Document:

Exhibit 10.16

 

OPTION AGREEMENT

 

This Option Agreement (this “Agreement”) is made and effective as of May 30, 2019 among MINERA PLATA REAL, S. DE R.L. DE C.V., a Mexico variable capital company (a “sociedad de responsabilidad limitada de capital variable” in Spanish) (“MPR”), OPERACIONES SAN JOSÉ DE PLATA S. DE R.L. DE C.V., a Mexico variable capital company (“Operaciones”) (MPR and Operaciones, collectively, “LGJV”) SUNSHINE SILVER MINING & REFINING CORPORATION, a corporation formed under the laws of the State of Delaware (“SSMRC”) and DOWA METALS & MINING CO., LTD., a corporation incorporated under the laws of Japan (“Dowa”).

 

Background

 

A.            Dowa and SSMRC entered into a Memorandum of Understanding dated as of April 16, 2019 (“MOU”).

 

B.            Pursuant to the terms of the MOU, Dowa made capital contributions to LGJV in excess of its Participating Interest (as defined in the Unanimous Omnibus Partner Agreement dated January 1, 2015 entered into among LGJV, SSMRC, Dowa and others (the “Partner Agreement”)), thereby diluting SSMRC’s Participating Interest by 18.518%.

 

C.            Dowa has agreed to grant to SSMRC an option to purchase social capital representing a Participating Interest of 18.518% in each of MPR and Operaciones (the “Option Shares”).

 

Agreements

 

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows:

 

1.                                      Option.  Dowa hereby grants to SSMRC the right to purchase the Option Shares (the “Purchase Option”), in whole, free and clear of any encumbrances, in accordance with the terms of this Agreement.  SSMRC may exercise the Purchase Option by providing notice in writing to Dowa at any time on or before June 30, 2021 after the Working Capital Facility (as defined below) is repaid in full, and paying the Exercise Price (as defined below) to Dowa.

 

2.                                      Exercise Price.  The exercise price (“Exercise Price”) will be an amount equal to the aggregate of: (a) US$51,105,400; plus (b) all costs incurred by Dowa in connection with its ownership of the Option Shares including without limitation, any legal and accounting fees, capital contributions or taxes.  For greater certainty, the Exercise Price is intended to be net of any taxes payable by Dowa in Mexico in connection with the transfer of the Option Shares, and the Exercise Price will be grossed up to reflect any such taxes.

 

3.                                      Term.  This Agreement will be effective as of the date hereof, and will terminate on June 30, 2021 (the “Termination Date”).  If the Purchase Option is not exercised on or before June 30, 2021, it will expire and cease to have any further effect.

 

 

4.                                      LGJV Dividends.  Dowa has the absolute right to receive and retain any dividends declared or paid on its entire Participating Interest and, if SSMRC exercises the Purchase Option, any dividends received by Dowa on the Option Shares prior to the date of payment of the Exercise Price will not be deducted from the Exercise Price.

 

5.                                      Procedure for Exercise of Purchase Option by SSMRC.

 

(a)           If SSMRC wishes to exercise the Purchase Option, SSMRC will deliver written notice (the “Purchase Option Notice”) to Dowa on or before the Termination Date.

 

(b)           Within ten business days after its receipt of the Purchase Option Notice, Dowa will deliver written notice of the Exercise Price to SSMRC (the “Exercise Price Notice”).

 

(c)           The closing for the exercise of the Purchase Option (“Closing”) will take place no later than five business days after the date of the Exercise Price Notice.  At Closing, SSMRC will pay the Exercise Price to Dowa, and Dowa will deliver a transfer form to assign the Option Shares to SSMRC.

 

(d)           Each party hereby expressly approves the transactions contemplated by this Agreement, and each party hereby agrees, at the expense of SSMRC, to execute and deliver such additional documents and instruments and to perform such additional acts as may be necessary or appropriate to effectuate, carry out and perform all of the terms, provisions and conditions of this Agreement and the transactions contemplated hereby.

 

(e)           SSMRC will bear, and will reimburse Dowa for, all of the costs of implementing the transactions contemplated by this Agreement.

 

6.                                      Notices.  All notices required or permitted hereunder will be in writing and will be deemed effectively given:

 

(i)                                     upon personal delivery to the party to be notified;

 

(ii)                                  five business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or

 

(iii)                               one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.

 

All communications will be sent as follows:

 

If to Dowa, to:                                     Dowa Metals & Mining Co., Ltd.
                                                                 14-1, Sotokanda 4-Chome
                                                                 Chiyoda-ku, Tokyo 101-0021 Japan 
                                                                 Attn: Hideo Kudo
                                                                 Director, General Manager
                                                                 Resource Development &

 

 

Raw Materials Department
                                                                 kudoh@dowa.co.jp
                                                                 Telephone: +81 3-6847-1201

 

with a copy to (which will not constitute notice to Dowa):

 

Torys LLP
 1114 Avenue of the Americas
 23rd Floor
 New York, NY 10036 
 Attn: Don Bell 
 dbell@torys.com
 Telephone: +1 (212) 880-6118

 

If to SSMRC, to:                                 1660 Lincoln Street, Suite 2750
                                                                 Denver, Colorado 80264 
                                                                 Attn: Roger Johnson, CFO
                                                                 Email: rjohnson@ssmines.com 
                                                                 Telephone: +1 (303) 784-5334

 

with a copy to (which will not constitute notice to SSMRC):

 

Polsinelli PC
 1401 Lawrence Street, Suite 2300
 Denver, Colorado 80202 
 Attention: Jeffrey Reeser
 Email: jreeser@polsinelli.com 
 Telephone: +1 (303) 256-2726

 

7.                                      Severability.  The determination that any provision of this Agreement is invalid or unenforceable will not affect the validity or enforceability of the remaining provisions or of that provision under other circumstances.  Any invalid or unenforceable provision will be enforced to the maximum extent permitted by law.

 

8.                                      Counterparts.  This Agreement may be executed in counterparts, each of which when executed will be an original, and all of which, when taken together, will constitute one agreement.

 

9.                                      Governing Law.  This Agreement and the rights and obligations of the parties hereunder will be construed in accordance with and be governed by the internal laws of the state of New York without regard to its conflicts of laws principles.

 

10.                               Further Assurances.  Each party will at its own expense do, make, execute or deliver all such further acts, documents and things in connection with this Agreement as reasonably required from time to time for the purpose of giving effect thereto, all promptly upon request.

 

 

11.                               Amendments, Assignments.  All amendments to this Agreement must be in writing and signed by the parties hereto.  No party may assign its rights hereunder, including but not limited to the Purchase Option, in whole or in part, without the consent of the other parties.

 

[REMAINDER OF PAGE INTENTIONALLY BLANK]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement as of the date first set forth above.

 

	
 
    	
DOWA   METALS & MINING CO., LTD.
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Toshiaki Suyama
    
	
 
    	
 
    	
Name: 
    	
Toshiaki Suyama
    
	
 
    	
 
    	
Title: 
    	
President
    

 

 

	
 
    	
SUNSHINE   SILVER MINING & REFINING CORPORATION
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Stephen A. Orr
    
	
 
    	
 
    	
Name: 
    	
Stephen A. Orr
    
	
 
    	
 
    	
Title: 
    	
Executive   Chairman & Chief Executive Officer
    

 

 

	
 
    	
MINERA   PLATA REAL, S. DE R.L. DE C.V.
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Roger Johnson
    
	
 
    	
 
    	
Name: 
    	
Roger Johnson
    
	
 
    	
 
    	
Title: 
    	
Treasurer
    

 

	
 
    	
OPERACIONES   SAN JOSÉ DE PLATA S. DE R.L. DE C.V.
    
	
 
    	
 
    
	
 
    	
By: 
    	
/s/ Roger Johnson
    
	
 
    	
 
    	
Name: 
    	
Roger Johnson
    
	
 
    	
 
    	
Title: 
    	
TreasurerExhibit 10.17

 

PRIORITY DISTRIBUTION AGREEMENT

 

This Priority Distribution Agreement (“Agreement”) is made and effective as of May 30, 2019, by and between Dowa Metals & Mining Co., Ltd., a corporation incorporated under the Laws of Japan (“Dowa”) and Sunshine Silver Mining & Refining Corporation, a corporation incorporated under the Laws of the State of Delaware (“SSMRC”), Minera Plata Real, S. de R.L. de C.V., a Mexico variable capital company incorporated under the Laws of Mexico (“MPR”), Operaciones San Jose de Plata, S. de R.L. de C.V., a Mexico variable capital company incorporated under the Laws of Mexico (“OpCo”, together with MPR, the “LGJV”).

 

Background

 

A.            Dowa, SSMRC, LGJV and Servicios San José de Plata S. de R.L. de C.V. entered into a Memorandum of Understanding dated April 16, 2019 (“MOU”);

 

B.            Pursuant to the terms of the MOU, SSMRC agreed to pay certain amounts to Dowa until such time as Dowa receives an aggregate amount equal to $20,000,000 from: (i) dividends and distributions payable to Dowa from the LGJV; and (ii) payments from SSMRC (such payments from SSMRC the “Priority Distribution Payments”); and

 

C.            The parties have agreed that the Priority Distribution Payments will be made in accordance with the terms of an escrow agreement (“Escrow Agreement”) entered into among Dowa, SSMRC and LGJV, dated as of May 30, 2019.

 

Agreements

 

For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the undersigned hereby agree as follows:

 

1.             Definitions.  Unless otherwise specified, any term not defined herein will have the meaning set out under the Term Loan Agreement, dated July 11, 2017, among Dowa, SSMRC, the LGJV and Servicios, as amended (the “TL Agreement”).

 

2.             Payment.  SSMRC hereby agrees to make the Priority Distribution Payments to Dowa from dividends and distributions received from LGJV.

 

3.             Direction.  SSMRC hereby irrevocably directs LGJV to pay all dividends and distributions payable to SSMRC by LGJV to the Escrow Agent, to be disbursed to Dowa pursuant to the terms of the Escrow Agreement, and LGJV hereby accepts such direction, until such time as Dowa receives dividends and distributions from LGJV and Priority Distribution Payments, equal to $20,000,000 in aggregate.

 

4.             Costs.  SSMRC is responsible for all costs relating to the payment of the Priority Distribution Payments and the Escrow Agreement and hereby agrees to indemnify and hold Dowa harmless for any such costs including, without limitation, all costs, fees, liabilities or

 

 

expenses payable to the Escrow Agent and any withholding or other taxes payable in connection with the Priority Distribution Payments, other than Japanese corporate income taxes.

 

5.             Right to Dividends and Distributions.  SSMRC represents and warrants that it is entitled to receive the dividends and distributions, and has not made a prior agreement, pledge, transfer, or encumbrance of any of its right, title or interest in the dividends and distributions, except with respect to the security granted to Dowa under or in respect of the TL Agreement and Working Capital Facility.

 

6.             Severability.  The determination that any provision of this Agreement is invalid or unenforceable will not affect the validity or enforceability of the remaining provisions or of that provision under other circumstances.  Any invalid or unenforceable provision will be enforced to the maximum extent permitted by law.

 

7.             Counterparts.  This Agreement may be executed in counterparts, each of which when executed will be an original, and all of which, when taken together, will constitute one agreement.

 

8.             Governing Law.  This Agreement and the rights and obligations of the parties hereunder will be construed in accordance with and be governed by the internal laws of the state of New York without regard to its conflicts of laws principles.

 

9.             Further Assurances.  Each party will at its expense do, make, execute or deliver all such further acts, documents and things in connection with this Agreement as reasonably required from time to time for the purpose of giving effect thereto, all promptly upon request.

 

10.          Amendments, Assignments.  All amendments to this Agreement must be in writing and signed by the parties hereto.  No party may assign its rights hereunder, in whole or in part, without the consent of the other parties.

 

[Signature page follows.]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first mentioned above.

 

	
 
    	
DOWA   METALS & MINING CO., LTD.
    
	
 
    	
 
    
	
 
    	
By:  
    	
/s/ Toshiaki Suyama
    
	
 
    	
 
    	
Name: 
    	
Toshiaki Suyama
    
	
 
    	
 
    	
Title: 
    	
President
    
	
 
    	
 
    
	
 
    	
SUNSHINE   SILVER MINING & REFINING CORPORATION
    
	
 
    	
 
    
	
 
    	
By:  
    	
/s/ Stephen A. Orr
    
	
 
    	
 
    	
Name: 
    	
Stephen A. Orr
    
	
 
    	
 
    	
Title: 
    	
Executive   Chairman & Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
MINERA   PLATA REAL, S. DE R.L. DE C.V.
    
	
 
    	
 
    
	
 
    	
By:  
    	
/s/ Roger Johnson
    
	
 
    	
 
    	
Name: 
    	
Roger Johnson
    
	
 
    	
 
    	
Title: 
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
OPERACIONES   SAN JOSÉ DE PLATA S. DE R.L. DE C.V.
    
	
 
    	
 
    
	
 
    	
By:  
    	
/s/ Roger Johnson
    
	
 
    	
 
    	
Name: 
    	
Roger Johnson
    
	
 
    	
 
    	
Title: 
    	
Treasurer
    

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the date first mentioned above.

 

	
 
    	
DOWA   METALS & MINING CO., LTD.
    
	
 
    	
 
    
	
 
    	
By:  
    	
/s/ Toshiaki Suyama
    
	
 
    	
 
    	
Name: 
    	
Toshiaki Suyama
    
	
 
    	
 
    	
Title: 
    	
President
    
	
 
    	
 
    
	
 
    	
SUNSHINE   SILVER MINING & REFINING CORPORATION
    
	
 
    	
 
    
	
 
    	
By:  
    	
/s/ Stephen A. Orr
    
	
 
    	
 
    	
Name: 
    	
Stephen A. Orr
    
	
 
    	
 
    	
Title: 
    	
Executive   Chairman & CEO
    
	
 
    	
 
    
	
 
    	
MINERA   PLATA REAL, S. DE R.L. DE C.V.
    
	
 
    	
 
    
	
 
    	
By:  
    	
/s/ Roger Johnson
    
	
 
    	
 
    	
Name: 
    	
Roger Johnson
    
	
 
    	
 
    	
Title: 
    	
Treasurer
    
	
 
    	
 
    
	
 
    	
OPERACIONES   SAN JOSÉ DE PLATA S. DE R.L. DE C.V.
    
	
 
    	
 
    
	
 
    	
By:  
    	
/s/ Roger Johnson
    
	
 
    	
 
    	
Name: 
    	
Roger Johnson
    
	
 
    	
 
    	
Title: 
    	
Treasurer
    

 

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