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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 XXXXXXX 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.
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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
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Conversion Notice, Xxxxxx 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
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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 XXXX-XXXXX-XXXXXX 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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(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
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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.
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(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 Xxxxxx'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).
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(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
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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.
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(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 Xxxxxx'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
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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;
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(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
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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
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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 Xxxxxx 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
Xxxxxx, upon surrendering the same. No service charge will be made for such
registration or transfer or exchange. In the event that Xxxxxx 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
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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 Xxxxxx
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:
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EXHIBIT A
(To be Executed by Xxxxxx
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 XXXXXX:
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,
Xxxxxx'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
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PAGE 2 TO CONVERSION NOTICE DATED FOR:
----------------- -------------------------
(CONVERSION DATE) (NAME OF XXXXXX)
COMPUTATION OF NUMBER OF COMMON SHARES TO BE RECEIVED
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 =
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:
--------------------------------------------------------------------------------
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