-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DCPRMiDnMsMqA+S/XKCPq9ROueGWG8NCaQXRsCOncpzPpdr3IJwpknUevpFKDi/9 ymvYH27MFyKHguqetJX+PQ== 0001012975-01-000024.txt : 20010223 0001012975-01-000024.hdr.sgml : 20010223 ACCESSION NUMBER: 0001012975-01-000024 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20010215 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: SUNSHINE MINING & REFINING CO CENTRAL INDEX KEY: 0000833376 STANDARD INDUSTRIAL CLASSIFICATION: MINING, QUARRYING OF NONMETALLIC MINERALS (NO FUELS) [1400] IRS NUMBER: 752231378 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-41271 FILM NUMBER: 1547752 BUSINESS ADDRESS: STREET 1: 877 WEST MAIN STREET STREET 2: SUITE 600 CITY: BOISES STATE: ID ZIP: 83702 BUSINESS PHONE: 2083450660 MAIL ADDRESS: STREET 1: 877 W MAIN STREET SUITE 600 CITY: BOISE STATE: ID ZIP: 83702 FORMER COMPANY: FORMER CONFORMED NAME: SUNSHINE MINING CO /DE DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: SUNSHINE HOLDINGS INC DATE OF NAME CHANGE: 19880915 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STONEHILL OFFSHORE PARTNERS LTD CENTRAL INDEX KEY: 0001051340 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: CORPORATE CENTRE WEST BAY RD STREET 2: P O BOX 31106 SMB CITY: GRANDCAYMAN CAYMAN I BUSINESS PHONE: 8099493977 MAIL ADDRESS: STREET 1: CORPORATE CENTRE WEST BAY RD STREET 2: P O BOX 31106 SMB CITY: GRANDCAYMAN CAYMAN I SC 13D 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D (Rule 13d-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO RULE 13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO RULE 13d-2(a) Sunshine Mining and Refining Company ------------------------------------ (Name of Issuer) Common Stock, par value $.01 per share -------------------------------------- (Title of Class of Securities) 867833-60-0 ----------- (CUSIP Number) John A. Motulsky Stonehill Capital Management LLC 126 East 56th Street - 9th Floor New York, New York 10022 (212) 739-7474 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) February 5, 2001 - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box: [ ] Page 1 of 8 pages CUSIP No. 867833-60-0 - --------------------- 1. Name of Reporting Person Stonehill Offshore Partners Limited S.S. or I.R.S. Identification No. of Above Person N.A. - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a (a) [x] Member of a Group (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds OO - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Cayman Islands - -------------------------------------------------------------------------------- 7. Sole Voting 0 Power ------------------------------------------------- Number of Shares 8. Shared Voting 44,995,000 Beneficially Owned Power by Each Reporting ------------------------------------------------- Person with 9. Sole Dis- 12,814,725 positive Power ------------------------------------------------- 10. Shared Dis- 12,814,725 positive Power - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned By Each Reporting Person 44,995,000 - -------------------------------------------------------------------------------- 12. Check box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 89.99% - -------------------------------------------------------------------------------- 14. Type of Reporting Person CO - -------------------------------------------------------------------------------- Page 2 of 8 pages 1. Name of Reporting Person Stonehill Institutional Partners, L.P. S.S. or I.R.S. Identification No. of Above Person 13-3982121 - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a (a) [x] Member of a Group (b) [ ] - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds OO - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) [ ] - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization Delaware - -------------------------------------------------------------------------------- 7. Sole Voting 0 Power ------------------------------------------------- Number of Shares 8. Shared Voting 44,995,000 Beneficially Owned Power by Each Reporting ------------------------------------------------- Person with 9. Sole Dis- 6,690,275 positive Power ------------------------------------------------- 10. Shared Dis- 6,690,275 positive Power - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned By Each Reporting Person 44,995,000 - -------------------------------------------------------------------------------- 12. Check box if the Aggregate Amount in Row (11) Excludes Certain Shares [ ] - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 89.99% - -------------------------------------------------------------------------------- 14. Type of Reporting Person PN Page 3 of 8 pages Item 1. Security and Issuer - ------ ------------------- This statement relates to the Common Stock, $.01 par value (the "Sunshine Common Stock"), of Sunshine Mining and Refining Company, a Delaware corporation ("Sunshine"). Sunshine's principal executive offices are located at 5956 Sherry Lane, Suite 621, Dallas, Texas. Item 2. Identity and Background - ------ ----------------------- Stonehill Offshore Partners Limited is a Cayman Islands corporation and Stonehill Institutional Partners, L.P. is a Delaware limited partnership. The two entities are referred to collectively as the "Stonehill Entities". The address of the principal office of Stonehill Offshore Partners Limited is c/o Citco Fund Services (Cayman Islands) Limited, Corporate Center, West Bay Road, Box 31106SMB, Grand Cayman Islands, B.W.I., and the address of the principal office of Stonehill Institutional Partners, L.P. is 126 E. 56th Street, 9th Floor, New York, New York 10022. The principal business of each of the Stonehill Entities is investment in securities. None of the Stonehill Entities or any officer, director or general partner of the Stonehill Entities has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations and similar misdemeanors). None of the Stonehill Entities or any officer, director of general partner of the Stonehill Entities has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction resulting in his having been or being subject to a judgment, decree, or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. The Stonehill Entities and The Liverpool Limited Partnership and Elliott International, L.P. (together, the "Elliott Entities") are parties to a Stockholders Agreement (the "Stockholders Agreement") dated as of February 5, 2001 described in item 4 and as a result are considered a "group" for purposes of this filing. The Stonehill Entities together own 19,505,000 shares (or 39.01%) of Sunshine Common Stock. The Elliott Entities are filing a separate Schedule 13D reporting their ownership of an aggregate of 25,490,000 shares (or 50.98%) of Sunshine Common Stock. The Stonehill Entities and the Elliott Entities together own an aggregate of 44,995,000 shares (or 89.99%) of Sunshine Common Stock. As a result of the Stockholders Agreement, each of the Stonehill Entities and each of the Elliott Entities is deemed the beneficial owner of all of the shares owned by all of them. Item 3. Source and Amount of Funds - ------ -------------------------- The shares of Sunshine Common Stock were issued to the Stonehill Entities in exchange for $12,312,945 principal amount of Senior Convertible Promissory Notes due November 24, 2002 (plus accrued interest thereon as of August 22, 2000) pursuant to the Joint Chapter 11 Plan of Reorganization (the "Plan") dated as of August 22, 2000 of Sunshine Mining Page 4 of 8 pages and Refining Company, Sunshine Argentina, Inc., Sunshine Precious Metals, Inc. and Sunshine Exploration, Inc. Item 4. Purpose of Transaction - ------ ---------------------- The shares of Sunshine Common Stock were acquired by the Stonehill Entities in order to effect the reorganization of Sunshine pursuant to the Plan. Pursuant to the Plan, the Board of Directors of Sunshine will consist of two designees of the Stonehill Entities (initially Arnold Kastenbaum and Charles Reardon), two designees of the Elliott Entities and the Chairman of Sunshine. The Stonehill Entities and the Elliott Entities have entered into the Stockholders Agreement pursuant to which they have agreed to vote for a board of directors consisting of such persons. The Stonehill Entities and the Elliott Entities have been and will be discussing with each other and with Sunshine various matters relating to Sunshine, including the pursuit of strategic alternatives for Sunshine such as financings, joint venture arrangements, assets sales and merger possibilities. Item 5. Interest in Securities of the Issuer - ------ ------------------------------------ (a) Pursuant to the Plan, the following number of shares were issued to each of the Stonehill Entities and the Elliott Entities: Number of Percentage Name Shares of Class ---- --------- ---------- Stonehill Offshore Partners Limited 12,814,725 25.63% Stonehill Institutional Partners, L.P 6,690,275 13.38% The Liverpool Limited Partnership ) ) 25,490,000 50.98% Elliot International, L.P. ) (b) Each of the Stonehill Entities and the Elliott Entities has the sole power to vote and the sole power to dispose of the shares owned by it, subject to the terms of the Stockholders Agreement. (c) None of the Stonehill Entities or the Elliott Entities has engaged in any transactions in the Sunshine Common Stock during the past 60 days except the receipt of shares pursuant to the Plan. Page 5 of 8 pages (d) None. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with respect - ------ ----------------------------------------------------------------------- to Securities of the Issuer --------------------------- The Stonehill Entities and the Elliott Entities are parties to the Stockholders Agreement, pursuant to which they have agreed to vote for a board of directors of Sunshine consisting of two designees of the Stonehill Entities, two designees of the Elliott Entities and the chief executive officer of Sunshine. The agreement terminates if either the Stonehill Entities or the Elliott Entities own less than 10% of the outstanding Sunshine Common Stock. The Stonehill Entities and the Elliott Entities are parties to a Call Option Agreement dated as of February 5, 2001 with Sunshine International Mining, Inc. and Sunshine Argentina, Inc., pursuant to which the Stonehill Entities have an option to acquire up to 43.5%, and the Elliott Entities have an option to acquire up to 56.5%, of the shares of Sunshine Argentina, Inc. for an aggregate purchase price of $1,000,000 under certain circumstances, including, without limitation, (1) if the Sunshine Common Stock does not trade on the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market System, the Nasdaq Small-Cap Market or the Nasdaq OTC Bulletin Board, (2) if the market capitalization of Sunshine is less than $15 million for 15 consecutive calendar days (and does not subsequently go above $15 million for at least 30 calendar days), or (3) upon the bankruptcy of Sunshine or a subsidiary. The option expires in 10 years or if Sunshine has a market capitalization of more than $150 million for at least 60 consecutive calendar days (and the Sunshine shares owned by the Sunshine Entities and the Elliott Entities are registered and freely tradeable during such 60-day period). The amount of shares subject to each option reduces proportionately if and to the extent that the Stonehill Entities or the Elliott Entities sell more than 50% of their shares of Sunshine Common Stock. Sunshine Argentina, Inc. owns the Pirquitas silver mine in Jujuy, Argentina. Pursuant to a Registration Rights Agreement dated as of February 5, 2001 among the Stonehill Entities, the Elliott Entities and Sunshine, Sunshine is required to register the shares of Sunshine Common Stock held by the Stonehill Entities and the Elliott Entities under the Securities Act of 1933. Sunshine is required to file a shelf Registration Statement by April 5, 2001 and use its best efforts to cause that Registration Statement to become effective by July 5, 2001. Item 7. Materials to be filed as Exhibits - ------ --------------------------------- (1) Joint Filing Agreement (2) Stockholders Agreement dated as of February 5, 2001 (3) Call Option Agreement dated as of February 5, 2001 (4) Registration Rights Agreement dated as of February 5, 2001 Page 6 of 8 pages SIGNATURES After reasonable inquiry and to the best knowledge and belief of each person or entity set forth below, each such person or entity certifies that the information set forth in this Statement is true, complete, and correct. STONEHILL OFFSHORE PARTNERS LIMITED By: Stonehill Advisers LLC By: s/ John A. Motulsky February 14, 2001 ------------------------------------ John A. Motulsky Member STONEHILL INSTITUTIONAL PARTNERS, L.P. By: s/ John A. Motulsky February 14, 2001 ------------------------------------ John A. Motulsky General Partner Page 7 of 8 pages EXHIBIT 1 JOINT FILING AGREEMENT The undersigned hereby agree that the Statement on Schedule 13D with respect to the shares of Common Stock, $.01 par value, of Sunshine Mining and Refining Company beneficially owned by the undersigned, which will be filed with the Securities and Exchange Commission no later than February 15, 2001 and signed by each of the undersigned, and any subsequent amendments to said Statement on Schedule 13D shall be filed on behalf of each of the undersigned pursuant to and in accordance with the provisions of Rule 13d-1(f) under the Securities Exchange Act of 1934, as amended. Dated: February 14, 2001 STONEHILL OFFSHORE PARTNERS LIMITED By: Stonehill Advisers LLC By: s/ John A. Motulsky ------------------------------------ John A. Motulsky Member STONEHILL INSTITUTIONAL PARTNERS, L.P. By: s/ John A. Motulsky ------------------------------------ John A. Motulsky General Partner Page 8 of 8 pages EX-99.1 2 0002.txt STOCKHOLDERS AGREEMENT Dated February __, 2001 The parties to this agreement are The Liverpool Limited Partnership and Elliott International, L.P. (together, the "Elliott Holders") and Stonehill Institutional Partners, L.P. and Stonehill Offshore Partners Limited (together, the "Stonehill Holders"). Sunshine Mining and Refining Company, a Delaware corporation ("Sunshine"), Sunshine Argentina, Inc. and Sunshine Precious Metals, Inc. (together, the "Sunshine Companies") have filed a Joint Chapter 11 Plan of Reorganization (the "Plan") in the United States Bankruptcy Court for the District of Delaware, which Plan was co-proposed by the Elliott Holders and the Stonehill Holders, and which Plan provides for a restructuring of Sunshine (the "Restructuring"). Upon completion of the Restructuring, the Elliott Holders will own approximately 50.98% of the outstanding shares of Sunshine's Common Stock (the "Shares") and the Stonehill Holders will own approximately 39.01% of the Shares. The parties wish to provide for certain matters with respect to the Shares owned by the Elliott Holders and the Stonehill Holders. It is therefore agreed as follows: 1. Directors. --------- 1.1 Election. During the period commencing on the date that the Plan is consummated and the Shares are issued to the Elliott Holders and the Stonehill Holders and, except as provided in section 3, ending on the date that the Elliott Holders or the Stonehill Holders (and their affiliates) own less than 10% of the then outstanding Shares, the Elliott Holders and the Stonehill Holders shall vote (or shall cause to be voted) all Shares beneficially owned by them or their affiliates (including any Shares acquired after the consummation of the Plan), and shall take all other action necessary, to cause the board of directors of each of Sunshine, Sunshine International Mining, Inc., a newly formed subsidiary of Sunshine ("Newco") and Sunshine Argentina, Inc., all of the stock of which will be owned by Newco ("Argentina"), to consist of five directors and to cause the election to the board of directors of each of Sunshine, Newco and Argentina of two nominees of the Elliott Holders, two nominees of the Stonehill Holders and one member of management of Sunshine designated by the Chairman of the Board of Sunshine. 1.2 Removal; Vacancies. ------------------ (a) If, during the period that the Elliott Holders or the Stonehill Holders are entitled to nominate directors pursuant to section 1.1, the Elliott Holders or the Stonehill Holders give notice to the other Holders of their wish to remove a director previously nominated by them and elected in accordance with section 1.1, the other Holders shall vote all Shares beneficially owned by them (or their afffiliates) in favor of removing that director and shall take all other action incidental to that vote as the Elliott Holders or the Stonehill Holders, as the case may be, reasonably request to cause that director to be removed. (b) If, during the period that the Elliott Holders or the Stonehill Holders are entitled to nominate directors pursuant to section 1.1, any director previously nominated and elected pursuant to section 1.1 ceases to hold office, the Holders that nominated the director who ceased to hold office promptly shall nominate an individual to fill the vacancy so created for the unexpired term, and each of the other Holders shall vote all Shares beneficially owned by them to cause the individual so nominated to be elected to fill the vacancy and shall take all other action incidental to that vote that the Elliott Holders or the Stonehill Holders, as the case may be, reasonably request to elect that director. 2. Extraordinary Transactions. The Elliott Holders and the Stonehill Holders shall take all action necessary to require that any of the following actions (the "Extraordinary Actions") shall only be approved by Sunshine, Newco or Argentina if approved by at least 66- 2/3% of the total number of directors of Sunshine, Newco or Argentina, as the case may be: (a) a merger or consolidation involving Sunshine, Newco or Argentina, or the sale of all or substantially all of the assets of Sunshine, Newco or Argentina; (b) the appointment of the Chief Executive Officer, Chief Financial Officer or Chief Operating Officer of Sunshine, Newco or Argentina; (c) the issuance of any shares of common stock of Sunshine, Newco or Argentina or any options, warrants or rights to purchase, or any securities convertible into, shares of common stock of Sunshine, Newco or Argentina; (d) a change in the number of the members of the board of directors of Sunshine, Newco or Argentina; (e) any transaction between Sunshine, Newco or Argentina and any affiliate of Sunshine, Newco or Argentina or any affiliate of any Elliott Holder or Stonehill Holder (other than transactions between Sunshine and any wholly-owned subsidiary of Sunshine other than Newco or Argentina); 2 (f) any borrowing by Sunshine, Newco or Argentina in excess of U.S. $3,000,000 (excluding the $5 million exit facility from the Elliot Holders and the Sunshine Holders and any refinancing thereof); (g) any material agreement with a material impact on the value or the marketability of the Pirquitas Mine located in Jujuy, Argentina; or (h) any amendment of the certificate of incorporation or by-laws of Sunshine, Newco or Argentina. 3. Assignment. Any transferee (or group of related transferees) of any Shares from any Elliott Holder or any Stonehill Holder, and the Shares owned by any such transferee, shall not be subject to the terms of this agreement, except that this agreement shall inure to the benefit of, and be binding upon, (a) any transferee that is an affiliate of any Elliott Holder or any Stonehill Holder, and (b) any transferee (or group of related transferees or transferees acting in concert) that acquires, directly or indirectly, in one or a series of transactions, from one or more of the Elliott Holders or one or more of the Stonehill Holders, 50% or more of the Shares originally owned by the Elliott Holders or the Stonehill Holders, as the case may be. Any such transferee shall execute an agreement to become a party to this agreement in form and substance reasonably satisfactory to Newco and the other Holders, and all references to the Elliott Holders or the Stonehill Holders, as the case may be, shall include such transferee(s). 4. Miscellaneous. ------------- 4.1 Governing Law. This agreement shall be governed by and construed in accordance with the laws of the state of New York applicable to agreements made and to be performed wholly in New York. 4.2 Notices. Any notice or other communication under this agreement shall be in writing and shall be considered given when delivered personally or mailed by registered mail, return receipt requested, at the following address (or at such other address as a party may designate by notice given to the others): If to the Elliott Holders, to them at: c/o Elliott Management Corporation 712 Fifth Avenue New York, New York 10019 Attn: Dan Gropper with a copy to: Kleinberg, Kaplan, Wolff & Cohen, P.C. 551 Fifth Avenue 3 New York, New York 10176 Attn: Lawrence D. Hui, Esq. 4 If to the Stonehill Holders, to them at: 126 East 56th Street New York, NY 10022 Attn: John Motulsky with a copy to: Proskauer Rose LLP 1585 Broadway New York, NY 10036 Attn: Lawrence H. Budish, Esq. 4.3 Counterparts. This agreement may be executed in counterparts, each of which shall be considered an original, but all of which together shall constitute the same instrument. 4.4 Equitable Relief. The parties acknowledge that the remedy at law for breach of this agreement would be inadequate and that, in addition to any other remedy a party may have for a breach of this agreement, that party shall be entitled to an injunction restraining any such breach or threatened breach, or a decree of specific performance, without the necessity of showing actual damages and without any bond or other security being required. The remedy provided in this section 4.4 is in addition to, and not in lieu of, any other rights or remedies a party may have. 4.5 Separability. If any provision of this agreement is invalid or unenforceable, the balance of this agreement shall remain in effect, and, if any provision is inapplicable to any person or circumstances, it shall nevertheless remain applicable to all other persons and circumstances. 4.6 Entire Agreement . This agreement contains a complete statement of all the arrangements among the parties with respect to its subject matter, supersedes all existing agreements among them with respect to that subject matter and may not be changed or terminated orally. 5 4.7 Affiliate, etc. As used in this agreement, an affiliate of any person means any person that, directly or indirectly, controls, is controlled by, or is under common control with, the specified person, and beneficial ownership shall be determined in accordance with the rules under the Securities Exchange Act of 1934. THE LIVERPOOL LIMITED PARTNERSHIP By:__________________________________ Name: Title: WESTGATE INTERNATIONAL, L.P. By:__________________________________ Name: Title: STONEHILL INSTITUTIONAL PARTNERS, L.P. By:__________________________________ Name: Title: STONEHILL OFFSHORE PARTNERS LIMITED By:__________________________________ Name: Title: ACKNOWLEDGED: SUNSHINE MINING AND REFINING COMPANY By:__________________________________ Name: Title: 6 EX-99.2 3 0003.txt CALL OPTION AGREEMENT CALL OPTION AGREEMENT made as of February ___, 2001, by and among SUNSHINE INTERNATIONAL MINING, INC., a Delaware corporation ("Grantor"), SUNSHINE MINING AND REFINING COMPANY, a Delaware corporation (the "Company"), SUNSHINE ARGENTINA, INC., a Delaware corporation ("SAI"), (each a "Sunshine Company" and collectively, the "Sunshine Companies"), ELLIOTT INTERNATIONAL, L.P., a Cayman Islands limited partnership ("EILP"), THE LIVERPOOL LIMITED PARTNERSHIP, a Bermuda limited partnership ("TLLP" and, together with EILP, the "Elliott Holders") and STONEHILL INSTITUTIONAL PARTNERS, L.P. ("SIP") and STONEHILL OFFSHORE PARTNERS LIMITED ("SOPL" and, together with SIP, the "Stonehill Holders" )(collectively, the "Holders"). WHEREAS, in connection herewith, the Company, SAI, together with Sunshine Precious Metals Inc., a Delaware corporation, have filed a Joint Chapter 11 Plan of Reorganization in the United States Bankruptcy Court for the District of Delaware (the "Bankruptcy Court") which shall have been co-proposed by the Elliott Holders and the Stonehill Holders (the "Plan") and related statements, motions and applications and the agreements and instruments to be entered into by the Sunshine Companies pursuant to the Plan and attached as exhibits thereto (the "Transaction Documents") and among other things, provide for the restructuring of the Company (the "Restructuring"); WHEREAS, in connection with the Restructuring, the Company and the Holders are entering into that certain Registration Rights Agreement of even date herewith (the "Registration Rights Agreement"); WHEREAS, upon the completion of the Restructuring, assuming that there have been no stock splits, dividends, combinations, reorganizations, recapitalizations and similar capital structure changes ("Capital Structure Changes") with respect thereto, the Elliott Holders will have received, or be entitled to receive, a total of 50.98% of outstanding shares ("Elliott's Interest") of the Company's common stock, par value $.01 (the "Common Stock") and the Stonehill Holders will have received or be entitled to receive a total of 39.01% of the outstanding shares of Common Stock ("Stonehill's Interest"); WHEREAS, the Company owns 100% of the capital stock of the Grantor; WHEREAS, Grantor owns 100% of the capital stock in SAI; WHEREAS, pursuant to the Transaction Documents, the parties hereto desire that Grantor issue a call option to each Holder (each a "Call Option" and, collectively, the "Call Options") to purchase, collectively, up to 100% of the shares of capital stock of SAI (the "SAI Shares") and to grant each Holder a first priority perfected security interest in such SAI Shares in connection therewith; NOW, THEREFORE, in consideration of the premises, and for such other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 1. Grant of Call Options. ---------------------- (a) Subject to Section 1(b) below and the terms and conditions herein, Grantor hereby grants to each Holder a Call Option to purchase up to a certain maximum number of SAI Shares (as adjusted for Capital Structure Changes) at a certain purchase price per SAI Share (the "Purchase Price"), all as set forth in Schedule 1 annexed hereto. (b) In the event that the Elliott Holders sell more than 50% of their shares of Common Stock initially received in the Restructuring (as adjusted for Capital Structure Changes) or the Stonehill Holders sell more than 50% of their shares of Common Stock initially received in the Restructuring (as adjusted for Capital Structure Changes), then the number of SAI Shares that the Elliott Holders or the Stonehill Holders, respectively, are entitled to purchase as set forth in Schedule 1 hereto shall be reduced ratably to the extent that such Holders sold in excess of such amounts. For example, if the Elliott Holders were to sell 55% of their shares of Common Stock initially received in the Restructuring, then the maximum number of SAI Shares that the Elliott Holders could purchase, in the aggregate, upon the exercise of their Call Options would be reduced by a percentage equal to (55% - 50% ) x 2, or 10%. Schedule 1 shall be amended and redistributed to the parties hereto and the Pledge Agent (as defined in Section 4) shall be directed to reflect any such reductions. 2. Term. The term of each Call Option (the "Term") shall commence on the date upon which the Plan approved by the Bankruptcy Court goes effective (the "Closing Date") and shall expire upon the earlier of the following: (a) the exercise in full of such Call Option, (b) The market capitalization of the Company shall exceed $150 million for at least 60 consecutive calendar days, and (c) The ten year anniversary of the effective date of the Plan of Reorganization ; provided, however, that, with respect to (b) above, all of the Common Stock is registered and freely tradeable during such 60-day-period (e.g., among other things, (x) no Interfering Event has occurred, without giving effect to any Suspension Grace Period (each as defined in the Registration Rights Agreement), (y) the Holders are not restricted from trading because the Holders are in possession of material, non-public information and (z) none of the events set forth in Section 3(a) below shall have occurred. 3. Exercise of Call Options. ------------------------- (a) Right to Exercise. The Call Option shall become exercisable upon the occurrence of any one of the following: (i) the Common Stock is delisted from, or not approved for trading on, the New York Stock Exchange, the American Stock Exchange, the Nasdaq National Market System, the Nasdaq Small-Cap Market or the Nasdaq OTC Bulletin Board (each, an "Approved Market"); (ii) the Common Stock is suspended from listing or is no longer approved for trading on an Approved Market for at least seven (7) consecutive calendar days; (iii) the market capitalization of the Company is less than $15 million for at least fifteen (15) consecutive calendar days; provided, however, that such market capitalization shall not have subsequently gone above $15 million for at least 30 calendar days (but if the market capitalization thereafter drops below $15 million for at least 15 consecutive calendar days, then the Call Option shall again become exercisable); (iv) a bankruptcy proceeding has occurred with respect to a Sunshine Company or any other direct or indirect subsidiary of the Company; (v) the Company fails to comply with its obligations set forth in this Agreement; (vi) unless waived by all of the Holders, (A) any person not designated by the Holders, other than management directors, is serving as a member of the board of directors of the Grantor or (B) any person designated by the Holders in accordance with Section 6(j) hereof to serve as a member of the board of directors of the Grantor is not serving in such capacity as a result of any action or omission on the part of any Sunshine Company; (vii any Interfering Event (as defined in the Registration Rights Agreement) has occurred which causes the Call Options to become immediately exercisable pursuant to the Registration Rights Agreement; (viii) any representation or warranty of the Sunshine Companies made in this Agreement, the Pledge Agreement or any other Transaction Document shall be false or misleading; or (ix) any of the Sunshine Companies otherwise fails to comply with or breaches any other provision of any Transaction Document or the by-laws or charter of any Sunshine Company. The Company and the Grantor shall provide the Holders with immediate written notice of the occurrence of any of the events described in (i), (ii), (iv), (v), (vi), (vii), (viii) or (ix). (b) Exercise Notice. If any of the conditions to exercise set forth in Section 3(a) above shall have been met, then the Call Options may be exercised, at any time and from time to time, by each Holder in full or in part by the tendering of a written notice (the "Exercise Notice") to the Grantor and the Pledge Agent (as defined in Section 4(b) below) at the address set forth in Section 9(c) herein. The Exercise Notice shall specify: (i) the date on which the purchase is to take place (the "Purchase Date"), which may be the same date as the Exercise Notice; (ii) the number of SAI Shares with respect to which the Holder is then exercising its Call Option (the "Call Amount"); (iii) the aggregate purchase price for the Call Amount (determined by multiplying the Purchase Price set forth in Schedule 1 hereto by the Call Amount); and (iv) whether the exercising Holder elects to pay the aggregate purchase price in cash or by delivering shares of Common Stock (pursuant to Section 3(c) and 3(d)(ii) below) in lieu of cash. Upon receipt of the Exercise Notice as a result of which the Holders shall have acquired, in the aggregate, a majority of the SAI Shares, the Company and Grantor shall cause each officer and director of SAI to offer his or her resignation in writing to the Holder(s), which such resignation shall become effective upon the Purchase Date unless otherwise agreed to by the officer or director and the Holder(s). (c) Cashless Exercise. If the exercising Holder elects to pay for the Call Amount by delivering shares of Common Stock, the number of shares of Common Stock to be delivered by the Holder(s) shall be computed using the following formula: X = Y x B ------ A where: X = the number of shares of Common Stock to be delivered Y = the number of SAI Shares included in the Call Amount A = the Market Value (defined below) per share of Common Stock B = the Purchase Price For the purposes of the foregoing, "Market Value" shall mean the price of one share of Common Stock determined as follows: (i) if the Common Stock is listed on the New York Stock Exchange or on the American Stock Exchange, the closing price on such exchange on the date prior to the Purchase Date; (ii) if (i) does not apply and the Common Stock is listed on the NASDAQ National Market System, the NASDAQ Small-Cap Market or the NASDAQ OTC Bulletin Board, the last reported bid price on the day preceding the Purchase Date; (iii if neither (i) nor (ii) apply but the Common Stock is quoted in the over-the-counter market, another recognized exchange or on the pink sheets, the closing bid price on the day preceding the Purchase Date; and (iv) if neither clause (i), (ii) or (iii) above applies, the fair market value of the Common Stock as reasonably determined in good faith by the Company's board of directors with the concurrence of an investment banker acceptable to the Holders and with the concurrence of the Holders. (d) Purchase Date. ------------- (i) On the Purchase Date, the Grantor shall deliver beneficial ownership of the Call Amount to the Holder by delivering, or causing the Pledge Agent (as defined in Section 4 below) to deliver, the certificates therefore together with duly executed "stock powers". In the event that the Call Amount is not delivered to the Holder in accordance with the foregoing on a timely basis, the Holder may, by written notice, rescind its exercise of the Call Option, in whole or in part, reserving all rights to damages for breach of this Agreement or any other Transaction Document. (ii) On the Purchase Date, SAI agrees to register the transfer of the shares of capital stock of SAI included in the Call Amount to the name of the exercising Holder or its designee. This obligation of SAI is and shall at all times be valid and enforceable and SAI absolutely, unconditionally and irrevocably waives any and all rights to assert any defense or other objection to this obligation. (iii) On the Purchase Date, provided that as a result of the exercise of the Call Option, the Holders shall have acquired, in the aggregate, a majority of the outstanding SAI Shares, the written resignation of each director and officer of SAI shall be delivered to the Holders and shall become effective unless otherwise agreed to by the director or the officer and the Holder(s) pursuant to Section 3(b) above. (iv) In exchange for the above, on the Purchase Date, the exercising Holder shall deliver (A) the aggregate purchase price set forth in the Exercise Notice to the Grantor by wire transfer in immediately available funds to an account designated on Schedule 2 annexed hereto or such other account as may be designated in writing by the Grantor from time to time or (B) if the Holder opted for a cashless exercise in the Exercise Notice, (1) the physical stock certificates representing the Common Stock deliverable upon such cashless exercise (as determined in accordance with Section 3(c) above) or (2) in lieu thereof, provided the transfer agent of such Holder is participating in the Depository Trust Company ("DTC") Fast Automated Securities Transfer ("FAST") program, upon request of the Grantor, the Holder shall use its best efforts to cause its transfer agent to electronically transmit such shares of Common Stock to the Grantor on the Purchase Date by crediting the account of Grantor's prime broker with DTC through its Deposit Withdrawal Agent Commission ("DWAC") system. The parties agree to coordinate with DTC to accomplish this objective. (e) Transfer Tax. Transfers of the Call Amounts upon exercise of the Call Options shall be made without charge to the Holders for any transfer tax or other costs in respect thereof. 4. Security Interest. ----------------- (a) Generally. In order to secure the observance and performance of the Grantor's obligations under this Agreement, the Grantor hereby transfers, assigns and grants to the Pledge Agent for the ratable benefit of the Holders a first priority perfected and continuing security interest in the SAI Shares. (b) Perfection of Security Interest. The security interest and lien granted to the Holders hereunder shall constitute valid, perfected and first priority security interests and liens in and to the SAI Shares, in each case enforceable against third parties and securing the obligations purported to be secured thereby, upon: (i) the execution of this Agreement and that certain Pledge Agreement of even date among the Grantor, the Holders and Wells Fargo Bank Minnesota, N.A. (the "Pledge Agent") attached hereto as Exhibit 1 (the "Pledge Agreement"); (ii) (A) the pledge of the SAI Shares by the Grantor to the Pledge Agent for the ratable benefit of the Holders, and (B) the delivery by the Grantor of the certificates representing such SAI Shares together with duly executed "stock powers" to the Pledge Agent in connection therewith; and (iii) the filing of certain UCC-1 financing statements describing the SAI Shares with the appropriate offices in Idaho and Delaware. (c) Pledge of SAI Shares. In connection with the pledge and delivery of SAI Shares to the Pledge Agent pursuant to the Pledge Agreement, Grantor will grant the Pledge Agent the right (and the obligation) to vote such SAI Shares as instructed by the Holders in accordance with the Pledge Agreement. 5. Representations and Warranties of the Sunshine Companies. Each of the Sunshine Companies, severally and jointly, hereby makes the following representations and warranties to Holders as of the date hereof: (a) Representations and Warranties. Each of the representations and warranties of the Sunshine Companies contained in the other Transaction Documents are true and accurate. (b) Due Organization. Each Sunshine Company is a corporation duly organized and in good standing under the laws of the State of Delaware. Each Sunshine Company is duly qualified as a foreign corporation in each jurisdiction where the nature and conduct of its business or the location of its assets so requires. (c) Power and Authority. Each Sunshine Company has full power and authority to enter into and perform this Agreement and the Pledge Agreement and the Grantor has full power and authority to sell, create a security interest in, and pledge the SAI Shares in accordance herewith. This Agreement (i) has been duly authorized, executed and delivered by each Sunshine Company and (ii) is legal, valid and binding and enforceable against such Sunshine Company in accordance with its terms, subject as to enforceability to general principles of equity and to applicable bankruptcy, insolvency, reorganization, moratorium, liquidation and other similar laws relating to, or affecting generally, the enforcement of applicable creditors' rights and remedies. (d) No Other Consents. Other than the approval of the Bankruptcy Court, no consent is required to be received by any Sunshine Company from any governmental authority or any other person in connection with the execution or delivery by each such Sunshine Company of this Agreement or the exercise of the Call Options or the Pledge Agreement, or the sale, creation of a security interest in, or pledge of, the SAI Shares. (e) No Violations. The execution and delivery of this Agreement and the Pledge Agreement by the Sunshine Companies, the consummation by each Sunshine Company of the transactions contemplated herein and therein and the compliance by each Sunshine Company with any of the provisions hereof and thereof relating to the Sunshine Companies will not (i) conflict with or result in any breach of any provision of the certificate of incorporation, by-laws or other charter document of the Sunshine Company, (ii) result in a violation or breach of, or constitute (with or without notice or lapse of time or both) a default (or give rise to any right of termination, cancellation or acceleration) under any of the terms, conditions or provisions of, any material contract, agreement, note, indenture, mortgage, lease, license or other arrangement or understanding to which such Sunshine Company is a party or by which such Sunshine Company or any of its assets or property is subject, (iii) result in the creation or imposition of any material lien or encumbrance of any kind upon any of the asset of such Sunshine Company or any subsidiary thereof or (iv) violate any applicable provision of any U.S., state, local or foreign statute, law, rule or regulation or any order, decision, injunction, judgment, aware or decree to which such Sunshine Company or its assets or properties are subject. (f) Capitalization. -------------- (i) SAI is a direct and wholly-owned subsidiary of Grantor. The authorized capital stock of SAI consists of 10,000 shares of common stock. As of the date hereof, there were 1,000 shares of common stock issued and outstanding, all of which are owned legally and beneficially by Grantor, and no shares of capital stock are reserved for issuance. All of the outstanding shares of capital stock of SAI have been validly issued and are fully paid and nonassessable. There are currently no outstanding options, outstanding warrants nor other rights to acquire SAI capital stock. (ii) 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, SAI Shares, or contracts, commitments, understandings, or arrangements by which SAI is or may become bound to issue additional shares of capital stock of SAI or options, warrants, scrip, rights to subscribe to, or commitments to purchase or acquire, any shares, or securities or rights convertible into shares, of capital stock of SAI. (g) Subsidiaries. Except as disclosed in the Transaction Documents, SAI has no subsidiaries. (h) Due Authorization. The SAI Shares will be delivered by the Grantor to the Pledge Agent in the manner set forth in the Pledge Agreement free and clear of all security interests, liens, claims, pledges, options, rights of first refusal, agreements, limitations on voting rights, charges and other encumbrances whatsoever, except for those created for the benefit of the Holders pursuant to the Transaction Documents. The delivery by the Pledge Agent to the Holders of the SAI Shares in the manner provided in this Agreement and the Pledge Agreement will transfer to the Holders good and valid title to the SAI Shares, free and clear of all security interests, liens and encumbrances whatsoever, except for those created by the Holder or those created for the benefit of the Holders pursuant to the Transaction Documents. (i) Indebtedness and Other Liabilities. Neither the Grantor nor SAI has any Indebtedness (as defined below) except as disclosed in the Plan or Schedule 5(i) hereto. Each of the Grantor and SAI has no other liabilities or obligations (including, without limitation, claims existing under environmental or similar laws) that are not disclosed in the Plan or on Schedule 5(i) hereto other than those liabilities incurred in the ordinary course of such Sunshine Company's respective businesses since December 31, 1999, which liabilities, individually or in the aggregate, do not or would not have a Material Adverse Effect (as defined in the Transaction Documents) on such Sunshine Company. There are no liens, security interests or other encumbrances on, or with respect to, any asset of SAI other than a mortgage on the Pirquitas Mine to secure financing made to SAI by Highwood Partners, L.P. and Stonehill Capital Management, LLC.. "Indebtedness" means, with respect to any person or entity, all obligations (s) 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, (t) for borrowed money, (u) consisting of intercompany advances, (v) 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), (w) 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, (x) 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, (y) for capitalized leases, (z) for all guarantees, whether or not reflected in the balance sheet of such person, and (aa) all reimbursement and other payment obligations (whether contingent, matured 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: (i) trade debt to unaffiliated third parties 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) performance bonds or surety or appeal bonds entered into in the ordinary course of business; and (iv) 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 $25,000. (j) SAI Ownership of Pirquitas Mine. SAI is the sole record and beneficial owner of the silver mine in Argentina known as the "Pirquitas Mine" (the "Pirquitas Mine"), all real property and personal property relating to the mining operations thereon, and all rights and permits to develop and operate the Pirquitas Mine. 6. Covenants of Sunshine Companies. During the Term of the Call Option, each of the Sunshine Companies, severally and jointly, hereby covenants to the Holders that: (a) Corporate Existence. The Sunshine Companies shall maintain and preserve their individual corporate existence unless otherwise agreed to in writing by each of the Holders. (b) Indebtedness. Neither the Grantor nor SAI shall incur Indebtedness or pledge, hypothecate, grant any lien with respect to or otherwise encumber any assets without the prior written approval of each of the Holders. (c) Transfers, Liens, Etc. --------------------- (i) Except as otherwise provided in any Transaction Document to the contrary, neither the Grantor nor SAI shall split, combine or reclassify, sell, assign, divide, transfer, dispose of, or pledge, hypothecate or otherwise encumber the SAI Shares or any securities convertible into or exchangeable for such SAI Shares, without the written consent of each of the Holders. (ii) Neither Grantor nor SAI shall create, incur or permit to exist any security interest, lien or other encumbrance on or with respect to any SAI Shares other than in accordance with the Transaction Documents. (iii) Any attempted transfer of SAI Shares in contravention of the provisions of this Section 6(c) shall be void and ineffectual and shall not bind or be recognized by any Sunshine Company. (iv) Except as required by this Agreement, SAI shall not issue any additional shares of capital stock. (d) Subsidiaries. The Grantor and SAI shall not create, own or hold any interest in any subsidiary (other than the subsidiaries disclosed in the Transaction Documents) without the written consent of each Holder. Unless otherwise agreed to in writing by each of the Holders, in the event that the Grantor or SAI shall create, own or hold any interest in any subsidiary in accordance with the foregoing: (i) the Grantor and SAI shall cause such subsidiary to sign this Agreement as an additional party, at which time all capital stock of the subsidiary ("Subsidiary Shares") shall be treated the equivalent of SAI Shares for all purposes hereunder; (ii) the Grantor, SAI and such subsidiary shall assume the equivalent obligations that the Grantor and SAI have with respect to SAI Shares in connection with the Subsidiary Shares (including, but not limited to, granting to the Holders a first priority perfected security interest in the Subsidiary Shares and perfecting such security interest in accordance with Section 4(b) hereof); and (iii) the Grantor, SAI and such subsidiary shall take all such further actions and deliver all documents and instruments as may be necessary to accomplish the foregoing. (e) Transfer of Assets. ------------------ (i) Neither Grantor nor SAI shall transfer any asset, or a controlling interest therein (including, but not limited to, any amounts received, directly or indirectly, by such Sunshine Company from one or more of the Holders pursuant to the Transaction Documents) to any of the other Sunshine Companies or any affiliates of the Sunshine Companies (including any subsidiaries of such Sunshine Company) without the prior written approval of each Holder. (ii) Neither Grantor nor SAI shall transfer any asset or a controlling interest therein outside the ordinary course of business. (iii) Any attempted transfer in contravention of the provisions of this Section 6(e) shall be void and ineffectual and shall not bind or be recognized by the Company or SAI. (f) Obligations of SAI. On each Purchase Date, SAI shall (i) register the transfer of the SAI Shares included in the Call Amount to the name of the exercising Holder or its designee and (ii) if as a result of the Call Option exercise, the Holders shall in the aggregate, have acquired a majority of the SAI Shares, take all such actions as are necessary to effectuate the resignation of each officer of SAI unless otherwise agreed to by the officer and the exercising Holder(s) pursuant to Section 3(b) above. (g) No Conflicting Actions. No Sunshine Company shall take any action which is inconsistent or in conflict with the terms and provisions of this Agreement and the Pledge Agreement. (h) No Modification. The obligations of the Sunshine Companies hereunder shall not be modified by any sale or issuance of each of their capital stock to another person or entity. (i) Accuracy of Representations and Warranties. The representations and warranties of each Sunshine Company will be true and correct in all material respects as of the date when made, except for representations and warranties of an earlier date, which will be true and correct in all material respects as of such date. (j) Board of Directors. For so long as any Holder holds any Call Option, the directors of Grantor, other than management directors, shall be nominated solely by the Holders holding a Call Option, the Company agrees to vote the capital stock of Grantor in favor of such Holders' nominees and the Company agrees not to remove any director without the consent of the Holders holding Call Options. Furthermore, for so long as any Holder holds any Call Option, the Company agrees that it shall make no stockholder proposals with respect to Grantor and shall not nominate any directors (other than the nominees proposed by the Holders other than the management director). (k) No Dividends or Other Distribution. No Sunshine Company shall, without the written consent of each of the Holders, declare or pay any dividends, purchase, redeem, retire, defease or otherwise acquire for value any of its capital stock or any warrants, rights or options to acquire such capital stock, now or hereafter outstanding, return any capital to its stockholders as such, make any distribution of assets, capital stock, warrants, rights, options, obligations or securities to its stockholders as such or issue or sell any capital stock or any warrants, rights or options to acquire such capital stock, or permit any of its subsidiaries to purchase, redeem, retire, defease or otherwise acquire for value any capital stock of a Sunshine Company or any warrants, rights or options to acquire such capital stock or to issue or sell any capital stock or any warrants, rights or options to acquire such capital stock. (l) No Burdensome Agreements. No Sunshine Company shall become a party to any agreement or arrangement, or otherwise undertake any responsibility, that may prove to be materially burdensome on the Sunshine Company or its ability to comply with the provisions hereof. (m) Transactions With Affiliates. Each Sunshine Company agrees that any transaction or arrangement between it or any of its subsidiaries and any affiliate or employee of the Sunshine Company shall be effected on an arms' length basis in accordance with customary commercial practice and, except with respect to grants of options and stock to service providers, including employees, shall receive the prior written approval of each Holder holding a Call Option. 7. Indemnification. Each of the Sunshine Companies, jointly and severally, agrees to indemnify each Holder and hold it harmless from and against (a) any loss, costs and damages (including reasonable attorney's fees) incurred as of result of such party's breach of any representation, warranty, covenant or agreement in this Agreement or incurred in connection with the enforcement of this indemnity; (b) any and all injuries, claims, damages, judgments, liabilities, costs and expenses (including, without limitation, reasonable fees and disbursements of counsel whether involving a third party or a claim between the parties), charges and encumbrances which may be incurred by or asserted against a Holder in connection with or arising out of this Agreement other than those resulting from Holder's breach of this Agreement; (c) any assertion, declaration or defense of the Holders' rights or security interest under the provisions of this Agreement or the Pledge Agreement in connection with the realization, possession, safeguarding, insuring or other protection of the SAI Shares or in connection with the collecting, perfecting or protecting of the Holders' liens and security interests hereunder or under the Pledge Agreement. 8. Miscellaneous. ------------- (a) Further Assurances. Each of the Sunshine Companies and each of the Holders shall promptly execute and deliver all further instruments and documents and take all further action that may be reasonably necessary or desirable to effect the purposes of this Agreement. (b) Amendment. This Agreement may not be amended, modified or terminated except by written agreement of each of the Sunshine Companies and each of the Holders. (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 Sunshine Companies: Sunshine Mining and Refining Company Sunshine International Mining, Inc. Sunshine Argentina, Inc. 5956 Sherry Lane Suite 1621 Dallas, Texas 75225 Attention: William Davis Facsimile: (214) 265-0324 with copies to: Prager, Metzger & Kroemer, PLLC 2626 Cole Avenue Suite 900 Dallas, Texas 75204 Attention: Steven C. Metzger, Esq. Facsimile: (214) 523-3838 to the Stonehill Holders: c/o Stonehill Capital Management LLC 126 E. 56th Street, 9th Floor New York, New York 10022 Attention: John Motulsky Facsimile: (212) 838-2291 with a copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Attention: Lawrence Budish, Esq. Facsimile: (212) 969-2900 to the Elliott Holders: c/o Elliott Management Corporation 712 Fifth Avenue New York, New York 10019 Attention: Dan Gropper 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 written notice of such changed address to the other parties hereto. (d) Titles. The titles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement. (e) 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. (f) Successors and Assigns. This Agreement shall be binding upon the inure to the benefit of the parties and their successors and permitted assigns. Each Holder may assign this Agreement or any rights or obligations hereunder without the consent of the Sunshine Companies, but only if such transfer is made to an entity that, on the date hereof, is an affiliate of such Holder. (g) Remedies Cumulative. Each Holder's rights and remedies under this Agreement and the Pledge Agreement shall be cumulative and non-exclusive of any other rights or remedies which it or he may have under any other Transaction Document or any other agreement or instrument, by operation of law or otherwise, and may be exercised alternatively, successively or concurrently as each Holder may deem expedient. (h) Severability. Any provision of this Agreement that may be determined by competent authority to be illegal, invalid, prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such illegality, invalidity, prohibition or unenforceability without invalidating the remaining terms and provisions hereof, and any such illegality, invalidity, prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable any terms and provisions hereof in any other jurisdiction. (i) Governing Law. This Agreement and the validity and performance of the terms hereof shall be governed and construed in accordance with the laws of the State of Delaware applicable to contracts executed and to be performed entirely within such state. (j) Jurisdiction. The Sunshine Companies and the Holders (i) hereby irrevocably submit 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 waive, and agree 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. To the fullest extent permitted by applicable law, the Sunshine Companies and the Holders consent 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 Section 8(j) shall affect or limit any right to serve process in any other manner permitted by law. (k) Specific Performance. The Sunshine Companies and the Holders acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the Pledge 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 the Pledge Agreement and to enforce specifically the terms and provisions hereof and thereof, this being in addition to any other remedy to which any of them may be entitled by law or equity. (l) Jury Trial. EACH PARTY HERETO WAIVES THE RIGHT TO A TRIAL BY JURY. (m) No Third Party Beneficiaries. Nothing in this Agreement shall confer any rights upon any person or entity other than the parties hereto and their respective successors and assigns. (n) 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 counterpart. IN WITNESS WHEREOF, the parties hereof have caused this Agreement to be duly executed as of the date first above written. THE SUNSHINE COMPANIES THE HOLDERS SUNSHINE INTERNATIONAL MINING, INC. ELLIOTT INTERNATIONAL, L.P. By: Elliott International Capital Advisors, Inc. Attorney-in-Fact By: By: ---------------------------- ---------------------------- Name: Name: Paul E. Singer Title: Title: President SUNSHINE MINING AND REFINING THE LIVERPOOL LIMITED PARTNERSHIP COMPANY By: Liverpool Associates, Ltd. General Partner By: By: ----------------------------- ---------------------------- Name: Name: Paul E. Singer Title: Title: President SUNSHINE ARGENTINA, INC. STONEHILL INSTITUTIONAL PARTNERS, L.P. By: By: ----------------------------- ---------------------------- Name: Name: John Motulsky Title: Title: General Partner STONEHILL OFFSHORE PARTNERS LIMITED By: Stonehill Advisors LLC By: ---------------------------- Name: John Motulsky Title: Managing Member SCHEDULE 1 to the Call Option Agreement ELLIOTT STONEHILL HOLDERS HOLDERS ------- ------- - -------------------------------------------------------------------------------- SAI SHARES (a) maximum # of SAI Shares 566 434 (b) Purchase Price $1,000 per share $1,000 per share - -------------------------------------------------------------------------------- SCHEDULE 2 to the Call Option Agreement Wire Instructions for Grantor: INDEX OF DEFINED TERMS As Defined on Page Approved Market................................................................3 Bankruptcy Court...............................................................1 Call Amount....................................................................4 Call Option....................................................................1 Call Options...................................................................1 Capital Structure Changes......................................................1 Closing Date...................................................................2 Common Stock...................................................................1 Company........................................................................1 DTC............................................................................5 DWAC...........................................................................5 EILP...........................................................................1 Elliott Holders................................................................1 Elliott's Interest.............................................................1 ExerciseNotice.................................................................3 FAST...........................................................................5 Grantor........................................................................1 Holders........................................................................1 Indebtedness...................................................................8 Market Value...................................................................4 Pirquitas Mine.................................................................9 Plan...........................................................................1 Pledge Agent...................................................................6 Pledge Agreement...............................................................6 Purchase Date..................................................................4 Purchase Price.................................................................4 Registration Rights Agreement..................................................1 Restructuring..................................................................1 SAI............................................................................1 SAI Shares.....................................................................1 SIP............................................................................1 SOPL...........................................................................1 Stonehill Holders..............................................................1 Stonehill's Interest...........................................................1 Subsidiary Shares.............................................................10 Sunshine Companies.............................................................1 Sunshine Company...............................................................1 Term...........................................................................2 TLLP...........................................................................1 Transaction Documents..........................................................1 EX-99.3 4 0004.txt REGISTRATION RIGHTS AGREEMENT THIS REGISTRATION RIGHTS AGREEMENT ("Agreement") is entered into as of February ___, 2001 between Sunshine Mining and Refining Company, a Delaware corporation, with offices at 817 West Main Street, Suite 600, 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 under such Investor's name on Schedule I hereto. W I T N E S S E T H: ------------------- WHEREAS, pursuant to a Plan of Reorganization, dated as of August 23, 2000 filed by the Company, as subsequently amended and which became effective on February 5, 2001, certain affiliates of the Company and the Investors with the federal bankruptcy court in Delaware (the "Plan of Reorganization"); and WHEREAS, the Company and the investors desire that all shares of the Company's common stock, par value $0.01 per share ("Common Stock") issued to the Investors pursuant to the Plan of Reorganization (the "Reorganization Shares") be subject to the registration rights contained herein; NOW, THEREFORE, in consideration of the mutual promises, representations, warranties, covenants and conditions set forth in and this Agreement, the Company and the Investors agrees as follows: 1. Certain Definitions. Capitalized terms used herein and not otherwise defined shall have the meaning ascribed thereto in the Plan of Reorganization. As used in this Agreement, the following terms shall have the following respective meanings: "Approved Market" shall mean the New York Stock Exchange, the American Stock Exchange, the NASDAQ National Market, the NASDAQ Small Cap Market or the NASDAQ OTC Bulletin Board. "Closing Date" shall refer to the Effective Date of the Plan of Reorganization. "Commission" or "SEC" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. "Common Stock" shall have the meaning set forth in the preamble. "Default Payment" shall have the meaning set forth in Section 2(b)(i). "Deficiency" shall have the meaning set forth in Section 2(b)(iv). "Holder" and "Holders" shall mean the Investor or the Investors, respectively, and any transferee of the Registrable Securities which have not been sold to the public to whom the registration rights conferred by this Agreement have been transferred in compliance with this Agreement. "Indemnified Party" shall have the meaning set forth in Section 6(c). "Indemnifying Party" shall have the meaning set forth in Section 6(c). "Interfering Events" shall have the meaning set forth in Section 2(b). "Listing Period" shall have the meaning set forth in Section 2(b)(ii)(A). "Market Price"" shall mean the price of one share of Common Stock determined as follows: (i) if the Common Stock is listed on the New York Stock Exchange or the American Stock Exchange, the closing price on such exchange on the date of valuation; (ii) if (i) does not apply and the Common Stock is listed on the NASDAQ National Market System, the NASDAQ Small-Cap Market or the NASDAQ OTC Bulletin Board, the last reported bid price on the date of valuation; (iii) If neither (i) nor (ii) apply but the Common Stock is quoted in the over-the-counter market, another recognized exchange or on the pink sheets, the last reported bid price on the date of valuation; and (iv) If neither clause (i), (ii) or (iii) above applies, the good faith determination of the Board of Directors, with the concurrence and participation of an investment banking firm acceptable to the Holders. "Mandatory Repurchase Price" shall have the meaning set forth in Section 2(b)(i)(B). "Put Notice" shall have the meaning set forth in Section 2(b)(i)(B). "Registrable Securities" shall mean (i) the Reorganization Shares; (ii) any securities of the Company issued or issuable to the Investors or their permitted transferees upon any stock split, stock dividend, recapitalization or similar event with respect to the aforementioned securities; and (iii) any securities of the Company issued as a dividend or other distribution with respect to, conversion or exchange of, or in replacement of, Registrable Securities. 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. "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. "Regulation D" shall mean Regulation D as promulgated pursuant to the Securities Act, and as subsequently amended. "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". "Suspension Grace Period" shall have the meaning set forth in Section 2(b)(iii). 2. Registration Requirements. The Company shall use its best efforts to effect the registration of the Investors' 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 sale or distribution of all the Registrable Securities in the manner (including manner of sale) designated by the Holder and in all U.S. jurisdictions. Such best efforts by the Company shall include the following: (a) The Company shall, as expeditiously as reasonably possible after the Effective Date (as defined in the Plan of Reorganization) (the "Closing Date"): (i) But in any event by March 20, 2001 (the "Filing Date") 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 the Registrable Securities (such registration statement, including any amendments or supplements thereto and prospectuses contained therein, is referred to herein as the "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 number of additional shares of Common Stock as may become issuable to prevent dilution resulting from stock splits, stock dividends or similar events. The number of shares of Common Stock initially included in such Registration Statement shall be no less than the number of shares of Common Stock that are as of the date of this Agreement issued or issuable to the Investors. Thereafter, the Company shall use its best efforts to cause such Registration Statement to be declared effective as soon as practicable, and in any event prior to 60 days following the Filing Date. The Company shall provide Holders and their legal counsel 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 methods of disposition by the seller thereof as set forth in the Registration Statement 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. (iv) Register and qualify the securities covered by such Registration Statement under the securities or "Blue Sky" laws of all U.S. 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 as a result of which the prospectus (including any supplements thereto or thereof and any information incorporated or deemed to be incorporated by reference therein) 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 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 the Holders of the Registrable Securities included in the Registration Statement to review the Registration Statement and all amendments and supplements thereto within a reasonable period of time prior to each filing, and shall not file any document in a form to which such counsel reasonably objects. (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, the National Association of Securities Dealers, Inc. or any exchange or market where the Common Stock is then traded. (ix) If applicable, 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. (x) Upon the effectiveness of the Registration Statement, cause any restrictive legend placed on the certificates representing Registrable Securities to be removed promptly. (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 the Transaction Documents (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 60 calendar days from the Filing Date and provided that such Holder is not able to freely transfer the Registrable Securities pursuant to Rule 144(k) of the Act, then the Company shall pay to each Holder (in cash or shares of Common Stock, at the option of each Holder as provided in Section 2(b)(iv)), a default payment for each 30-day period (or portion thereof) that the effectiveness of the Registration Statement has not been declared effective or failure to issue such unlegended Registrable Securities persists, equal to 1% of the value of the outstanding Registrable Securities held by such Holder, based upon the Market Price determined on the last day of each such 30-day period (a "Default Payment"). (B) If the Registration Statement has not been declared effective within 120 days after the Filing Date and provided that such Holder is not able to freely transfer the Registrable Securities pursuant to Rule 144(k) of the Act, then (x) the Call Options shall become immediately exercisable and (y) each Holder shall have the right to sell at any time after the 150th day after the Closing Date any or all of its Registrable Securities and at the Mandatory Repurchase Price (as defined below). Each Holder shall exercise such right by providing the Company with written notice thereof (the "Put Notice"), which such Put Notice shall include the type and amount of each security that the Holder seeks to repurchase and a date at least five (5) business days from the date thereof on which the Holder seeks the repurchase to occur. The "Mandatory Repurchase Price" shall be equal to, with respect to the Registrable Securities to be sold in accordance with this paragraph, (x) the number of such shares multiplied by (y) 115% of the Market Price on the date the Holder acquires the right to require the Company to repurchase the shares or the date upon which the Holder received the shares. (ii) No Listing; Premium Price Redemption for Delisting of Class of Shares. (A) In the event that the Company fails, refuses or is unable to cause the Registrable Securities covered by the Registration Statement to be approved for trading subject to issuance with an Approved Market: (1) at all times during the period ("Listing Period") commencing the earlier of the effective date of the Registration Statement or the 60th calendar day following the Filing Date, and continuing thereafter for so long as the Call Options are outstanding, then the Company shall pay in cash or Common Stock, as provided in Section 2(b)(i)(A), to each Holder a Default Payment for each 30-day period (or portion thereof) during the Listing Period from and after such failure, refusal or inability to so list the Registrable Securities until the Registrable Securities are so listed and (2) within 30 calendar days following the Filing Date, then the Call Options shall become immediately exercisable. (B) In the event that shares of Common Stock of the Company are delisted from, or are no longer approved for trading on, the Approved Market at any time following the Closing Date and remain delisted or not approved for trading for 7 consecutive calendar days, then (1) the Call Options shall become immediately exercisable and (2) at the option of each Holder and to the extent such Holder so elects, the Company shall on 2 business days notice either (x) pay in cash or Common Stock (as provided in Section 2(b)(iv) to such Holder a Default Payment for each 30-day period that the shares are delisted or (y) require the Company to repurchase the Registrable Securities held by such Holder, in whole or in part, at Mandatory Repurchase Price (as defined above); provided, however, that such Holder may revoke such request at any time prior to receipt of payment of such Default Payments or Mandatory Repurchase Price, as the case may be. (iii) Blackout Periods. In the event any Holder is unable to sell Registrable Securities under the Registration Statement for more than (A) ten (10) consecutive days or (B) an aggregate of thirty (30) days in any 365 day period ("Suspension Grace Period") including without limitation by reason of a suspension of trading of the Common Stock on the Approved Market, 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, or the number of shares of Common Stock covered by the Registration Statement is insufficient at such time to make such sales, then the Call Options shall become immediately exercisable. In addition, the Company shall pay in cash or Common Stock (as provided in Section 2(b)(iv)) to each Holder a Default Payment for each 30-day period (or portion thereof) from and after the expiration of the Suspension Grace Period or, in the alternative, at any time following the expiration of the Suspension Grace Period, a Holder shall have the right but not the obligation to have the Company repurchase its Registrable Securities at the price and on the terms set forth in Section 2(b)(i)(B) above. (iv) Default Payment Terms; Status of Unpaid Default Payments. All Default Payments (which payments shall be pro rata on a per diem basis for any period of less than 30 days) required to be made in connection with the above provisions shall be paid at any time upon demand, and whether or not a demand is made, by the tenth (10th) day of each calendar month for each partial or full 30-day period occurring prior to that date. Such Default Payments shall be payable in cash or Common Stock, as determined by each Holder in its sole discretion. If the Holder elects to be paid in Common Stock, the Holder shall be entitled to that number of shares of Common Stock, as shall equal to the amount of such Default Payment multiplied by a fraction, the numerator of which is one and the denominator of which is equal to the average of the Market Price for the three (3) business days prior to, but not including, the date upon which such payments are due. Unless the Company shall receive written notice to the contrary from the respective Holder, the Default Payments shall be in cash. (v) Mandatory Repurchase Price for Default. In the event that the Company fails or refuses to pay any Default Payment provided for in the foregoing paragraphs (i) through (iv) when due, (A) the Call Options shall become immediately exercisable and (B) at any Holder's request and option the Company shall purchase all or a portion of the Registrable Securities held by such Holder (with Default Payments accruing through the date of such purchase), within five (5) days of such request, at a purchase price equal to the Mandatory Repurchase Price; provided that such Holder may revoke such request at any time prior to receipt of such payment of such purchase price. (vi) Cumulative Remedies. Each Default Payment triggered by an Interfering Event provided for in the foregoing paragraphs (i) through (iii) shall be in addition to each other Default Payment triggered by another Interfering Event; provided, however, that in no event shall the Company be obligated to pay to any Holder Default Payments in an aggregate amount greater than 1% of the value of the outstanding Registrable Securities based upon the Market Price for any 30-day period (or portion thereof). The Default Payments, mandatory repurchases and the triggering of the ability of the Holders to exercise Call Options 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 Transaction Documents, including without limitation the right to specific performance. Each Holder shall be entitled to specific performance of any and all obligations of the Company in connection with the registration rights of the Holders hereunder. (vii) Certain Acknowledgments. The Company acknowledges that any failure, refusal or inability by the Company described in the foregoing paragraphs (i) through (iii) and paragraph (v) will cause the Holders to suffer damages in an amount that will be difficult to ascertain, including without limitation damages resulting from the loss of liquidity in the Registrable Securities and the additional investment risk in holding the Registrable Securities. Accordingly, the parties agree that it is appropriate to include in this Agreement the foregoing provisions for Default Payments, mandatory repurchases and the triggering of the ability of the Holders to exercise the Call Options in order to compensate the Holders for such damages. The parties acknowledge and agree that the Default Payments, mandatory repurchases and the triggering of ability of the Holders to exercise of the Call Options set forth above represent the parties' good faith effort to quantify such damages and, as such, agree that the form and amount of such Default Payments and mandatory repurchases and the triggering of the ability of the Holders to exercise of the Call Options are reasonable and will not constitute a penalty. The parties agree that the provisions of this clause (vii) consist of certain acknowledgments and agreements concerning the remedies of the Holders set forth in clauses (i) through (iii) and paragraph (v) of this paragraph; nothing in this clause (vii) imposes any additional default payments and mandatory repurchases for violations under this Agreement. (c) If the Holder(s) intend to distribute the Registrable Securities by means of an underwriting, the Holder(s) shall so advise the Company. Any such underwriting may only be administered by investment bankers reasonably satisfactory to the Company. (d) The Company shall enter into such customary agreements for secondary offerings (including a customary underwriting agreement with the underwriter or underwriters, if any) and take all such other reasonable actions reasonably requested by the Holders in connection therewith in order to expedite or facilitate the disposition of such Registrable Securities. In the event that the offering in which the Registrable Securities are to be sold is deemed to be an underwritten offering or an Investor selling Registrable Securities is deemed to be an underwriter, the Company shall: (i) make such representations and warranties to the Holders and the underwriter or underwriters, if any, in form, substance and scope as are customarily made by issuers to underwriters in secondary offerings; (ii) cause to be delivered to the sellers of Registrable Securities and the underwriter or underwriters, if any, opinions of independent counsel to the Company, on and dated as of the effective day (or in the case of an underwritten offering, dated the date of delivery of any Registrable Securities sold pursuant thereto) 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 the underwriter(s), if any, 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 and each underwriter, if any. (iii) cause to be delivered, immediately prior to the effectiveness of the Registration Statement (and, in the case of an underwritten offering, at the time of delivery of any Registrable Securities sold pursuant thereto), 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 and each underwriter, if any, 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 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. (iv) if an underwriting agreement is entered into, the same shall include customary indemnification and contribution provisions to and from the underwriters and procedures for secondary underwritten offerings; (v) deliver such documents and certificates as may be reasonably requested by the Holders of the Registrable Securities being sold or the managing underwriter or underwriters, if any, to evidence compliance with clause (i) above and with any customary conditions contained in the underwriting agreement, if any; and (vi) deliver to the Holders on the effective day (or in the case of an underwritten offering, dated the date of delivery of any Registrable Securities sold pursuant thereto) of the Registration Statement, and at the beginning of each fiscal quarter thereafter, a certificate in form and substance as shall be reasonably satisfactory to the Holders, executed by an executive officer of the Company and to the effect that all the representations and warranties of the Company contained in the Purchase Agreement are still true and correct except as disclosed in such certificate; the Company shall, as to each such certificate delivered at the beginning of each fiscal quarter, update or cause to be updated each such certificate during such quarter so that it shall remain current, complete and correct throughout such quarter; and such updates received by the Holders during such quarter, if any, shall have been reasonably satisfactory to the Holders. (e) The Company shall make available for inspection by the Holders, representative(s) of all the Holders together, any underwriter participating in any disposition pursuant to a Registration Statement, and any attorney or accountant retained by any Holder or underwriter, 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. (f) The Company shall file a Registration Statement with respect to any newly authorized and/or reserved shares within thirty (30) business days of the authorization or reservation of same and shall use its best efforts to cause such Registration Statement to become effective within ninety (90) days of such filing. If the Holders become entitled, pursuant to an event described in clause (ii) or (iii) 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. 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 contained herein. 3. Expenses of Registration. All Registration Expenses incurred 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; Other Forms. If eligible to use Form S-3 or comparable or successor form, the Company shall use such form to register the Registrable Securities. In the event that the Company is ineligible to use such form, the Company will use 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 effective until the earlier to occur of (i) sales are permitted of all Registrable Securities without registration under Rule 144(k) or (ii) all Registrable Securities shall have been sold pursuant to such registration. 6. Indemnification. --------------- (a) The Company Indemnity. The Company will indemnify each Holder, each of its officers, directors and partners, and each person controlling each Holder, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder with respect to which registration, qualification or compliance has been effected pursuant to this Agreement, and each underwriter, if any, and each person who controls, within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder, any underwriter, 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, offering circular or other document (including any related registration statement, notification or the like) incident to any such registration, qualification or compliance, 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, 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, qualification or compliance, and will reimburse each Holder, each of its officers, directors and partners, and each person controlling such Holder, each such underwriter and each person who controls any such underwriter, 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 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 such Holder or the underwriter (if any) therefor and stated to be specifically for use therein. The indemnity agreement contained in this Section 6(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, qualification or compliance is being effected, indemnify the Company, each of its directors, officers, partners, and each underwriter, if any, of the Company's securities covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of Section 15 of the Securities Act and the rules and regulations thereunder, 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 such registration statement, prospectus, offering circular or other document, or any omission (or alleged omission) to state therein a material fact required to be stated therein or necessary to make the statement therein not misleading, and will reimburse the Company 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 registration statement, prospectus, offering circular or other document in reliance upon and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein, and provided that 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. The indemnity agreement contained in this Section 6(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 6 (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 such party's 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 Article 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 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. 7. Contribution. If the indemnification provided for in Section 6 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 each of such Indemnified Parties, shall contribute to the amount paid or payable by each 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 7 exceed the amount that such Indemnifying Party would have been obligated to pay by way of indemnification if the indemnification provided for under Section 6(a) or 6(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 7 were determined by pro rata allocation (even if the Holders or the underwriters 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 or underwriter shall be required to contribute any amount in excess of the amount by which (i) in the case of any Holder, the net proceeds received by such Holder from the sale of Registrable Securities or (ii) in the case of an underwriter, the total price at which the Registrable Securities purchased by it and distributed to the public were offered to the public exceeds, in any such case, 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. 8. Survival. The indemnity and contribution agreements contained in Sections 6 and 7 and the representations and warranties of the Company referred to in Section 2(d)(i) shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, or the underwriting 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. 9. Information by Holders. Each Holder shall reasonably promptly 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 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, except that such Holder may not require an intended method of disposition which violates applicable securities law. 10. 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 such Registrable Securities; provided that such transfer or assignment shall be for at least .25% of the shares of Common Stock outstanding and that the rights granted under this Agreement may not be assigned to a transferee who has acquired the Registrable Securities from an Investor pursuant to an effective registration statement and who is not an affiliate (as defined in the Act) of the Company; further provided in each case that the Company must be given written notice by the such Investor at the time of or within a reasonable time after said transfer or assignment, stating the name and address of said transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned; and provided further that the transferee or assignee of such rights agrees in writing to be bound by the provisions of this Agreement. 11. 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 United States District Court, the New York State courts and other courts of the United States sitting in New York County, New York 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. (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 5956 Sherry Lane Suite 1621 Dallas, Texas 75225 Attention: William Davis Facsimile: (214) 265-0324 with copies to: Prager, Metzger & Kroemer, PLLC 2626 Cole Avenue Suite 900 Dallas, Texas 75204 Attention: Steven C. Metzger, Esq. Facsimile: (214) 523-3838 to the Investors: To each Investor at the address and/or fax number set forth on Schedule I of this Agreement 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 at least 10 days' 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 and the enforcement of this indemnity. (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. The representations and warranties and the agreements and covenants of the Company and each Investor contained herein shall survive the Closing. (f) 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. (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 express written approval, 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. This Agreement and the agreements and documents contemplated hereby contain the entire understanding and agreement of the parties, and may not be modified or terminated except by a written agreement signed by both parties. (i) Governing Law. This Agreement and the validity and performance of the terms hereof shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware applicable to contracts executed and to be performed entirely in such State. (j) Severability. The parties acknowledge and agree that the Investors are not agents, affiliates or partners of each other, 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. (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. Signature page follows 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:--------------------------------- Name: Title: INVESTORS: STONEHILL INSTITUTIONAL PARTNERS, L.P. By:--------------------------------- Name: John Motulsky Title: General Partner STONEHILL OFFSHORE PARTNERS LIMITED By: Stonehill Advisors LLC By:--------------------------------- Name: John Motulsky Title: Managing Member ELLIOTT INTERNATIONAL, L.P. By: Elliott International Capital Advisors, Inc. Attorney-in-Fact By:--------------------------------- Name: Paul E. Singer Title: President THE LIVERPOOL LIMITED PARTNERSHIP By: Liverpool Associates, Ltd. General Partner By:--------------------------------- Name: Paul E. Singer Title: President Signature page to Sunshine Mining and Refining Company Registration Rights Agreement Schedule I Investors --------- Stonehill Institutional Partners, L.P. Stonehill Offshore Partners Limited c/o Stonehill Capital Management LLC 126 E. 56th Street, 9th Floor New York, New York 10022 Attention: John Motulsky Facsimile: (212) 838-2291 with a copy to: Proskauer Rose LLP 1585 Broadway New York, New York 10036 Attention: Lawrence Budish, Esq. Facsimile: (212) 969-2900 The Liverpol Limited Partnership Elliott International, L.P. c/o Elliott Management Corporation 712 Fifth Avenue New York, New York 10019 Attention: Dan Gropper Facsimile: (212) 974-2092 with copies to: Kleinberg, Kaplan, Wolff & Cohen, P.C. 551 Fifth Avenue, 18th Floor New York, New York 10176 Attention: Lawrence D. Hui, Esq. Facsimile: (212) 986-8866 -----END PRIVACY-ENHANCED MESSAGE-----