EXHIBIT 10.2
ECHO BAY MINES LTD.
0000 Xxxxxxxx Xxxxx
00000 - 000 Xxxxxx
Xxxxxxxx, Xxxxxxx X0X 0X0
September 5, 0000
Xxxxxxx Xxxx Xxxxxxxxxxx
00xx xxxxx, Xxxxxx Place
00 Xxxx Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxx X. Xxxxxx
Dear Sir:
This confirms the agreement we have reached regarding the investment
by Kinross Gold Corporation ("Kinross") 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 Kinross 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 Kinross 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
Kinross and Franco-Nevada Mining Corporation Limited ("FN") 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. Kinross
represents that it beneficially owns $15.8 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, Kinross
will own approximately 57.1 million Shares. Notwithstanding the foregoing, at
any time prior to Closing (as hereinafter defined), Kinross may
sell a portion of the Securities it now owns or hereafter acquires to a
non-affiliated party such that immediately following Closing, Kinross would own
less than the approximate 57.1 million Shares it would acquire pursuant to this
Agreement. Kinross agrees, however, that the buyer of the Securities so sold by
Kinross will be obligated to exchange such Securities for Shares at Closing.
The following preconditions are included in this Agreement expressly
for the benefit of Kinross and may be waived, in whole or in part, by Kinross
giving notice to EB:
1. Contemporaneously with this Agreement, EB shall enter into an
agreement with FN by which FN will agree with EB to exchange all
of the Securities held by FN into Shares of EB on the same terms
as Kinross.
2. 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.
3. 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.
4. 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 between the date of this Agreement and the Closing
(as hereinafter defined).
5. 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.
Kinross 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
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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 Kinross.
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
Kinross and the Securities held by Kinross 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 Kinross and FN, 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 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, Kinross 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 Kinross 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.
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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 Kinross 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/ Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxxxx
Chairman and Chief Executive Officer
Accepted and agreed:
Kinross Gold Corporation
By: /s/ Xxxxxx X. Xxxxxx
