EXHIBIT 1
ECHO BAY MINES LTD.
0000 Xxxxxxxx Xxxxx
00000 - 000 Xxxxxx
Xxxxxxxx, Xxxxxxx X0X 0X0
September 5, 2001
Franco-Nevada Mining Corporation Limited
Xxxxx 0000
00 Xxxxxxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxx Xxxxxxxx and Xxxxxxx Xxxxxxxx
Dear Sirs:
This confirms the agreement we have reached regarding the
investment by Franco-Nevada Mining Corporation Limited ("FN") in the capital
securities (the "Securities") issued by Echo Bay Mines Ltd. ("EB") pursuant to
that certain indenture dated as of March 27, 1997 between EB and Bankers Trust
Company, as amended or supplemented from time to time (the "Indenture"). Each of
FN and EB represents and warrants to the other that it has obtained any
necessary approvals required of its respective board of directors for the
entering into of this agreement and consummation of the transactions
contemplated hereby. Subject to the further provisions herein contained, this
letter shall constitute a binding agreement (the/this "Agreement") enforceable
in accordance with its terms.
EB covenants with FN that it will as soon as practicable
following the entering into of this Agreement prepare and file with the
securities regulatory authorities in Canada and the United States such documents
as are necessary to allow EB to offer to holders of the Securities other than FN
and Kinross Gold Corporation ("Kinross") the right to exchange their Securities
for common shares (the "Shares") in the share capital of EB (the "Exchange
Right"), on a basis whereby, if all holders of the Securities were to exercise
their Exchange Right, Shares would be issued by EB and the ratio of ownership in
EB would become 72:28 as to all present holders of the Securities and the
present holders of the Shares respectively. FN represents that it beneficially
owns
$72.355 million in principal amount of the Securities and agrees to exchange
all, and not less than all, of the Securities it owns, or may hereafter acquire,
forthwith following the Exchange Right becoming effective, on the same 72:28
ratio as applies in respect of the Exchange Right, upon and subject to the
preconditions set out below. In result, following exchange, and assuming no
further acquisitions of Securities, FN will own approximately 261.6 million
Shares. Notwithstanding the foregoing, at any time prior to Closing (as
hereinafter defined), FN may sell a portion of the Securities it now owns or
hereafter acquires to a non-affiliated party such that immediately following
Closing, FN would own less than 50% of all of the issued and outstanding Shares;
provided, however, that the buyer of the Securities so sold by FN would be
obligated to exchange the Securities for Shares at Closing.
The following preconditions are included in this Agreement
expressly for the benefit of FN and may be waived, in whole or in part, by FN
giving notice to EB:
1. Contemporaneously with this Agreement, EB shall enter into an
agreement with Kinross by which Kinross will agree with EB to
exchange all of the Securities held by Kinross into Shares of
EB on the same terms as FN.
2. Ninety percent of the holders of the Securities, other than FN
and Kinross, agree to exchange their holdings for Shares on
the same terms as those applicable to FN, such agreement to be
obtained prior to EB mailing proxy solicitation materials to
its shareholders.
3. BMO Xxxxxxx Xxxxx will have prepared and delivered a fairness
opinion to the independent committee and board of directors of
EB which opinion will be available to append to the proxy
material to be sent to shareholders and to any registration
statement or other material to be filed with the applicable
regulatory authorities to register or otherwise qualify the
Shares to be issued to the holders of the Securities.
4. The syndicate of banks who have lent to Echo Bay Inc. as
Borrower and EB and certain of its subsidiaries as Guarantors
with the Bank of Nova Scotia as Agent under the terms of the
Second Amended and Restated Gold Bullion Loan Agreement dated
February 11, 1999 (the "Loan Agreement") must have consented
to the exchange of the Securities on the basis of the Exchange
Right set out in this Agreement and agreed to waive the right
to demand repayment under the Loan Agreement in the context of
a change of control to the satisfaction of FN no later than 20
days before the date fixed for the meeting of shareholders of
EB to approve the steps required to accomplish this
transaction.
5. EB agrees to conduct its business in the ordinary course and
abide by the the positive and negative covenants in the Loan
Agreement in the period
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between the date of this Agreement and the Closing (as
hereinafter defined).
6. The proxy materials to be distributed to the shareholders of
EB and any registration statement filed with the applicable
regulatory authorities in connection with these transactions
will be satisfactory to FN, acting reasonably.
7. The Shares issued to holders of the Securities shall be
qualified for listing and trading on the applicable securities
exchanges and registered or qualified for distribution
pursuant to applicable securities laws and regulations.
FN and EB recognize that the transaction contemplated by this
Agreement and the issuance of the Shares are subject to obtaining the approval
of the shareholders of EB and the applicable regulatory authorities. The term
"approval" includes approval, consent or the failure to object. The expression
"applicable regulatory authorities" includes, without limitation, any securities
exchanges on which the common shares of EB are listed; the government authority
having jurisdiction under the Competition Act and the Xxxx-Xxxxx-Xxxxxx Act; and
the Court of Queen's Bench (Alberta), should any order of that court be required
as to the conduct by EB of any business at the meeting of shareholders to be
called in respect of the transaction contemplated hereby and the issuance of the
Shares. EB represents and warrants that it will recommend the transaction and
issuance of the Shares for approval by shareholders and use its best business
efforts to secure such approval on a timely basis. The Exchange Right shall
become effective on the business day following the date on which all necessary
approvals are obtained and shall remain effective for 20 business days
thereafter, unless extended by EB with the consent of FN.
The Shares issuable on exercise of the Exchange Right shall be
issued within five business days of the expiration of the Exchange Right. The
issue of the Shares is referred to herein as the Closing. The Closing shall
occur December 31, 2001 or on such earlier or later date as the parties may
determine; provided, however, that if the Closing date has not occurred by March
31, 2002, this Agreement may be terminated by the party not causing the delay.
At the Closing, EB shall deliver certificates representing the Shares to FN and
the Securities held by FN shall be cancelled. Similarly, EB shall deliver
certificates representing the Shares to those holders of the Securities that
exercise their Exchange Right and the Securities held by such holder shall be
cancelled. EB shall use its best business efforts to ensure that all Shares
issued to holders of the Securities are listed for trading on the applicable
securities exchanges and registered or qualified for distribution pursuant to
applicable securities laws and regulations. EB expressly acknowledges that,
prior to being able to complete an exchange of Securities for Shares with FN and
Kinross, it is required to file and cause a registration statement on Form S-3
to become effective and to make such filings as are required under applicable
Canadian securities legislation to cause the Shares to be freely
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tradeable and not subject to resale restrictions in the United States and
Canada. EB undertakes to complete the foregoing steps in addition to complying
with all other regulatory requirements applicable to this Agreement.
Between the date hereof and the Closing, FN and EB undertake
and agree to take such steps and do such things as may be necessary or
appropriate to give full effect to this Agreement and the transaction
contemplated hereby. In addition, the parties agree to execute such further
documents as may be necessary or appropriate in the circumstances to give effect
to the terms of this Agreement, and to include any matters contemplated hereby
and such other matters as may be deemed appropriate by FN and EB. Specifically,
but without limitation, the parties recognize that it will likely be desirable
to recommend to shareholders that the Shares be consolidated on a minimum basis
of one new Share for each five Shares currently held. Market conditions will
dictate the timing of any such recommendation and the parties will communicate
with each other, all with a view to reaching the most appropriate decision as to
consolidation of the Shares.
The parties specifically acknowledge that EB is required to
make timely disclosure of this Agreement and the transaction contemplated hereby
and EB undertakes to review with FN any press releases it wishes to make prior
to their public dissemination.
If this Agreement reflects the understandings we have reached,
please execute the duplicate original provided and return it to us.
Yours truly,
s/s Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
Accepted and agreed:
Franco-Nevada Mining Corporation Limited
By: s/s Xxxxxxx Xxxxxxxx
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