribution commitments, puts or letter of credit, then the
Eurobonds held by Investors shall be enhanced in the same manner on a ratable
basis (i.e., such enhancement shall be pari passu with the enhancement issued to
the Note Indebtedness being supported and the same proportion of amounts due and
owing on the Eurobonds held by the Investors shall be covered by such
enhancement, as with such Note Indebtedness).
(b) The Company covenants that it shall comply, and cause all of
its subsidiaries to comply with the following:
(i) in the event that all or substantially all the Pirquitas
Mine, or a controlling interest therein, is sold or disposed of, to one
or more persons, in one or more transactions, then none of the proceeds
shall be transferred from the entity selling or disposing of the
Pirquitas Mine or a controlling interest therein unless such proceeds
are used to pay the Note Indebtedness and the Eurobonds; and
(ii) Sunshine Argentina shall remain obligated with respect to
the provisions of the Put Agreements, notwithstanding any transfer or
issuance of its capital stock to any other person.
ARTICLE V
CONDITIONS TO CLOSINGS
Section 5.1 Conditions Precedent to the Obligation of the Company to
Sell the Notes. The obligation hereunder of the Company to issue and/or sell the
Notes to the Investors at the Closing is subject to the satisfaction, at or
before the Closing, of each of the applicable conditions set forth below. These
conditions are for the Company's sole benefit and may be waived by the Company
at any time in its sole discretion.
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(a) Accuracy of the Investors' Representations and Warranties. The
representations and warranties of each Investor will be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time.
(b) Performance by the Investors. Each Investor shall have
performed all agreements and satisfied all conditions required to be performed
or satisfied by such Investor at or prior to the Closing, including payment of
the purchase price set forth on Schedule I hereto.
(c) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement or the Notes or the Put
Agreements.
(d) Certificate. Investors shall have delivered a certificate to
the Company certifying that the representations and warranties of the Investors
contained in Section 2.2 are true and correct in all material respects as of the
Closing Date.
Section 5.2 Conditions Precedent to the Obligation of the Investors to
Purchase the Notes. The obligation hereunder of each Investor to acquire and pay
for the Notes at the Closing is subject to the satisfaction, at or before the
Closing, of each of the applicable conditions set forth below. These conditions
are for each Investor's benefit and may be waived by each Investor at any time
in its sole discretion.
(a) Accuracy of the Company's Representations and Warranties. The
representations and warranties of the Company shall be true and correct in all
material respects as of the date when made and as of the Closing Date as though
made at that time (except for representations and warranties as of an earlier
date, which shall be true and correct in all material respects as of such date).
(b) Performance by the Company. The Company shall have performed
all agreements and satisfied all conditions required to be performed or
satisfied by the Company at or prior to the Closing, including, without
limitation, delivery of the Notes issued to Investors.
(c) NYSE; Trading. From the date hereof to the Closing Date,
trading in the Company's Common Stock shall not have been suspended by the SEC
and trading in securities generally as reported by the NYSE (or other Approved
Market) shall not have been suspended or limited, and the Common Stock shall be
listed on the NYSE or another Approved Market.
(d) No Injunction. No statute, rule, regulation, executive order,
decree, ruling or injunction shall have been enacted, entered, promulgated or
endorsed by any court or governmental authority of competent jurisdiction which
prohibits the consummation of any of the transactions contemplated by this
Agreement or the Registration Rights Agreement or the Notes or the Put
Agreements.
(e) Opinion of Counsel. At the Closing, the Investors shall have
received an opinion of counsel to the Company in the form attached hereto as
Exhibit 5.2(e) and such other
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opinions, certificates and documents as the Investors or their counsel shall
reasonably require incident to the Closing.
(f) Registration Rights Agreement. The Company and the Investors
shall have executed and delivered the Registration Rights Agreement in the form
and substance of Exhibit 5.2(f) attached hereto.
(g) Officer's Certificate. The Company shall have delivered to the
Investors a certificate in form and substance satisfactory to the Investors and
the Investors' Counsel, executed by an officer of the Company, certifying as to
satisfaction of closing conditions, incumbency of signing officers, and the
true, correct and complete nature of the Certificate of Incorporation, By-Laws,
good standing and authorizing resolutions of the Company.
(h) Silver Prices. The Investors shall not be obligated to
purchase any of Notes if the spot price of silver (as reported on the Bloomberg
financial network) trades below $4.000 per troy ounce for 30 consecutive
calendar days.
(i) Put Agreements. Sunshine Argentina and Sunshine Exploration
shall have executed and delivered to each Investor (and in the case of Elliott,
to Elliott and its wholly-owned subsidiary, the Liverpool Limited Partnership) a
Put Agreement in the form of Exhibit 5.2(j) attached hereto (the "Put
Agreements").
Section 5.3 Closing Deliveries.
(a) On the Closing Date, the Company shall deliver to the
Investors:
(i) Notes in denominations requested by the Investors;
(ii) The certificate referred to in Section 5.2(g) above;
(iii) The executed Registration Rights Agreement;
(iv) The opinion of counsel referred to in Section 5.2(e)
above; and
(v) The executed Put Agreements.
(b) On the Closing Date, the Investors shall deliver to the
Company:
(i) The Purchase Price set forth on Schedule I hereto;
(ii) The executed Registration Rights Agreement;
(iii) The executed Put Agreements; and
(iv) The certificate referred to in Section 5.1(d) above.
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ARTICLE VI
LEGEND AND STOCK
(a) Upon payment therefor as provided in this Agreement, the
Company will issue one or more Notes in the name of the Investors or their
designees and in such principal amounts to be specified by the Investors prior
to (or from time to time subsequent to) Closing. Each Note and any certificate
representing Common Shares issued upon conversion thereof, prior to such Common
Shares being registered under the Act for resale or available for resale under
Rule 144 under the Act, shall be stamped or otherwise imprinted with a legend
substantially in the following form:
THESE SECURITIES HAVE NOT BEEN REGISTERED FOR OFFER OR SALE
UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE
SOLD OR OFFERED FOR SALE EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER SAID ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN APPLICABLE
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS.
The Company agrees to reissue Notes without the legend set
forth above at such time as (i) the holder thereof is permitted to dispose of
such Notes and/or Common Shares issuable upon conversion thereof pursuant to
Rule 144 under the Act, or (ii) such Notes are sold to a purchaser or purchasers
who (in the opinion of counsel to the seller or such purchaser(s), in form and
substance reasonably satisfactory to the Company and its counsel) are able to
dispose of such shares publicly without registration under the Act.
Prior to the Registration Statement (as defined in the
Registration Rights Agreement) being declared effective, any Common Shares
issued pursuant to conversion of Notes shall bear a legend in the same form as
the legend indicated above; provided that such legend shall be removed from the
Common Shares and the Company shall issue new certificates without such legend
if (i) the holder thereof is permitted to dispose of such Common Shares pursuant
to Rule 144 under the Act, (ii) such Common Shares are registered for resale
under the Act, or (iii) such Common Shares are sold to a purchaser or purchasers
who (in the opinion of counsel to the seller or such purchaser(s), in form and
substance reasonably satisfactory to the Company and it counsel) are able to
dispose of such shares publicly without registration under the Act. Upon such
Registration Statement becoming effective, the Company agrees to promptly, but
no later than three (3) business days thereafter, issue new certificates
representing such Common Shares without such legend. Any Common Shares issued
after the Registration Statement has become effective shall be free and clear of
any legends, transfer restrictions and stop orders. Notwithstanding the removal
of such legend, each Investor agrees to sell the Common Shares represented by
the new certificates in accordance with the applicable prospectus delivery
requirements (if copies of a current prospectus are provided to such Investor by
the Company) or in accordance with an exemption from the registration
requirements of the Act.
Nothing herein shall limit the right of any holder to pledge
these securities pursuant to a bona fide margin account or lending arrangement
entered into in compliance with law, including applicable securities laws.
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(b) Each Note shall be stamped with a legend indicating whether
the Note is convertible into Common Shares at the Floating Conversion Price (as
defined in the Notes) or the Capped Conversion Price (as defined in the Notes ).
ARTICLE VII
TERMINATION
Section 7.1 Termination by Mutual Consent. This Agreement may be
terminated at any time prior to the Closing by the mutual written consent of the
Company and a majority in interest of the Investors.
Section 7.2 Other Termination. This Agreement may be terminated by
action of the Board of Directors of the Company or by any of the Investors at
any time if the Closing shall not have been consummated by the fifth business
day following the date of this Agreement; provided, however, that the party (or
parties) prepared to close shall retain its (or their) right to sue for any
breach by the other party (or parties).
ARTICLE VIII
MISCELLANEOUS
Section 8.1 Stamp Taxes. The Company shall pay all stamp and other
taxes and duties levied in connection with the issuance of the Notes pursuant
hereto (other than taxes measured against the Investors' income) and the Common
Shares issued to holders of Notes upon conversion thereof.
Section 8.2 Specific Performance; Consent to Jurisdiction; Jury Trial.
(a) The Company and the Investors acknowledge and agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement, the Registration Rights Agreement or the Notes were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent or cure breaches of the provisions of this Agreement and
to enforce specifically the terms and provisions hereof, this being in addition
to any other remedy to which any of them may be entitled by law or equity.
(b) The Company and each of the Investors (i) hereby irrevocably
submits to the exclusive jurisdiction of the state and federal courts in the
State of Delaware for the purposes of any suit, action or proceeding arising out
of or relating to this Agreement, the Registration Rights Agreement or the Notes
and (ii) hereby waives, and agrees not to assert in any such suit action or
proceeding, any claim that it is not personally subject to the jurisdiction of
such court, that the suit, action or proceeding is brought in an inconvenient
forum or that the venue of the suit, action or proceeding is improper. The
Company and each of the Investors consents to process being served in any such
suit, action or proceeding by mailing a copy thereof to such
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party at the address in effect for notices to it under this Agreement and agrees
that such service shall constitute good and sufficient service of process and
notice thereof. Nothing in this paragraph shall affect or limit any right to
serve process in any other manner permitted by applicable law.
(c) THE COMPANY AND EACH INVESTOR HEREBY WAIVES ALL RIGHTS TO A
TRIAL BY JURY.
Section 8.3 Entire Agreement; Amendment; Notes Outstanding.
(a) This Agreement, together with the Registration Rights
Agreement, the Notes and the agreements and documents executed in connection
herewith and therewith, contains the entire understanding of the parties with
respect to the matters covered hereby and thereby and, except as specifically
set forth herein or therein, neither the Company nor any Investor makes any
representation, warranty, covenant or undertaking with respect to such matters.
No provision of this Agreement may be waived or amended other than by a written
instrument signed by the Company and Investors holding 75% of the principal
amount of the outstanding Notes.
(b) For purposes of this Agreement, the Registration Rights
Agreement and the Notes, the term "Notes" shall refer only to Notes issued
pursuant to this Agreement and Notes shall not be deemed "outstanding" if held
by the Company or any subsidiary or other affiliate and Notes so held shall not
be considered outstanding.
Section 8.4 Notices. Any notice or other communication required or
permitted to be given hereunder shall be given in writing by mail, facsimile or
personal delivery and shall be effective upon actual receipt of such notice. The
addresses for such communications shall be:
to the Company:
Sunshine Mining and Refining Company
877 W. Main Street, Suite 600
Boise, Idaho 83702
Attention: John S. Simko
Facsimile: (208) 342-0004
with copies to:
Haynes and Boone, LLP
901 Main Street, Suite 3100
Dallas, Texas 75202
Attention: Janice V. Sharry, Esq.
Facsimile: (214) 651-5940
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to the Investors:
c/o Stonington Management Corporation
712 Fifth Avenue
New York, New York 10019
Attention: Paul E. Singer
Facsimile: (212) 974-2092
with copies to:
Kleinberg, Kaplan, Wolff & Cohen, P.C.
551 Fifth Avenue, 18th Floor
New York, New York 10176
Attention: Stephen M. Schultz, Esq.
Facsimile: (212) 986-8866
Any party hereto may from time to time change its address for notices by giving
at least 10 days' written notice of such changed address to the other parties
hereto.
Section 8.5 Indemnity. Each party shall indemnify each other party
against any loss, cost or damages (including reasonable attorney's fees)
incurred as a result of such parties' breach of any representation, warranty,
covenant or agreement in this Agreement, the Registration Rights Agreement or
Notes or incurred in connection with the enforcement of this indemnity.
Section 8.6 Waivers. No waiver by any party of any default with respect
to any provision, condition or requirement of this Agreement shall be deemed to
be a continuing waiver in the future or a waiver of any other provision,
condition or requirement hereof, nor shall any delay or omission of any party to
exercise any right hereunder in any manner impair the exercise of any such right
accruing to it thereafter.
Section 8.7 Headings. The headings herein are for convenience only, do
not constitute a part of this Agreement and shall not be deemed to limit or
affect any of the provisions hereof.
Section 8.8 Successors and Assigns. Except as otherwise provided
herein, this Agreement shall be binding upon and inure to the benefit of the
parties and their successors and permitted assigns. The parties hereto may amend
this Agreement without notice to or the consent of any third party. The Company
may not assign this Agreement or any rights or obligations hereunder without the
prior written consent of all Investors (which consent may be withheld for any
reason in their sole discretion). No Investor may assign this Agreement (in
whole or in part) or any rights or obligations hereunder without the consent of
the Company, which shall not be unreasonably withheld; provided that such
consent shall not be required for assignment by any Investor to affiliates
thereof.
Section 8.9 No Third Party Beneficiaries. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.
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Section 8.10 Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of New
York without regard to such state's principles of conflict of laws.
Section 8.11 Survival. The representations and warranties and the
agreements and covenants of the Company and each Investor contained herein shall
survive the Closing.
Section 8.12 Execution. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement, it
being understood that all parties need not sign the same counterpart.
Section 8.13 Publicity. The Company agrees that it will not disclose,
and will not include in any public announcement, the name of any Investor
without its consent, unless and until such disclosure is required by law or
applicable regulation, and then only to the extent of such requirement. The
Company agrees that it will deliver a copy of any public announcement regarding
the matters covered by this Agreement or any agreement and document executed
herewith to each Investor and any public announcement including the name of an
Investor to such Investor, prior to the release of such announcements, other
than the Company's Form 10-K and Form 10-Q reports filed under the Exchange Act.
Section 8.14 Severability. The parties acknowledge and agree that all
representations, warranties, covenants and agreements of the Investors hereunder
are several and not joint, that no Investor shall have any responsibility or
liability for the representations, warranties, agreements, acts or omissions of
any other Investor, and that any rights granted to "Investors" hereunder shall
be enforceable by each Investor hereunder.
Section 8.15 Like Treatment of Holders; Redemption. Neither the Company
nor any of its affiliates shall, directly or indirectly, pay or cause to be paid
any consideration (immediate or contingent), whether by way of interest, fee,
payment for the redemption or exchange of Notes, or otherwise, to any holder of
Notes, for or as an inducement to, or in connection with the solicitation of,
any consent, waiver or amendment of any terms or provisions of the Notes or this
Agreement or the Registration Rights Agreement, unless such consideration is
required to be paid to all holders of Notes bound by such consent, waiver or
amendment whether or not such holders so consent, waive or agree to amend and
whether or not such holders tender their Notes for redemption or exchange. The
Company shall not, directly or indirectly, redeem any Notes unless such offer of
redemption is made pro rata to all holders of Notes on identical terms.
Section 8.16 No Strict Construction. The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied against
any party.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
SUNSHINE MINING AND REFINING COMPANY
By: /s/ William W. Davis
---------------------------------------------
William W. Davis
Executive Vice President
INVESTORS:
WESTGATE INTERNATIONAL, L.P.
By: Martley International, Inc., Attorney-In-Fact
By: /s/ Paul E. Singer
------------------------------------------
Paul E. Singer
President
ELLIOTT ASSOCIATES, L.P.
By: /s/ Paul E. Singer
-------------------------------------------
Paul E. Singer
General Partner
23
<PAGE> 24
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT OF
INVESTOR NOTES PURCHASE PRICE RESTRICTED OWNERSHIP PERCENTAGE
-------- -------------- -------------------------------
<S> <C> <C> <C>
Elliott Associates, L.P. $3,000,000 $3,000,000 9.9%
Westgate International, L.P. $3,000,000 $3,000,000 9.9%
</TABLE>
