<PAGE>
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Royal Oak Mines Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1)
and 0-11
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
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<PAGE>
ROYAL OAK MINES INC.
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
NOTICE IS HEREBY GIVEN that the Annual and Special Meeting of the
shareholders of Royal Oak Mines Inc. (the "Meeting") will be held in the Jervis
Room, Pacific Palisades Hotel, 1277 Robson Street, Vancouver, British Columbia
on Friday, June 26, 1998 at 10:00 a.m., Vancouver time, to receive the annual
report, including the financial statements for the year ended December 31, 1997
and auditors' report thereon, and to consider and vote upon the following
matters:
1. to consider and, if deemed appropriate, to approve a special
resolution in the form set forth in Schedule "A" to the accompanying
Management Information Circular, (Proxy Statement) fixing the number
of directors at five (5) and authorizing the Board of Directors of
the Corporation to determine the number of directors within the
minimum and maximum number provided for in the Articles of the
Corporation (page 4 of enclosed Management Information Circular
(Proxy Statement));
2. to elect five directors (page 4 of enclosed Management Information
Circular (Proxy Statement));
3. to appoint Arthur Andersen & Co. as auditors of the Corporation and
to authorize the directors to fix their remuneration (page 7 of
enclosed Management Information Circular (Proxy Statement));
4. to consider and, if deemed advisable, to confirm the adoption by the
Corporation of the Shareholder Rights Plan, as set forth in the
Shareholder Rights Plan Agreement dated as of February 25, 1998
between the Corporation and Montreal Trust Company of Canada (page 7
of enclosed Management Information Circular (Proxy Statement));
5. to consider, and, if deemed advisable, to approve the stock options
previously granted to certain senior officers and directors of the
Corporation to purchase, in aggregate, up to 1,810,000 Common Shares
of the Corporation; these options are included among the options for
which shareholder approval is being sought at this Meeting to reduce
the exercise price to $1.10 per share (page 12 of enclosed
Management Information Circular (Proxy Statement));
6. to consider and, if deemed appropriate, to approve the amendment to
reduce the exercise prices of stock options previously granted by
the Corporation to $1.10 per share (page 15 of enclosed Management
Information Circular (Proxy Statement));
7. to consider and, if deemed advisable, to approve the stock options
granted to certain senior officers of the Corporation to purchase,
in aggregate, up to 300,000 Common Shares of the Corporation at a
price of $1.55 per share (page 16 of enclosed Management Information
Circular (Proxy Statement)); and
8. to transact such other business as may properly come before the
Meeting or any adjournment thereof.
A Management Information Circular (Proxy Statement), form of proxy and the
annual report on Form 10-K accompany this notice of meeting of shareholders.
The list of shareholders will be prepared as of May 20, 1998, the record date
fixed for determining shareholders entitled to notice of the Meeting. If a
person acquires ownership of Common Shares after that date, the person may
establish such ownership and demand, not later than ten days before the Meeting,
that the person's name be included on the list of shareholders.
By Order of the Board of Directors
/s/William J.V. Sherican
William J.V. Sheridan
Secretary
<PAGE>
DATED at Toronto, Ontario, Canada, this 21st day of May, 1998.
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NOTE: Whether or not you plan to attend the Meeting, shareholders
are requested to complete, date, sign and return the accompanying
form of proxy for use at the Meeting. To be effective, forms of
proxy must be received by Montreal Trust Company of Canada, 510
Burrard Street, Vancouver, British Columbia, Canada, V6C 3B9,
Attention: Corporate Trust Services, by the last business day
preceding the day of the Meeting or be received by the Chair or
Secretary of the Meeting on the day of the Meeting.
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<PAGE>
ROYAL OAK MINES INC.
5501 Lakeview Drive
Kirkland, Washington 98033-7314
U.S.A.
MANAGEMENT INFORMATION CIRCULAR (PROXY STATEMENT)
RELATING TO THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 26, 1998
SOLICITATION OF PROXIES
THIS MANAGEMENT INFORMATION CIRCULAR (PROXY STATEMENT) IS FURNISHED IN
CONNECTION WITH THE SOLICITATION BY THE BOARD OF DIRECTORS (THE "BOARD OF
DIRECTORS" OR THE "BOARD") OF ROYAL OAK MINES INC. (THE "CORPORATION") OF
PROXIES TO BE USED AT THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS OF THE
CORPORATION OR ANY ADJOURNMENTS OR POSTPONEMENTS THEREOF (THE "MEETING") TO BE
HELD AT 10:00 A.M., VANCOUVER TIME, ON FRIDAY, JUNE 26, 1998, FOR THE PURPOSES
SET OUT IN THE ACCOMPANYING NOTICE OF MEETING. SOLICITATION WILL BE MADE
PRIMARILY BY MAIL, BUT MAY BE SUPPLEMENTED BY SOLICITATION PERSONALLY BY
DIRECTORS, OFFICERS AND EMPLOYEES OF THE CORPORATION WITHOUT ADDITIONAL
COMPENSATION. THE COST OF SOLICITATION BY MANAGEMENT WILL BE BORNE BY THE
cORPORATION. THIS PROXY STATEMENT IS FIRST BEING MAILED TO SHAREHOLDERS ON OR
ABOUT MAY 22, 1998.
APPOINTMENT AND REVOCATION OF PROXIES
The persons named in the enclosed form of proxy are officers and directors
of the Corporation. A SHAREHOLDER DESIRING TO APPOINT SOME OTHER PERSON TO
ATTEND AND ACT FOR HIM OR HER AND ON HIS OR HER BEHALF AT THE MEETING MAY DO SO
BY INSERTING IN THE BLANK SPACE PROVIDED IN THE ACCOMPANYING FORM OF PROXY THE
NAME OF THE PERSON TO BE APPOINTED, WHO NEED NOT BE A SHAREHOLDER OF THE
CORPORATION.
A shareholder who has given a proxy may revoke it by an instrument in
writing executed by the shareholder or his or her attorney duly authorized in
writing and deposited either at the registered office of the Corporation (Suite
2500, BCE Place, 181 Bay Street, Toronto, Ontario, Canada, M5J 2T7) or with
Montreal Trust Company of Canada, 510 Burrard Street, Vancouver, British
Columbia, Canada, V6C 3B9, Attention: Corporate Trust Services, at any time up
to and including the last business day preceding the day of the Meeting or any
adjournment or postponement thereof at which the proxy is to be used, or with
the Chair of the Meeting on the day of the Meeting or any adjournment or
postponement thereof or in any other manner permitted by law.
VOTING OF PROXIES
Common Shares which are entitled to be voted at the Meeting and which are
represented by properly executed proxies will be voted by the persons named in
the enclosed form of proxy in accordance with the directions contained therein
on any ballot that may be called for.
IN THE ABSENCE OF SUCH DIRECTIONS, IT IS INTENDED THAT SUCH SHARES WILL BE
VOTED FOR EACH OF THE FOLLOWING MATTERS:
1. FIXING THE NUMBER OF DIRECTORS AT FIVE (5) AND
CONFIRMATION OF THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE
THE NUMBER OF DIRECTORS SERVING ON THE BOARD OF DIRECTORS;
2. ELECTION OF EACH OF THE FIVE NOMINEES FOR DIRECTORS
NAMED IN THIS MANAGEMENT INFORMATION CIRCULAR (PROXY STATEMENT);
3. APPOINTMENT OF ARTHUR ANDERSEN & CO. AS AUDITORS AND THE
AUTHORIZATION OF THE DIRECTORS TO FIX THE AUDITORS' REMUNERATION.
<PAGE>
4. CONFIRMATION OF THE ADOPTION OF THE SHAREHOLDER RIGHTS
PLAN;
5. APPROVAL OF THE STOCK OPTIONS PREVIOUSLY GRANTED TO
CERTAIN SENIOR OFFICERS AND DIRECTORS OF THE CORPORATION TO
PURCHASE, IN AGGREGATE, UP TO 1,810,000 COMMON SHARES OF THE
CORPORATION; THESE OPTIONS ARE INCLUDED AMONG THE OPTIONS FOR WHICH
SHAREHOLDER APPROVAL IS BEING SOUGHT AT THIS MEETING TO REDUCE THE
EXERCISE PRICE TO $1.10 PER SHARE;
6. APPROVAL OF THE REPRICING OF STOCK OPTIONS PREVIOUSLY
GRANTED TO CERTAIN SENIOR OFFICERS, DIRECTORS AND EMPLOYEES OF THE
CORPORATION TO PURCHASE, IN AGGREGATE, UP TO 5,994,500 COMMON SHARES
OF THE CORPORATION AT A PRICE OF $1.10 PER SHARE; AND
7. APPROVAL OF THE STOCK OPTIONS PREVIOUSLY GRANTED TO
CERTAIN SENIOR OFFICERS OF THE CORPORATION TO PURCHASE, IN
AGGREGATE, UP TO 300,000 COMMON SHARES OF THE CORPORATION AT A PRICE
OF $1.55 PER SHARE.
THE ENCLOSED FORM OF PROXY CONFERS DISCRETIONARY AUTHORITY UPON THE
PERSONS NAMED THEREIN WITH RESPECT TO AMENDMENTS OR VARIATIONS TO MATTERS
IDENTIFIED IN THE ACCOMPANYING NOTICE OF MEETING AND WITH RESPECT TO OTHER
MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING. AS OF THE DATE HEREOF,
MANAGEMENT OF THE CORPORATION KNOWS OF NO SUCH AMENDMENTS, VARIATIONS OR OTHER
MATTERS TO COME BEFORE THE MEETING.
CURRENCY
Except as otherwise noted herein, all dollar amounts are expressed in
Canadian dollars.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
The authorized capital of the Corporation consists of an unlimited number
of Common Shares (the "Common Shares") and an unlimited number of special
shares, issuable in series, of which, on the date of this Proxy Statement,
140,865,079 Common Shares and no special shares are issued and outstanding.
Witteck Development Inc., a wholly-owned subsidiary of the Corporation acquired
in December 1995, is the registered and beneficial owner of 1,924,816 Common
Shares of the Corporation. The shares owned by Witteck Development Inc. may not
be voted but are included in the number of shares issued and outstanding.
Except for Witteck Development Inc., each shareholder is entitled to one vote
for each Common Share shown as registered in his or her name on the list of
shareholders which is available for inspection during usual business hours at
the offices of Montreal Trust Company of Canada, 510 Burrard Street, Vancouver,
British Columbia, V6C 3B9, and at the Meeting. The list of shareholders will be
prepared as of May 20, 1998, the record date fixed for determining shareholders
entitled to notice of the Meeting. If a person acquires ownership of Common
Shares after that date, the person may establish such ownership and demand, not
later than ten days before the Meeting, that his or her name be included on the
list of shareholders. The quorum for meetings of shareholders is 2 persons
present, being either shareholders or proxyholders for shareholders.
To the knowledge of the directors and officers of the Corporation, no
person or corporation beneficially owns, directly or indirectly, or exercises
control or direction over shares carrying more than 5% of the voting rights
attached to the issued shares of the Corporation.
The following table presents certain information regarding the number and
percentage of Common Shares beneficially owned by each director and by each
executive officer of the Corporation and by all directors and executive officers
as a group, as of May 8, 1998. Except as otherwise indicated, the directors and
officers have sole voting and investment power with respect to the shares
beneficially owned or controlled by them.
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<TABLE>
<CAPTION>
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SHARES OF THE
CORPORATION
BENEFICIALLY PERCENTAGE
NAME OFFICE OWNED OR OF
CONTROLLED, COMMON SHARES(1)(2)
DIRECTLY OR
INDIRECTLY(1)(2)
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<S> <C> <C> <C>
Margaret K. Witte Director, Chairman, President, 1,697,109 1.2%
Chief Executive Officer
Ross F. Burns Director, Vice-President,
Global Exploration 565,779 *
William J. V. Sheridan Director, Secretary 80,000 *
J. Conrad Lavigne Director 115,000 *
George W. Oughtred Director 700,000 *
Edmund Szol Executive Vice-President and 210,000 *
Chief Operating Officer
John R. Smrke Senior Vice-President 167,870 *
James H. Wood Chief Financial Officer 252,500 *
J. Graham Eacott Vice-President, 171,000 *
Investor Relations
Scott Lampe Treasurer Nil *
Joseph A. Brand Controller Nil *
All present directors and 2.8%
executive officers as a
group (11 persons)
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</TABLE>
* The percentage of shares beneficially owned does not exceed 1% of the
class.
(1) The information as to shares beneficially owned, not being within the
knowledge of the Corporation, has been furnished by the respective
directors and executive officers individually.
(2) Includes and assumes the issuance of the following number of Common Shares
issuable upon the exercise by the following individuals of options which
are currently exercisable or exercisable within 60 days of the date
hereof: Ms. Witte: 410,000; Mr. Burns: 155,000; Mr. Sheridan: 75,000; Mr.
Lavigne: 100,000; Mr. Oughtred: 100,000; Mr. Szol: 210,000; Mr. Smrke:
110,000; Mr. Wood: 250,000; Mr. Eacott: 108,000; Mr. Lampe: Nil and Mr.
Brand: Nil. Does not include options referred to under "Particulars of
Matters to be Acted On - Stock Options to Senior Officers and Directors"
or under "Stock Options to Senior Officers" as those options are not
currently exercisable and are only exercisable if shareholder approval is
obtained.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Act of 1934 requires that those persons
who are officers or directors of the Corporation or who beneficially own more
than ten percent of the Corporation's Common Shares must file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Under rules adopted by the Securities and Exchange Commission, such officers,
directors and greater-than-ten-percent stockholders are also required to furnish
the Corporation with copies of all such filed reports.
Based solely on a review of the copies of such reports furnished to the
Corporation consistent with the rules adopted by the Securities and Exchange
Commission, to the best of the Corporation's knowledge during the fiscal year
ended December 31, 1997, all section 16(a) filing requirements applicable to
such officers, directors and
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<PAGE>
greater-than-ten-percent stockholders were complied with, except that John R.
Smrke, the Corporation's Senior Vice-President, filed late by one day a Form 4
reporting two transactions occurring in October 1997.
PARTICULARS OF MATTERS TO BE ACTED ON
1. DETERMINATION OF NUMBER OF DIRECTORS
The Meeting has been called in part to consider and if deemed appropriate,
to approve a special resolution in the form of the proposed resolution set forth
in Schedule "A" hereto to set the number of directors at five (5) and to empower
the directors of the Corporation to determine from time to time the number of
directors within the range of a minimum of three and a maximum of fifteen
directors as provided for in the Articles of the Corporation. This empowerment
was previously conferred on the Corporation's predecessor, Royal Oak Mines Inc.,
which amalgamated with its subsidiary, Kemess Mines Inc. on December 29, 1997 to
form the Corporation. The provisions of the BUSINESS CORPORATIONS ACT (Ontario)
will continue to restrict the ability of the Board of Directors to increase the
number of directors between meetings of shareholders by more than one-third of
the number of directors required to be elected at the preceding annual meeting
of shareholders.
The special resolution necessary requires the approval of two-thirds of
the votes cast in respect thereof by the shareholders. Abstention from voting
(and broker non-votes) will have no effect on the approval or non-approval of
the special resolution since only votes cast either "for" or "against" will be
counted in determining whether the special resolution has been approved by the
required two-thirds majority of votes cast. Unless a choice is otherwise
specified, it is intended that the Common Shares represented by proxies hereby
solicited will be voted for approval of the special resolution (refer to
Schedule "A").
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSED SPECIAL
RESOLUTION.
2. ELECTION OF DIRECTORS
The articles of the Corporation provide for a minimum of three and a
maximum of fifteen directors. The Corporation currently has five directors.
The number of directors to be elected at the Meeting shall be five (5)
directors, subject to the shareholders approving the special resolution set
forth in Schedule "A" hereto. Unless a choice is otherwise specified, it is
intended that the shares represented by the proxies hereby solicited will be
voted by the persons named therein for the election of each of the five nominees
whose names are set forth below, all of whom are now members of the Board of
Directors and have been since the dates indicated below. Management does not
contemplate that any nominee will be unwilling or unable to serve as a director
but, if that should occur for any reason prior to the Meeting, it is intended
that the persons named in the enclosed form of proxy shall reserve the right to
vote for another nominee in their discretion. Each of the following persons is
nominated to hold office as a director until the next annual meeting of
shareholders of the Corporation or until his or her successor is duly elected,
unless his or her office is earlier vacated in accordance with the by-laws of
the Corporation.
Under the BUSINESS CORPORATIONS ACT (Ontario), the five nominees for
election to the Board of Directors who receive the greatest number of votes cast
for the election of directors, will be elected directors. A withholding of a
vote (or a broker non-vote) will have no effect on the election since only
affirmative votes will be counted with respect to the election of directors.
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<PAGE>
The following table sets forth certain information with respect to each of
the nominees:
<TABLE>
<CAPTION>
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SHARES OF THE
CORPORATION
BENEFICIALLY
NAME AND OFFICE WITH AGE DIRECTOR PRINCIPAL OCCUPATION OWNED OR
THE CORPORATION SINCE(1) CONTROLLED
DIRECTLY OR
INDIRECTLY(2)
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<S> <C> <C> <C> <C>
MARGARET K. WITTE 44 July President and Chief
Chairman, President, 1991 Executive Officer of 1,697,109
Chief Executive Officer the Corporation
ROSS F. BURNS(5) 54 July Vice-President, Global 565,779
Vice-President, Global 1991 Exploration of the
Exploration Corporation
WILLIAM J. V. 53 July Partner, Lang Michener 80,000
SHERIDAN(4)(5) 1991 (barristers and
Secretary solicitors)
J. CONRAD LAVIGNE(3)(5) 82 July President, JCL 115,000
1991 Corporation
(broadcast consultants)
GEORGE W. 69 July President, Privatbanken 700,000
OUGHTRED(3)(4)(5) 1991 Holdings Inc. (private
holding company)
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</TABLE>
(1) Each of the nominees listed above was a director of one or more of the
Corporation's predecessors prior to the amalgamation of such predecessors
on July 23, 1991.
(2) The information as to shares beneficially owned, not being within the
knowledge of the Corporation, has been furnished by the respective
directors individually. The number of shares indicated above includes and
assumes the issuance of the following number of Common Shares issuable
upon the exercise by the following individuals of options which are
currently exercisable or exercisable within 60 days of the date hereof:
Ms. Witte: 410,000; Mr. Burns: 155,000; Mr. Sheridan: 75,000; Mr. Lavigne:
100,000 and Mr. Oughtred: 100,000.
(3) Denotes members of the Corporation's Audit Committee.
(4) Denotes members of the Corporation's Compensation Committee.
(5) Denotes members of the Corporation's Governance and Nominating Committee.
ROSS F. BURNS has served as Vice-President, Global Exploration
of the Corporation or a predecessor thereof since 1989. From
1986 to 1989, Mr. Burns was Vice-President of Neptune
Resources Corp. Mr. Burns has a Bachelor of Science (Honours)
degree in Geology from Queens University and is a Fellow of
the Geological Association of Canada, a registered
professional geologist in the Northwest Territories, and a
member of the Prospectors and Developers Association and the
British Columbia and Yukon Chambers of Mines. Mr. Burns is
also the President and a director of Ronnoco Gold Mines
Limited, President and a director of Beauchastel Copper Mines
Limited and is a director of Asia Minerals Corp., Northbelt
Yellowknife Mines Ltd. and Mate Yellowknife Mines Ltd.
-5-
<PAGE>
J. CONRAD LAVIGNE has served as a director of the Corporation
since 1991. Mr. Lavigne is President of JCL Corporation, a
broadcast consulting firm.. Mr. Lavigne is the former
Chairman of Northern Telephone Co. Ltd. and a former director
of Ontario Hydro and National Bank of Canada. Mr. Lavigne is
a Lifetime Honorary Associate Member of the Central Canadian
Broadcast Association and was inducted into the Canadian
Broadcasters Hall of Fame in 1990.
GEORGE W. OUGHTRED has served as a director of the Corporation
since 1991. Mr. Oughtred is President of Privatbanken
Holdings Inc., a private holding company and a director of
C.I. Fund Management Inc., an investment fund manager. Mr.
Oughtred has served as a director and/or officer of numerous
other public companies. Mr. Oughtred has a Bachelor of
Commerce degree from McGill University and a Master of
Business Administration degree from the University of Western
Ontario.
WILLIAM J. V. SHERIDAN has served as a director of the
Corporation since 1991. Mr. Sheridan has a Bachelor of
Commerce degree from the University of Toronto and a law
degree from Osgoode Hall Law School, Toronto. Mr. Sheridan
joined Lang Michener, a Canadian law firm, in 1972, became a
partner in 1974 and is currently the Managing Partner. He
specializes in mergers and acquisitions, mining, securities
and international joint ventures. Mr. Sheridan is also a
director and/or officer of Highwood Resources Ltd., Waterford
Capital Management Inc., Win-Eldrich Mines Ltd., Eden Roc
Mineral Corp., Pinkerton's of Canada Limited and other public
and private companies.
MARGARET K. (PEGGY) WITTE has served as President and Chief
Executive Officer and Chairman of the Board of the Corporation
or a predecessor thereof since 1989. From 1986 to 1989, Ms.
Witte was President and Chief Executive Officer of Neptune
Resources Corp. Ms. Witte has a Master of Science degree in
Metallurgical Engineering from Mackay School of Mines and
Geology in Reno, Nevada and a Bachelor of Science degree in
Chemistry from the University of Nevada. Ms. Witte is a
member of the American Institute of Mining, Metallurgical and
Petroleum Engineers and the Canadian Institute of Mining and
Metallurgy and past director of the Mining Association of
Canada and the Prospectors and Developers Association of
Canada. Ms. Witte is a recipient of several awards, including
Special Achievement Award, Canadian Mineral Processors (1985),
Woman of Distinction Award Y.W.C.A. (1991), Developer of the
Year, Prospectors and Developers Association of Canada (1993)
and the Financial Post's Newsmaker of the Year (1994). Ms.
Witte is also a director of Highwood Resources Ltd., Talisman
Energy Inc., an oil and gas company, and TransCanada Pipelines
Limited, an oil and gas pipeline company.
CERTAIN INFORMATION ABOUT THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board of Directors met 12 times during 1997 and each director attended
all of the meetings, except G. Oughtred and R. Burns, who attended 8 and 11,
respectively, of the 12 meetings. The standing committees of the Board of
Directors are the Audit Committee, the Compensation Committee and the Governance
and Nominating Committee. All such committees met 5, 5 and 2 times,
respectively, during 1997 and each director attended all of such meetings of the
committees on which he or she served, except Matthew Gaasenbeek (who was then a
director), George Oughtred and Conrad Lavigne who missed one meeting each of the
Compensation Committee, Governing and Nominating Committee and Audit Committee;
and Audit Committee, respectively.
The Audit Committee, the members of which during 1997 were Messrs. John
May (who was then a director), Conrad Lavigne and George Oughtred, met 5 times
in 1997. The Audit Committee's principal functions are to meet with the
Corporation's independent auditors to review the financial statements contained
in the Annual Report, and to discuss specific issues as appropriate, to review
the Corporation's system of internal accounting controls and to report to the
Board of Directors thereon.
-6-
<PAGE>
The Compensation Committee, the members of which during 1997 were Messrs.
Sheridan, Gaasenbeek (who was then a director) and Oughtred, met 5 times in
1997. The Compensation Committee's principal functions are to make
recommendations to the Board of Directors concerning the adequacy and form of
compensation of senior officers and directors of the Corporation.
The Governance and Nominating Committee, the members of which are Messrs.
Oughtred, Lavigne, Sheridan and Burns, met 2 times in 1997. The Governance and
Nominating Committee's principal functions are as set out herein under
"Statement of Corporate Governance Practices - Description of board committees,
their mandates and their activities".
3. APPOINTMENT AND REMUNERATION OF AUDITORS
It is intended that the Common Shares represented by the proxies hereby
solicited will be voted for the reappointment of Arthur Andersen & Co.,
Chartered Accountants, as auditors of the Corporation, to hold office until the
next annual meeting of the shareholders of the Corporation and to authorize the
directors to fix the auditors' remuneration. Arthur Andersen & Co. have been
the auditors of the Corporation since July 23, 1991. A representative of Arthur
Andersen & Co. is expected to be present at the Meeting to make a statement if
he so desires and to be available to respond to questions of the shareholders.
In the appointment of auditors, a withholding of a vote (or a broker non-vote)
will have no effect on the appointment since only affirmative votes will be
counted with respect to the appointment of the auditors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REAPPOINTMENT OF ARTHUR
ANDERSEN & CO. AS AUDITORS OF THE CORPORATION AND TO AUTHORIZE THE BOARD TO FIX
THEIR REMUNERATION.
4. RATIFICATION OF SHAREHOLDER RIGHTS PLAN
The Meeting has been called in part to consider and if thought
appropriate, to confirm the adoption by the Corporation of the Shareholder
Rights Plan (the "Rights Plan"), the terms of which are set forth in the
Shareholder Rights Plan Agreement dated as of February 25, 1998 between the
Corporation and Montreal Trust Company of Canada (the "Rights Plan Agreement").
A copy of the Rights Plan Agreement is included in this Management Information
Circular (Proxy Statement) as Exhibit 1.
BACKGROUND TO THE RIGHTS PLAN
On February 10, 1998, the Board of Directors approved, subject to
obtaining regulatory approval, the entering into of the Rights Plan Agreement
and the adoption of the Rights Plan. Regulatory approval was obtained and the
Rights Plan Agreement establishing the Rights Plan was entered into effective
February 25, 1998. The Rights Plan was not adopted in response to any pending
or threatened acquisition of control of the Corporation. The Rights Plan has
been created to ensure equal treatment of shareholders in connection with a
change of control of the Corporation. The Rights Plan, through its dilutive
aspects, is intended to discourage a potential acquiror from undertaking
"creeping acquisitions" or buying a large block of shares from a select group of
shareholders through "private agreement transactions." The Rights Plan is also
designed to provide the Board of Directors of the Corporation with sufficient
time, should a take-over bid be made for the shares of the Corporation, to
maximize shareholder value by developing alternative transactions or soliciting
a competing bid for the Corporation's shares.
Under the Rights Plan, one Common Share purchase right (a "Right") for
each outstanding Common Share was issued to shareholders of record as at 5:00
p.m. (Toronto time) on February 25, 1998 (the "Record Time"). In addition, one
Right will be issued with each Common Share issued after the Record Time and
prior to the earlier of the Separation Time (as discussed below) and the
redemption or expiration of the Rights.
In general terms, if a person (an "Acquiring Person") acquires twenty
percent (20%) or more of the voting shares of the Corporation other than by way
of a Permitted Bid or a Competing Permitted Bid (each as discussed below) or a
transaction otherwise approved by the Board of Directors, holders of Rights
other than the Acquiring Person may acquire Common Shares of the Corporation at
a fifty percent (50%) discount to the then prevailing market price.
Accordingly, in such a case, the Rights will cause substantial dilution to an
Acquiring Person who becomes an Acquiring Person other than through a Permitted
Bid, a Competing Permitted Bid or in certain limited
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<PAGE>
circumstances as may be approved by the Board of Directors. Because of the
Permitted Bid and Competing Permitted Bid feature of the Rights Plan, a bidder
does not have to negotiate with the Board of Directors, but is entitled to have
the shareholders determine whether to accept the bidder's offer.
The adoption of the Rights Plan will not detract in any way from or lessen
the duties imposed upon the Board of Directors at law to act honestly and in
good faith with a view to the best interests of the Corporation and its
shareholders in considering any take-over bid made for the voting shares. The
Board of Directors shall continue to be entitled to recommend that shareholders
accept or reject any take-over bid or to take any other action with respect to
any take-over bid or otherwise that the Board of Directors believes is necessary
or appropriate in the exercise of its fiduciary duties.
The Rights Plan will also not prevent any shareholder from utilizing the
proxy mechanism of the BUSINESS CORPORATIONS ACT (Ontario) to propose a change
in the management or directors of the Corporation, to submit proposals to be
included in the Management Information Circular or to requisition a meeting of
shareholders for the purposes stated in the requisition.
Issuance of the Rights will not alter in any way the financial condition
of the Corporation and will not interfere with the day-to-day operations of the
Corporation or its business plans. The issuance of the Rights is not dilutive
and will not affect the Corporation's earnings per share nor will it change the
way in which shareholders currently trade Common Shares.
TERMS OF THE RIGHTS PLAN
The following is a summary of the terms of the Rights Plan Agreement,
which is qualified in its entirety by reference to the text of the Rights Plan
Agreement.
TRADING OF RIGHTS
Rights issued prior to the Separation Time will be evidenced, with respect
to any Common Share certificate outstanding as of the Record Time, by such share
certificate. The Rights Plan Agreement provides that, until the Separation Time,
the Rights will be transferable only together with, and will be transferred by,
a transfer of the associated Common Shares. Until the Separation Time or earlier
redemption or expiration of the Rights, new share certificates issued after the
Record Time upon the transfer of existing Common Shares or the issuance of
additional Common Shares will contain a legend incorporating the Rights Plan
Agreement by reference.
SEPARATION TIME
The Rights will separate and trade separately from the Common Shares after
the Separation Time. Following the Separation Time, separate certificates
evidencing the Rights ("Rights Certificates") will be mailed to holders of
record of Common Shares as of the close of business on the Separation Time, and
each separate Rights Certificate alone will evidence the Rights.
The "Separation Time" is the close of business on the eighth (8th) trading
day following the earlier of: (i) the date of the first public announcement made
by the Corporation or an Acquiring Person that a person has become an Acquiring
Person (the "Stock Acquisition Date"), and (ii) the date of the commencement of,
or first public announcement of the intent of any person (other than the
Corporation or any subsidiary of the Corporation), to commence a Take-over Bid
(other than a Permitted Bid or Competing Permitted Bid (each as defined below)),
or such later date as determined by the Board of Directors.
A "Take-over Bid" means an offer to acquire voting shares of the
corporation or securities convertible into or exchangeable for or carrying a
right to purchase voting shares of the Corporation where the securities subject
to the offer and the securities owned by the offeror would constitute, in the
aggregate, twenty percent (20%) or more of the outstanding voting shares of the
Corporation at the date of such offer.
If any Take-over Bid triggering the Separation Time expires or is
cancelled, terminated or otherwise withdrawn prior to the Separation Time or if
the Board of Directors determines to waive application of the Rights
-8-
<PAGE>
Plan to any such Take-over Bid, then such bid shall be deemed, for the purposes
of determining the Separation Time, never to have been made.
EXERCISE PRICE OF RIGHTS
The Rights are not exercisable until the Separation Time. After the
Separation Time and prior to the occurrence of a "Flip-in Event", each Right
entitles the registered holder to purchase from the Corporation one Common Share
at an Exercise Price of $20.00 per Common Share, subject to certain
anti-dilution adjustments as set out in the Rights Plan Agreement, and subject
to adjustment upon occurrence of a Flip-in Event. Until a Right is exercised,
the holder thereof, as such, will have no rights as a shareholder of the
Corporation, including without limitation, the right to vote or receive
dividends.
The Exercise Price payable, and the number of Common Shares or other
securities or property issuable, upon exercise of the Rights are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Common
Shares (ii) upon the grant to holders of the Common Shares of certain rights or
warrants to subscribe for or purchase Common Shares at a price, or securities
convertible into Common Shares with a conversion price, less than ninety percent
(90%) of the then-current market price of the Common Shares or (iii) upon the
distribution to holders of the Common Shares of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of earnings or
retained earnings or dividends payable in Common Shares) or of subscription
rights or warrants (other than those referred to above). The number of
outstanding Rights and the number of Common Shares issuable upon exercise of
each Right are also subject to adjustment in the event of a stock split of the
Common Shares or a stock dividend on the Common Shares payable in Common Shares
or subdivisions, consolidations or combinations of the Common Shares occurring,
in any such case, prior to the Separation Date. With certain exceptions, no
adjustment in the Exercise Price will be required until cumulative adjustments
require an adjustment of at least 1% in such Exercise Price.
No fractional Common Shares will be issued and in lieu thereof, an
adjustment in cash will be made based on the market price of the Common Shares
on the last trading day prior to the date of exercise.
FLIP-IN EVENT
A "Flip-in Event" is triggered in the event that a transaction occurs
pursuant to which a person becomes an Acquiring Person. Upon the occurrence of a
Flip-in Event, each Right (except for Rights Beneficially Owned by the Acquiring
Person and certain other persons specified below) shall thereafter constitute
the right to purchase from the Corporation upon exercise thereof in accordance
with the terms of the Rights Plan Agreement that number of Common Shares of the
Corporation having an aggregate Market Price on the date of the consummation or
occurrence of such Flip-in Event equal to twice the Exercise Price for an amount
in cash equal to the Exercise Price.
The Rights Plan Agreement provides that Rights that are beneficially owned
by: (i) an Acquiring Person or any affiliate or associate of an Acquiring
Person, or any Person acting jointly or in concert with an Acquiring Person, or
any affiliate or associate of such Acquiring Person; or (ii) a transferee or
other successor in title of Rights of an Acquiring Person (or of an affiliate or
associate of an Acquiring Person or of any person acting jointly or in concert
with an Acquiring Person or any associate or affiliate of an Acquiring Person)
who becomes a transferee or successor in title concurrently with or subsequent
to the Acquiring Person becoming an Acquiring Person; shall become null and void
without any further action and any holder of such Rights (including transferees
or successors in title) shall not have any right whatsoever to exercise such
Rights under any provision of the Rights Plan Agreement.
ACQUIRING PERSON
An Acquiring Person is a person who Beneficially Owns twenty percent (20%)
or more of the voting shares of the Corporation. An Acquiring Person does not,
however, include the Corporation or any subsidiary of the Corporation, or any
person who becomes the Beneficial Owner of twenty percent (20%) or more of the
outstanding Voting Shares of the Corporation as a result of Permitted Bids,
Competing Permitted Bids and certain other exempt transactions.
-9-
<PAGE>
PERMITTED BIDS AND COMPETING PERMITTED BIDS
A "Permitted Bid" is a take-over bid made by take-over bid circular in
compliance with the following additional provisions:
(1) the bid must be made to all holders of record of Common Shares;
(2) the bid must be open for a minimum of 60 days following the date of
the bid and no shares may be taken up prior to such time;
(3) take-up and payment for shares may not occur unless the bid is
accepted by persons holding more than fifty percent (50%) of the
outstanding Common Shares exclusive of shares held by the person
responsible for triggering the Flip-in Event or any person who has
announced an intention to make, or who has made, a take-over bid for
the shares of the Corporation and the respective affiliates and
associates of such persons and persons acting jointly or in concert
with such persons;
(4) shares may be deposited into or withdrawn from the bid at any time
prior to the take-up date; and
(5) if the bid is accepted by the requisite percentage specified in (3)
above, the bidder must extend the bid for a period of 10 business
days to allow other shareholders to tender into the bid should they
so wish and must make a public announcement to such effect.
A "Competing Permitted Bid" is a take-over bid that satisfies all of the
criteria of a Permitted Bid except that since it is made after a Permitted Bid
has been made, the minimum deposit period and the time period for the take-up of
and payment for shares tendered under a Competing Permitted Bid is not 60 days,
but is instead the greater of 21 days (the minimum permitted by law) and the
60th day after the date on which the Permitted Bid then in existence was made.
Neither a Permitted Bid nor a Competing Permitted Bid need be approved by
the Board of Directors and may be taken directly to the shareholders of the
Corporation. Acquisitions of Common Shares made pursuant to a Permitted Bid or a
Competing Permitted Bid do not give rise to a Flip-in Event.
REDEMPTION AND WAIVER
The Board of Directors may, at any time prior to the occurrence of a
Flip-in Event, and subject to shareholder approval, elect to redeem all but not
less than all of the Rights at a redemption price of $0.0001 per Right (the
"Redemption Price"), appropriately adjusted in certain events. Rights will be
deemed to automatically be redeemed at the Redemption Price where a person who
has made a Permitted Bid, a Competing Permitted Bid or a take-over bid otherwise
exempted by the Board, takes up and pays for the Corporation's shares under the
terms of the bid. If the Board of Directors elects or is deemed to have elected
to redeem the Rights, the right to exercise the Rights will terminate and each
Right will, after redemption, be null and void and the only right thereafter of
the holders of Rights shall be to receive the Redemption Price. Under the Rights
Plan, the Board of Directors has discretion to waive application of the Rights
Plan to a take-over bid, subject to an automatic waiver with respect to all
other take-over bids made while the waived take-over bid is outstanding. The
Board of Directors of the Corporation may also waive the application of the
Rights Plan to a Flip-in Event which occurs through inadvertence, subject to the
"inadvertent" Acquiring Person reducing its holding of the Corporation's shares
within an agreed upon time. Other waivers of the Plan will require shareholder
approval.
AMENDMENTS TO THE RIGHTS PLAN
The Rights Plan Agreement provides that prior to ratification by
shareholders, the Board of Directors may in its sole discretion supplement or
amend the Rights Plan Agreement. Once the Rights Plan Agreement has been
ratified by the shareholders, however, any amendments or supplements to the
terms of the Plan (other than for clerical errors or to maintain the Plan's
validity as a result of changes in legislation) will require prior shareholder
approval. Changes arising from changes in applicable legislation will require
subsequent shareholder ratification.
-10-
<PAGE>
TERM
If the adoption of the Rights Plan is confirmed by Shareholders, the term
of the Rights Plan ends on the date of the Corporation's Annual Meeting of
Shareholders to be held in 2002 at which time the Rights expire unless they are
terminated, redeemed or exchanged earlier by the Board of Directors.
SHAREHOLDER RATIFICATION
The Rights Plan requires the approval of a majority of the votes cast in
respect thereof by the shareholders of the Corporation, excluding votes cast
with respect to shares beneficially owned or controlled, directly or indirectly,
by any person who beneficially owns or controls, directly or indirectly, more
than 20% of the outstanding shares of the Corporation and such person's
associates, affiliates and insiders. To the knowledge of the directors and
officers of the Corporation, no person beneficially owns, directly or
indirectly, or exercises control over 20% of the outstanding shares of the
Corporation. Abstention from voting with respect to the Rights Plan (and broker
non-votes) will have no effect on the approval or non-approval of the Rights
Plan, since only votes cast either "for" or "against" will be counted in
determining whether the Plan has been approved by a majority of the votes cast.
Unless a choice is otherwise specified, it is intended that the Common Shares
represented by proxies hereby solicited will be voted for approval of the Rights
Plan. In the event that the said approval is not forthcoming, the Rights Plan,
the Rights Plan Agreement and the Rights will terminate at the completion of the
Meeting.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE RIGHTS PLAN.
-11-
<PAGE>
5. STOCK OPTIONS TO SENIOR OFFICERS AND DIRECTORS
During 1997, the Corporation granted options to purchase in aggregate
1,810,000 Common Shares at prices ranging from $1.50 to $4.80 per share to its
existing senior officers and directors of the Corporation as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
NUMBER OF SHARES ISSUABLE ON ORIGINAL EXERCISE
OFFICE HELD EXERCISE OF OPTIONS PRICE
OPTION HOLDER
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Margaret K. Witte Chairman, President, Chief Executive 200,000 $1.50
Officer, Director 150,000 $4.38
Edmund Szol Executive Vice-President and Chief 150,000 $1.50
Operating Officer 65,000 $2.50 (US)
75,000 $4.38
Ross F. Burns Vice-President, Global Exploration, 100,000 $1.50
Director 50,000 $3.43
75,000 $4.38
James H. Wood Chief Financial Officer 100,000 $1.50
75,000 $4.38
John R. Smrke Senior Vice-President 100,000 $1.50
50,000 $3.43
75,000 $4.38
J. Graham Eacott Vice-President, Investor Relations 100,000 $1.50
50,000 $3.43
75,000 $4.38
Scott Lampe Treasurer 50,000 $1.50
50,000 $4.70
Joseph A. Brand Controller 50,000 $1.50
50,000 $4.80
J. Conrad Lavigne Director 40,000 $4.38
George Oughtred Director 40,000 $4.38
William Sheridan Director and Secretary 40,000 $4.38
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
Options are exercisable for cash for seven years from the date of the
grant, provided that a holder's options shall terminate 90 days after he or she
ceases for any reason to be an officer or director of the Corporation. The
options are non-assignable and are subject to listing approval of The Toronto
Stock Exchange and the American Stock Exchange, which is expected to be
obtained. The exercise price in each case was equal to or above the closing
price of the Corporation's Common Shares on The Toronto Stock Exchange on the
last trading day prior to the day of grant. These options are included among
the options for which shareholder approval is being sought at this meeting to
reduce the exercise price to $1.10 per share. On the day the options were
repriced, the closing price of the Corporation's Common Shares on The Toronto
Stock Exchange was $1.10. Please see "Amendment of Stock Options". The closing
price of the Corporation's Common Shares on The Toronto Stock Exchange on May 8,
1998 was $1.55.
Because the named option holders are directors and/or senior officers of
the Corporation, the grant of these options requires the approval of a majority
of the votes cast in respect thereof by the shareholders of the Corporation.
Abstention from voting with respect to the grant of options (and broker
non-votes) will have no effect on the approval or non-approval of the options,
since only votes cast either "for" or "against" will be counted in
-12-
<PAGE>
determining whether the options have been approved by a majority of the votes
cast. Unless a choice is otherwise specified, it is intended that the Common
Shares represented by the proxies hereby solicited will be voted for approval of
the above-described options. In the event that the said approval is not
forthcoming, such options may not be exercised.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO THE OPTION GRANTS
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The Corporation has been advised that, based on the present provisions of
the U.S. Internal Revenue Code (the "Code") and regulations promulgated
thereunder, the U.S. federal income tax consequences for option holders who are
U.S. citizens or residents ("U.S. Optionees") and for Arctic Precious Metals,
Inc. ("Arctic") of the grant, vesting and exercise of the options and the
subsequent disposition of stock acquired thereby will be as described below.
Generally, a U.S. Optionee does not recognize any U.S. federal taxable
income, and Arctic is not allowed a U.S. federal income tax deduction, as a
result of the grant of an option. Upon the exercise of an option, a U.S.
Optionee will realize ordinary income for U.S. federal income tax purposes in an
amount equal to the excess, if any, of the fair market value of the shares
acquired at the time of exercise over the amount paid for such shares. At that
time, Arctic will be allowed a U.S. federal income tax deduction equal to the
amount of ordinary taxable income recognized by the U.S. Optionee, subject to
the limitations described below.
When a U.S. Optionee exercises an option, his or her U.S. federal income
tax basis in the shares acquired is equal to the fair market value of the shares
on the date ordinary income is recognized, and the holding period for such
shares begins on the day after the shares are received.
When a U.S. Optionee disposes of shares acquired upon exercise of an
option, the difference between the amount realized on the sale and the basis in
the shares is treated as capital gain or loss. The subsequent disposition by a
U.S. Optionee of shares acquired by exercise of an option will not result in any
additional tax consequences to the Corporation or Arctic.
Arctic must satisfy applicable federal tax reporting requirements with
respect to options in order to be entitled to the deductions described above.
In addition, under Section 162(m) of the Code, compensation of an individual who
is the Chief Executive Officer or any of the other four most highly paid
officers of the Corporation may not be deducted to the extent such compensation
exceeds $1 million in any taxable year, unless such compensation qualifies for
an exemption for certain performance-based compensation. The options will not
qualify for this exemption, so the deductions otherwise available to Arctic as
described above may be disallowed in whole or in part as a result of Section
162(m).
THE FOREGOING DISCUSSION IS INTENDED FOR GENERAL INFORMATION PURPOSES
ONLY, NOT AS SPECIFIC TAX ADVICE TO ANY OPTION HOLDER. IT DOES NOT ADDRESS THE
IMPACT OF STATE AND LOCAL TAXES, THE FEDERAL ALTERNATIVE MINIMUM TAX, AND
SECURITIES LAWS RESTRICTIONS. U.S. OPTIONEES ARE URGED TO CONSULT THEIR OWN TAX
ADVISORS REGARDING THE TAX EFFECT OF AWARDS IN THEIR INDIVIDUAL CIRCUMSTANCES.
CANADIAN FEDERAL INCOME TAX CONSEQUENCES
The following is a general summary of the principal Canadian federal
income tax consequences under the INCOME TAX ACT (Canada) (the "Act") for those
option holders who are or are deemed to be residents of Canada ("Canadian
Optionees"). This summary is based on the current provisions of the Act and the
regulations thereunder and on the current published administrative and assessing
practices of Revenue Canada, Customs, Excise and Taxation.
A Canadian Optionee will not recognize any income upon the grant of an
option. Upon exercise of the option to acquire Common Shares of the
Corporation, a Canadian Optionee will be deemed for Canadian income tax purposes
to have received a taxable benefit from his or her employment in the year in
which the option is exercised. The amount of the benefit will be the amount by
which the fair market value of the shares at the time of the option
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<PAGE>
exercise (generally the closing price of the shares on the date of exercise)
exceeds the amount paid to acquire the shares upon the exercise of the option.
The amount of the deemed benefit is included in computing the Canadian
Optionee's income for tax purposes as employment income in the year in which the
option is exercised and the shares are acquired, and generally, the Canadian
Optionee will be entitled to deduct one-quarter of the taxable benefit in
computing taxable income for the year in which the option is exercised.
The adjusted cost base of shares acquired by a Canadian Optionee on the
exercise of an option will be equal to the amount paid to acquire the shares
plus the amount of the deemed benefit included in the Canadian Optionee's income
with respect to the acquisition of such shares. When a Canadian Optionee
disposes of his or her shares, the Canadian Optionee will generally realize a
capital gain (or capital loss) to the extent that the proceeds of disposition
exceed (or are less than) the aggregate of the adjusted cost base of the shares
disposed of and any reasonable costs of disposition. In computing a Canadian
Optionee's income for the year in which the shares are sold, three-quarters of
the amount of any resulting capital gain ("taxable capital gain") will be
included in income and three-quarters of the amount of any resulting capital
loss will be deductible against taxable capital gains realized by such Canadian
Optionee in the year of disposition, in any of the three years preceding the
year of disposition or any year following the year of disposition to the extent
and under the circumstances described in the Act. A Canadian Optionee may be
subject to alternative minimum tax. An individual must pay the greater of the
tax otherwise determined under the Act and an alternative minimum tax, which is
based on "adjusted taxable income". In calculating "adjusted taxable income",
the above described deduction of one-quarter of the amount of the taxable
benefit included in income on the exercise of the option is not deductible and
the full amount of capital gains realized must be included in income.
The Corporation is not permitted to deduct any amount with respect to the
grant, exercise or termination of the option.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
ABOVE-DESCRIBED STOCK OPTION GRANTS.
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<PAGE>
6. AMENDMENT OF STOCK OPTIONS
By resolution dated March 20, 1998, the Board of Directors determined,
subject to regulatory approval, to amend the terms of options to purchase
5,994,500 Common Shares of the Corporation, being substantially all of the
Corporation's then outstanding stock options (the "Prior Options") so as to
reduce the exercise price on such options to $1.10 per share. The closing price
of the Corporation's Common Shares on The Toronto Stock Exchange on the last
trading day prior to the date of Board approval of the amendment was $1.10. All
other terms and conditions of the Prior Options will remain unchanged. The
Prior Options had been previously granted to directors, officers and employees
of the Corporation with exercise prices ranging from $1.50 to $6.25. Of the
total number of Prior Options, existing directors and senior officers of the
Corporation hold in aggregate options to purchase 3,378,000 Common Shares, being
equal to approximately 2.4% of the number of Common Shares of the Corporation
currently issued and outstanding. The Prior Options held by directors and
senior officers are as follows:
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NUMBER OF SHARES
OFFICE HELD ISSUABLE ON
OPTION HOLDER EXERCISE OF
PRIOR OPTIONS
- -------------------------------------------------------------------------------
<S> <C> <C>
Margaret K. Witte Chairman, President, Chief 760,000
Executive Officer, Director
Edmund Szol Executive Vice-President and Chief 550,000
Operating Officer
James H. Wood Chief Financial Officer 465,000
Ross F. Burns Vice-President, Global 380,000
Exploration, Director
John R. Smrke Senior Vice-President 335,000
J. Graham Eacott Vice-President, Investor Relations 333,000
J. Conrad Lavigne Director 140,000
William J. V. Sheridan Secretary, Director 115,000
George W. Oughtred Director 100,000
Scott Lampe Treasurer 100,000
Joseph A. Brand Controller 100,000
- -------------------------------------------------------------------------------
</TABLE>
In August 1997, the Board of Directors approved, subject to regulatory
approval, an amendment to the terms of certain of the Prior Options, to reduce
the exercise price to $2.65 per share with respect to options to purchase
1,758,500 shares in aggregate. In December 1997, the Board of Directors
approved an amendment to reduce the exercise price of substantially all of the
Corporation's then outstanding stock options to $1.50. These earlier amendments
to the exercise prices have been superseded by the amendment to reduce the
exercise prices to $1.10 per share.
As the Corporation approached the opening of its Kemess Mine, management
believed that it was critical for the Corporation to maintain a dedicated and
committed work force to complete the project. Given the significant decline in
gold prices from a high of US$366 per ounce at the beginning of 1997 to a low of
US$283 per ounce in early December, the Corporation faced severe restrictions on
its cash flow. The Corporation was also met with budgetary constraints which
restricted the Corporation's ability to pay cash bonuses or to offer salary
increases as incentives to its personnel. Faced with the possibility of losing
key personnel, management viewed the repricing of existing options to reflect
then-current market prices as one of the few means available to not only reward
the Corporation's loyal personnel for their past efforts but also to continue to
provide a strong incentive to its personnel to maintain commitment to the
Corporation.
-15-
<PAGE>
The amendment to the terms of the Prior Options requires the approval of a
majority of the votes cast in respect thereof by the shareholders of the
Corporation, excluding the votes of all shares owned by the directors and senior
officers of the Corporation and their respective associates, which to the best
of the Corporation's knowledge, total 12,441,258 shares. Abstention from voting
with respect to the amendment of the Prior Options (and broker non-votes) will
have no effect on the approval or non-approval of the amendment to the Prior
Options, since only votes cast either "for" or "against" will be counted in
determining whether the resolution has been approved by the requisite majority
of votes. Unless a choice is otherwise specified, it is intended that the
Common Shares represented by proxies hereby solicited will be voted for approval
of the amendment to the terms of the Prior Options to reduce the exercise price
to $1.10 per share. In the event that the said approval is not forthcoming, the
Prior Options will continue to be outstanding and exercisable at their
respective original exercise prices.
A table providing information on repricings of options granted by the
Corporation since its formation in July 1991 is included under "Executive
Compensation" below. For a report discussing the basis for the current
amendments/repricings, see discussion under "Option Amendments/Repricings"
contained in "Report of the Compensation Committee on Executive Compensation"
below.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE REPRICING AMENDMENT TO
THE ABOVE-DESCRIBED STOCK OPTIONS.
7. STOCK OPTIONS TO SENIOR OFFICERS
On April 3, 1998, the Corporation granted options to purchase, in
aggregate, 400,000 common shares at a price of $1.55 per share to a number of
its senior management personnel, including options to purchase 300,000 shares to
the following senior officers of the Corporation:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NUMBER OF SHARES
ISSUABLE ON EXERCISE
OPTION HOLDER OFFICE HELD OF OPTIONS
- --------------------------------------------------------------------------------
<S> <C> <C>
Margaret K. Witte Chairman, President, Chief 200,000
Executive Officer, Director
Executive Vice-President and 50,000
Edmund Szol Chief Operating Officer
James H. Wood Chief Financial Officer 50,000
- --------------------------------------------------------------------------------
</TABLE>
The options were granted in recognition of the respective optionees'
efforts in regard to and are conditional upon the successful completion of the
Corporation's financing arrangements with Trilon Financial Corporation. The
options are exercisable for cash until April 2, 2003, provided that a holder's
options shall terminate 90 days after he or she ceases for any reason to be an
officer or director of the Corporation. The options are non-assignable and are
subject to listing approval of The Toronto Stock Exchange and the American Stock
Exchange, which is expected to be obtained. The exercise price of these options
was equal to the closing price of the Corporation's common shares on The Toronto
Stock Exchange on the last trading day prior to the day of grant. The closing
price of the Corporation's common shares on The Toronto Stock Exchange on May 8,
1998 was $1.55.
Because the above-named option holders are senior officers of the
Corporation, the grant of these options requires the approval of a majority of
the votes cast in respect thereof by the shareholders of the Corporation.
Abstention from voting with respect to the grant of options (and broker
non-votes) will have no effect on the approval or non-approval of the options,
since only votes cast either "for" or "against" will be counted in determining
whether the options have been approved by a majority of the votes cast. Unless
a choice is otherwise specified, it is intended that the common shares
represented by the proxies hereby solicited will be voted for approval of the
above-described options. In the event that the said approval is not
forthcoming, such options may not be exercised.
-16-
<PAGE>
The balance of the 400,000 options granted on April 3, 1998 were granted
to non-executive officers and employees of the Corporation. The grant of these
options does not require shareholder approval but the options are subject to
listing approval of The Toronto Stock Exchange and the American Stock Exchange,
which approval is expected to be obtained.
Reference should also be made to the section entitled "Federal Income Tax
Consequences Relating to the Option Grants" on page 13 of this Circular.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE GRANT OF THE
ABOVE DESCRIBED STOCK OPTIONS.
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<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION OF NAMED EXECUTIVE OFFICERS
The following table sets forth all compensation for the fiscal years ended
December 31, 1997, 1996 and 1995 for the Chief Executive Officer and the four
other most highly compensated executive officers of the Corporation
(collectively, the "Named Executive Officers").
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
- --------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long Term
Compensation
- ----------------------------------------------------------------------------------------------------------
NAME AND PRINCIPAL OTHER ANNUAL SECURITIES UNDER ALL OTHER
POSITION SALARY BONUS COMPENSATION OPTIONS/SARS COMPENSATION
YEAR ($) ($) ($)(2) GRANTED (#) ($)(7)
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M. K. Witte, 1997 $332,975 (US) $200,000 (US) $50,466 (US)(5) 350,000 $150,681 (US)
Chairman, President
and Chief Executive 1996 $280,300 (US) $950,000 (US) $317,754 (US)(5) 60,000 $174,380 (US)
Officer
1995 $250,200 (US) $150,000 (US) $122,151 (US)(3)
- --------------------------------------------------------------------------------------------------------------------------------
Edmund Szol, 1997 $174,100 (US) $150,000 (US) -- 290,000 $57,114 (US)
Executive Vice-
President and Chief 1996 $137,840 (US) $110,000 (US) -- 60,000 $36,621 (US)
Operating
Officer(1) 1995 $112,660 (US) $30,000 (US) -- 200,000
- --------------------------------------------------------------------------------------------------------------------------------
J.R. Smrke, Senior 1997 $158,210 (US) $40,000 (US) $100,713 (US)(4) 225,000 $25,912 (US)
Vice-President
1996 $137,840 (US) $40,000 (US) $110,619 (US)(4) 60,000 $27,863 (US)
1995 $132,800 (US) $30,000 (US) $63,400 (US)(4)
$41,034 (US)(3)
- --------------------------------------------------------------------------------------------------------------------------------
J. H. Wood, 1997 $154,460 (US) $100,000 (US) -- 175,000 $28,460 (US)
Chief Financial
Officer 1996 $137,840 (US) $80,000 (US) -- 60,000 $30,582 (US)
1995 $123,600 (US) $30,000 (US) $41,034 (US)(3)
- --------------------------------------------------------------------------------------------------------------------------------
R.F. Burns, 1997 $143,210 (US) $20,000 (US) $16,600 (US)(6) 225,000 $28,215 (US)
Vice-President,
Global Exploration 1996 $135,490 (US) $40,000 (US) $12,500 (US)(6) 60,000 $31,188 (US)
1995 $124,500 (US) $30,000 (US) $15,963 (US)(3)
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Mr. Szol was hired and appointed Vice-President, Human Resources in
February, 1995 and promoted to Executive Vice-President and Chief
Operating Officer in May, 1997.
(2) Except as otherwise indicated, the value of perquisites and benefits does
not exceed the lesser of $50,000 and 10% of the total annual salary and
bonus.
(3) Relocation payments upon the Corporation's move of its executive offices
to the United States were made to Ms. Witte for $100,000 (US), Mr. Smrke
for $40,000 (US), Mr. Wood for $40,000 (US) and to Mr. Burns for $15,000
(US).
(4) $99,785 (US) of the total amount for 1997 and $109,834 (US) of the total
amount for 1996 represent the difference between the market price of the
Corporation's Common Shares on the date of exercise and the option
exercise price, multiplied by the number of shares acquired, with the
balances representing life insurance premiums paid.
-18-
<PAGE>
(5) With respect to 1997, $5,767 (US) relates to car lease payments; $24,296
(US) relates to the payment of life insurance premiums and $20,403 (US)
relates to director's fees.
With respect to 1996, $272,845 (US) of the total amount represents the
difference between the market price of the Corporation's Common Shares on
the date of exercise and the option exercise price, multiplied by the
number of shares acquired. The balance relates to car lease payments of
$6,730 (US), the payment of life insurance premiums of $24,208 (US) and
director's fees of $13,971 (US).
(6) Refers to director's fees received.
(7) With respect to 1997, refers to the following amounts for each of Ms.
Witte and Messrs. Szol, Smrke, Wood and Burns, respectively: (i)
contributions by the Corporation on behalf of the named officers to the
401(k) Plan: $4,750 (US), $4,296 (US), $3,887 (US), $4,311 (US) and $4,296
(US), respectively and (ii) with respect to premiums paid by the
Corporation under the Corporation's "split-dollar" Life Insurance Program
the sum of (a) the value of the premium payment used to purchase term life
insurance plus (b) the value of the benefit to the executive officer of
the remainder of the premium payment: $145,931 (US), $52,818 (US), $22,025
(US), $24,149 (US) and $23,918 (US), respectively.
With respect to 1996, refers to the following amounts for each of Ms.
Witte and Messrs. Szol, Smrke, Wood and Burns, respectively: (i)
contributions by the Corporation on behalf of the named officers to the
401(k) Plan: $4,555 (US), $4,135 (US), $4,135 (US), $4,135 (US) and
$4,064 (US), respectively and (ii) with respect to premiums paid by the
Corporation under the Corporation's "split-dollar" Life Insurance Program
the sum of (a) the value of the premium payment used to purchase term life
insurance plus (b) the value of the benefit to the executive officer of
the remainder of the premium payment: $169,825 (US), $32,486 (US),
$23,728 (US), $26,447 (US) and $27,124 (US), respectively.
STOCK OPTIONS
During 1997, options to purchase a total of 3,571,500 Common Shares of the
Corporation were granted to directors, officers and employees of the
Corporation. Particulars of the grants of options are as follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------
Number of Shares Exercise Price
Date of Grant (#) ($)
- --------------------------------------------------------------------------
<S> <C> <C>
January 2, 1997 1,429,500 4.38
January 7, 1997 25,000 4.38
January 13, 1997 200,000 4.35
January 22, 1997 10,000 4.38
March 3, 1997 50,000 4.70
March 7, 1997 20,000 4.45
March 18, 1997 50,000 4.80
April 9, 1997 40,000 4.10
May 14, 1997 40,000 4.00
May 23, 1997 65,000 2.50 (US)
June 4, 1997 150,000 3.43
August 18, 1997 100,000 2.61
September 19, 1997 50,000 2.95
October 30, 1997 5,000 2.95
December 8, 1997 1,337,000 1.50
- --------------------------------------------------------------------------
</TABLE>
The following tables set forth details of the options granted during 1997
to each of the Named Executive Officers and the particulars of option exercises
and year-end option values for each of the Named Executive Officers:
-19-
<PAGE>
<TABLE>
<CAPTION>
OPTION GRANTS DURING 1997
- -------------------------------------------------------------------------------------------------------------------------------
MARKET VALUE OF
SECURITIES % OF TOTAL SECURITIES POTENTIAL REALIZABLE VALUE AT
UNDER OPTIONS UNDERLYING ASSUMED ANNUAL RATES OF STOCK
OPTIONS GRANTED TO EXERCISE OPTIONS ON THE PRICE APPRECIATION FOR
GRANTED EMPLOYEES PRICE(2) DATE OF GRANT OPTION TERM(1)
NAME (#) IN 1997 ($/SECURITY) ($/SECURITY) EXPIRATION DATE --------------------------------
5% ($) 10% ($)
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M.K. Witte 150,000 4.20 $4.38 4.38 Jan. 1/2004 267,465 623,307
200,000 5.60 $1.50 1.48 Dec. 7/2004 116,502 276,820
E. Szol 75,000 2.10 $4.38 4.38 Jan. 1/2004 133,732 311,654
65,000 1.82 $2.50 (US) 2.50 (US) May 22/2004 66,154 (US) 154,167 (US)
150,000 4.20 $1.50 1.48 Dec. 7/2004 87,376 207,615
J.R. Smrke 75,000 2.10 $4.38 4.38 Jan. 1/2004 133,732 311,654
50,000 1.40 $3.43 3.43 June 3/2004 69,818 162,705
100,000 2.80 $1.50 1.48 Dec. 7/2004 58,251 138,410
R.F. Burns 75,000 2.10 $4.38 4.38 Jan. 1/2004 133,732 311,654
50,000 1.40 $3.43 3.43 June 3/2004 69,818 162,705
100,000 2.80 $1.50 1.48 Dec. 7/2004 58,251 138,410
J.H. Wood 75,000 2.10 $4.38 4.38 Jan. 1/2004 133,732 311,654
100,000 2.80 $1.50 1.48 Dec. 7/2004 58,251 138,410
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Potential realizable values are based on assumed annual rates of return
specified by the Securities and Exchange Commission. The Corporation
cautions shareholders and option holders that such increases in values are
based on speculative assumptions and should not inflate expectations of the
future value of their holdings. See note 2.
(2) Subject to shareholder approval, the exercise price of these options will
be amended to $1.10, as described elsewhere in this circular.
-20-
<PAGE>
<TABLE>
<CAPTION>
Aggregate Option Exercises During 1997 and 1997 Year-End Option Values
- -------------------------------------------------------------------------------------------------------------------------------
VALUE OF UNEXERCISED
SECURITIES IN-THE-MONEY
ACQUIRED ON AGGREGATE VALUE UNEXERCISED OPTIONS AS AT YEAR END OPTIONS AT YEAR END
EXERCISE REALIZED (#) ($)
NAME (#) ($) ---------------------------------- -------------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
M. K. Witte 410,000 350,000 Nil 130,000
E. Szol 210,000 340,000 Nil 97,500
J. R. Smrke 70.000 139,100 110,000 225,000 Nil 65,000
R. F. Burns 155,000 225,000 Nil 65,000
J. H. Wood 250,000 215,000 Nil 65,000
- -------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The following table sets forth information on the repricing of options
granted by the Corporation since the Corporation's formation in July 1991.
<TABLE>
<CAPTION>
OPTION REPRICING
- ---------------------------------------------------------------------------------------------------------------------------------
MARKET LENGTH OF
PRICE OF ORIGINAL
SECURITIES AT OPTION TERM
SECURITIES UNDER TIME OF EXERCISE PRICE NEW REMAINING
OPTIONS REPRICED REPRICING OR AT TIME OF EXERCISE AT DATE OF
NAME DATE OF REPRICING OR AMENDED AMENDMENT REPRICING PRICE REPRICENG
- ---------------------------------------------------------------------------------------------------------------------------------
PART A(1)
<S> <C> <C> <C> <C> <C> <C>
M.K. Witte Mar. 20, 1998 760,000 $1.10 $1.50 $1.10 21 - 69 months
E. Szol Mar. 20, 1998 550,000 $1.10 $1.50 $1.10 23 - 73 months
J.H. Wood Mar. 20, 1998 465,000 $1.10 $1.50 $1.10 21 - 69 months
R.F. Burns Mar. 20, 1998 380,000 $1.10 $1.50 $1.10 21 - 75 months
J.R. Smrke Mar. 20, 1998 335,000 $1.10 $1.50 $1.10 21 - 75 months
J.G. Eacott Mar. 20, 1998 333,000 $1.10 $1.50 $1.10 21 - 75 months
S. Lampe Mar. 20, 1998 100,000 $1.10 $1.50 $1.10 48 months
J.A. Brand Mar. 20, 1998 100,000 $1.10 $1.50 $1.10 48 months
PART B(2)
M.K. Witte Dec. 8, 1997 760,000 $1.50 $2.65 $1.50 24 - 72 months
E. Szol Dec. 8, 1997 550,000 $1.50 $2.65 $1.50 26 - 76 months
- ---------------------------------------------------------------------------------------------------------------------------------
-21-
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MARKET LENGTH OF
PRICE OF ORIGINAL
SECURITIES AT OPTION TERM
SECURITIES UNDER TIME OF EXERCISE PRICE NEW REMAINING
OPTIONS REPRICED REPRICING OR AT TIME OF EXERCISE AT DATE OF
NAME DATE OF REPRICING OR AMENDED AMENDMENT REPRICING PRICE REPRICENG
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.H. Wood Dec. 8, 1997 465,000 $1.50 $2.65 $1.50 24 - 72 months
R.F. Burns Dec. 8, 1997 380,000 $1.50 $2.65 $1.50 24 - 78 months
J.R. Smrke Dec. 8, 1997 335,000 $1.50 $2.65 $1.50 24 - 78 months
J.G. Eacott Dec. 8, 1997 333,000 $1.50 $2.65 $1.50 24 - 78 months
S. Lampe Dec. 8, 1997 100,000 $1.50 $2.65 $1.50 51 months
J.A. Brand Dec. 8, 1997 100,000 $1.50 $2.65 $1.50 51 months
PART C(3)
M.K. Witte Aug. 18, 1997 300,000 $2.65 $4.90 $2.65 37 months
Aug. 18, 1997 60,000 $2.65 $4.90 $2.65 41 months
Aug. 18, 1997 50,000 $2.65 $4.50 $2.65 28 months
Aug. 18, 1997 150,000 $2.65 $4.38 $2.65 76 months
E. Szol Aug. 18, 1997 200,000 $2.65 $3.15(US) $2.65 30 months
Aug. 18, 1997 60,000 $2.65 $4.90 $2.65 41 months
Aug. 18, 1997 75,000 $2.65 $4.38 $2.65 76 months
Aug. 18, 1997 65,000 $2.65 $2.50(US) $2.65 80 months
J.H. Wood Aug 18, 1997 200,000 $2.65 $5.50 $2.65 32 months
Aug 18, 1997 30,000 $2.65 $4.50 $2.65 28 months
Aug 18, 1997 60,000 $2.65 $4.90 $2.65 41 months
Aug 18, 1997 75,000 $2.65 $4.38 $2.65 76 months
R.F. Burns Aug. 18, 1997 50,000 $2.65 $4.50 $2.65 28 months
Aug. 18, 1997 60,000 $2.65 $4.90 $2.65 41 months
Aug. 18, 1997 45,000 $2.65 $2.67 $2.65 33 months
Aug. 18, 1997 75,000 $2.65 $4.38 $2.65 76 months
Aug. 18, 1997 50,000 $2.65 $3.43 $2.65 82 months
J.R. Smrke Aug. 18, 1997 50,000 $2.65 $4.50 $2.65 28 months
Aug. 18, 1997 60,000 $2.65 $4.90 $2.65 41 months
Aug. 18, 1997 75,000 $2.65 $4.38 $2.65 76 months
Aug. 18, 1997 50,000 $2.65 $3.43 $2.65 82 months
- ---------------------------------------------------------------------------------------------------------------------------------
-22-
<PAGE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
MARKET LENGTH OF
PRICE OF ORIGINAL
SECURITIES AT OPTION TERM
SECURITIES UNDER TIME OF EXERCISE PRICE NEW REMAINING
OPTIONS REPRICED REPRICING OR AT TIME OF EXERCISE AT DATE OF
NAME DATE OF REPRICING OR AMENDED AMENDMENT REPRICING PRICE REPRICENG
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
J.G. Eacott Aug. 18, 1997 30,000 $2.65 $4.50 $2.65 28 months
Aug. 18, 1997 60,000 $2.65 $4.90 $2.65 41 months
Aug. 18, 1997 18,000 $2.65 $2.67 $2.65 33 months
Aug. 18, 1997 75,000 $2.65 $4.38 $2.65 76 months
Aug. 18, 1997 50,000 $2.65 $3.43 $2.65 82 months
S. Lampe Aug. 18, 1997 50,000 $2.65 $3.50(US) $2.65 55 months
J.A. Brand Aug. 18, 1997 50,000 $2.65 $4.80 $2.65 55 months
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The option repricing in Part A is subject to shareholder approval. See
"Amendment of Stock Options". It has been assumed that the repricing
described in Part B was in effect at the time of the Part A repricing.
(2) The option repricing in Part B which was subject to shareholder approval,
was replaced by the repricing set out in Part A of the Table. It has
been assumed that the repricing described in Part C was in effect at the
time of the Part B repricing.
(3) The option repricing in Part C, which was subject to shareholder approval,
was replaced by the repricing set out in Part B and subsequently replaced
by the repricing set out in Part A of the Table.
RETIREMENT PLAN
The officers of the Corporation participate in the Royal Oak Mines (USA)
Retirement Plan, which covers substantially all U.S. employees of the
Corporation, as defined. Contributions to the Retirement Plan, and the related
expense or income, are based on general actuarial calculations and accordingly,
no portion of the Corporation's contributions, and related expenses or income,
is specifically attributable to the Corporation's officers. The current maximum
annual pension benefit payable by the Plan to any employee is $125,000 (US),
subject to specified adjustments. Upon reaching the normal retirement age of
65, each participant is eligible to receive annual retirement benefits in
monthly instalments for life equal to, for each year of credited service, 1.2%
of Final Average Earnings (FAE) (defined as the average of the highest 60
consecutive months of earnings during the 120 months preceding severance date).
Officers of the Corporation are eligible to receive reduced retirement benefits
as early as age 55 with 5 years of eligible service. The Retirement Plan
earnings for purpose of the Plan include "regular salary or wages and any base
salary deferrals under the 401(k) Savings Plan. Earnings do not include any
bonus or commissions, overtime pay, moving expenses, car allowances, other
business expense reimbursement or nonqualified deferrals". Annual pensionable
compensation for the fiscal year ending December 31, 1997 covered by the
Retirement Plan is limited to $160,000 (US) (as may be indexed) pursuant to
Section 401(a)(17) of the Code.
The following table shows estimated aggregate annual benefits under the
Retirement Plan payable upon retirement to a participant who retires in 1997 at
age 65 having the years of service and Final Average Earnings as specified.
-23-
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
YEARS OF CREDITED SERVICE
- --------------------------------------------------------------------------------------------------------------------------
FAE 5 10 15 20 25 30
- --------------------------------------------------------------------------------------------------------------------------
$US $US $US $US $US $US $US
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
75,000 4,500 9,000 13,500 18,000 22,500 27,000
100,000 6,000 12,000 18,000 24,000 30,000 36,000
125,000 7,500 15,000 22,500 30,000 37,500 45,000
150,000 9,000 18,000 27,000 36,000 45,000 54,000
175,000+(1) 9,100 18,200 27,400 36,500 45,600 54,700
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) The amounts indicated in the years of credited service against the
$175,000+ relate to the $160,000 referred to in the preceding paragraph..
Benefits listed in the pension table are not subject to any deduction for
Social Security or other offset amounts. As of December 31, 1997, the following
executive officers have completed the indicated number of years of credited
service: R. F. Burns, 7 years; E. Szol, 2.8 years; J. R. Smrke, 8 years, M. K.
Witte, 7 years and J. H. Wood, 3.6 years.
SUPPLEMENTAL LIFE INSURANCE PLAN
The Corporation has established a plan effective January 1, 1996, to
provide certain executives of the Corporation, including the named officers,
with supplemental life insurance protection for their families in the event of
death under a split dollar life insurance arrangement. Under this plan, upon
the death of a participant, beneficiaries designated by such participant will be
entitled to receive that portion of the policy proceeds equal to the greater of
the total cash value of the policy or two times the participant's highest annual
compensation from the Corporation during the three consecutive calendar years
prior to the death.
EMPLOYMENT AGREEMENTS
The Corporation has guaranteed the performance of employment agreements
(collectively, the "Agreements") made by its wholly-owned U.S. subsidiary,
Arctic Precious Metals, Inc. carrying on business as Royal Oak Mines (USA) Inc.
("Arctic"), with Margaret K. Witte, President and Chief Executive Officer of the
Corporation, and Ross F. Burns, Vice-President of Global Exploration. The
Corporation also guaranteed the performance by Arctic of employment agreements
with the Corporation's Chief Financial Officer, Chief Operating Officer and two
Vice-Presidents (collectively, the "Executives"), being Messrs. Wood, Szol,
Smrke, and Eacott.
The Agreements, which for the four Executives are substantially identical
except for the compensation provisions, were reviewed and approved by the Board
of Directors of the Corporation following the recommendation of the Compensation
Committee. The Agreements are for initial fixed terms of two years in the case
of Ms. Witte and Mr. Burns and one year for the Executives, with identical
automatic renewal terms of additional 12-month periods until termination. In
the event of a termination of employment without cause and in certain other
specified circumstances, including a change of control of Arctic or the
Corporation, each employee is entitled to compensation. In the case of Ms.
Witte and Mr. Burns, the acquisition by any person or group acting in concert of
more than 30% of the issued and outstanding Common Shares of Arctic or the
Corporation or the election to the Board of Directors of Arctic or the
Corporation of persons employed by or representing any one person or group
acting in concert and constituting 40% or more of the Board of Directors would
constitute a "Terminating Event".
-24-
<PAGE>
In the event that the employment of either Ms. Witte or Mr. Burns is
terminated without cause, each is entitled to 24 months notice of termination or
payment in lieu thereof with full continuation of benefits for the notice
period. In the event of termination by either employee upon the occurrence of a
Terminating Event, Ms. Witte is entitled to receive a lump sum representing
three years salary, together with all benefits for a 24-month period and Mr.
Burns is entitled to receive a lump sum representing two years salary, together
with all benefits for the 24-month period. In addition, Ms. Witte and Mr. Burns
will have the right for a period of six months from such Terminating Event to
require the Corporation to purchase or arrange for the purchase of up to
2,000,000 Common Shares (in the case of Ms. Witte) and up to 50,000 Common
Shares (in the case of Mr. Burns) held by them or their spouses or any
corporation controlled by any of them, respectively, for a price per share equal
to the simple average of the closing price of the Common Shares of the
Corporation on The Toronto Stock Exchange for each of the business days on which
there was a closing price falling not more than 20 business days prior to the
receipt by the Corporation of the notice of exercise of the right herein
described. If such right is not exercised and Ms. Witte or Mr. Burns, as the
case may be, is then indebted to the Corporation, the outstanding principal
amount of such loan will be forgiven by the Corporation. Ms. Witte is currently
indebted to the Corporation in the principal amount of $1,400,000 (US) and Mr.
Burns is not indebted to the Corporation.
In the event that the employment of any one of the four Executives is
terminated without cause, including a dismissal arising from or related to a
change of ownership of Arctic or the Corporation, each is entitled to receive
compensation tied to length of service. When termination occurs after 12 months
of service but before the completion of 48 months of service, the employee is
entitled to 18 months base salary plus the cost to the Corporation of 18 months
benefits; and where termination occurs any time after 48 months of service, the
employee is entitled to 24 months base salary including bonus, plus the cost to
the Corporation of two years of benefits. In the event of a change of control
of Arctic or the Corporation, the Executive is entitled upon dismissal to
payments of any bonus earned but unpaid and has the immediate right to exercise
all valid option agreements. Loans outstanding under the Agreements with the
Executives are secured and must be repaid in full within 120 days following
termination of employment. Several of the Executives are indebted to Arctic
(see "Indebtedness of Directors and Officers"). Each of Ms. Witte, Mr. Burns
and the Executives are participants in the Corporation's Retirement Plan (see
"Retirement Plan").
COMPOSITION OF THE COMPENSATION COMMITTEE
The Compensation Committee of the Board of Directors of the Corporation
(the "Committee") consists of William J.V. Sheridan, the Secretary of the
Corporation and George Oughtred. Matthew Gaasenbeek, a former director of the
Corporation, was during 1997, Chairman of the Compensation Committee until his
retirement as a director in May 1998, prior to the preparation of the following
report.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
OVERALL POLICY
Compensation of the Corporation's executive officers rests in the
discretion of the Board of Directors, and the Compensation Committee of the
Board of Directors is charged with considering specific information and making
recommendations to the full Board. The Compensation Committee during 1997 was
comprised of three directors and presently has two members. The members of the
Committee, all of whom are (and were) non-employees, are appointed annually by
the Corporation's Board of Directors. The Compensation Committee's
consideration of and recommendations regarding executive compensation are guided
by a number of factors including overall corporate performance and return to
shareholders. The overall objectives of the Corporation's executive
compensation package are to attract and to retain the best possible executive
talent, to motivate the Corporation's executives to achieve goals consistent
with the Corporation's business strategy, to provide an identity between
executive and shareholder interests through stock option grants and finally to
provide a compensation package that recognizes an executive's individual
contributions in addition to the Corporation's overall business results.
The Compensation Committee periodically reviews the Corporation's
executive compensation program. In making recommendations concerning executive
compensation, the Committee reviews reports published by independent
compensation consultants assessing compensation programs and reviews the
Corporation's executive
-25-
<PAGE>
compensation, corporate performance, share price appreciation and total return
to shareholders against a peer group of public corporations. The Compensation
Committee's periodic review permits an ongoing evaluation of the link between
the Corporation's performance and its executive compensation in the context of
the compensation programs of other corporations.
The Compensation Committee recommends to the Board of Directors
compensation levels and programs for the Chief Executive Officer and all senior
officers, including the individuals whose compensation is detailed in the Proxy
Statement. In reviewing individual performance of executives whose compensation
is detailed in this Proxy Statement, the Compensation Committee takes into
account the views of the Corporation's Chief Executive Officer (except with
respect to the Chief Executive Officer).
The key elements of the Corporation's executive compensation consist of
base salary, an annual cash performance payment and grant of stock options. The
Compensation Committee's policies with respect to each of these elements,
including the basis for the compensation awarded to Ms. Witte as Chief Executive
Officer, are discussed below. While the Committee takes into consideration all
of the factors set forth below in setting base salaries, the Committee's
deliberations are essentially subjective, and no set quantitative formula
determines the base salaries or performance payments of any of the named
executives.
During 1997, the Corporation ceased operations at two of its five mines,
primarily as a result of the significant decrease in the world price for gold.
These initiatives resulted in a significant write-down of assets as at December
31, 1997 and constituted the largest factor contributing to the overall loss for
1997. Cash costs at the continuing operations were reduced to an average of
US$285 per ounce during the fourth quarter from US$332 during the first quarter.
As a result of the deterioration in the world gold and copper markets, the
final financing arrangements for the Corporation's new Kemess mine became more
complex and was delayed. Consequently, the Corporation experienced a liquidity
problem. However, the construction schedule was generally maintained with the
target of commencing operations in the second quarter of 1998. Cost overruns at
the Kemess Mine became apparent in the first quarter of 1998 which ultimately
required the Corporation to seek additional financing in difficult
circumstances.
The Committee considered the performance of the senior executive during
1997 in relation to the difficulties facing the Corporation and other gold
producers, including the response of such executives to the negative external
circumstances which arose last year and continued into 1998.
In March, 1998, the Compensation Committee met to consider the individual
performance of its Chief Executive Officer and the other executive officers of
the Corporation during 1997.
BASE SALARIES
Base salaries for new executive officers are initially determined by
evaluating the responsibilities of the position held and the experience of the
individual and by reference to the competitive marketplace for executive talent,
including a comparison to base salaries for comparable positions at other
corporations both in the peer group and more broadly since the Corporation
competes with companies outside of its peer group for executive talent.
Annual salary adjustments are determined by evaluating the performance of
the Corporation and of each executive officer, and also take into account new
responsibilities for any particular officer. The Compensation Committee, where
appropriate, also considers other corporate performance measures, including
productivity, cost control, safety, environmental awareness and improvements in
relations with customers, suppliers and employees. The Compensation Committee
places a premium on efficiency, because the Corporation has no control over the
prices at which its product is sold.
With respect to the base salary set for all senior executives, the
Compensation Committee took into account a comparison of base salaries of senior
executives of peer corporations, the assessment by the Compensation Committee of
the executive's individual performance, and the performance of the Corporation
when compared with
-26-
<PAGE>
other medium and large gold producers in what was generally considered to be the
most difficult year for such companies in recent history.
The Committee considered that, generally, the base salaries of the senior
executives were at the lower end of the range of salaries paid in comparable
circumstances. Notwithstanding this, the Committee recommended that 1997 base
salaries be maintained for 1998 in part to reflect the disappointing financial
results for 1997 and in part to conserve cash for construction of the Kemess
mine.
ANNUAL PERFORMANCE PAYMENT
In certain areas, individual performance was exemplary. The Corporation
achieved one of the highest average realized gold prices in the industry, namely
$393 (US) per ounce. The resultant revenue to the Corporation from hedging
activities was approximately $34,000,000. In 1997, cost containment and
production goals at its continuing operations met budget projections.
Taking into account these factors as well as the overall financial results
of the Corporation in 1997, and that salaries would not be increased in 1998,
the Compensation Committee recommended to the Board the following annual
performance payments be made with respect to 1997:
<TABLE>
<CAPTION>
INDIVIDUAL PAYMENT
---------- -------
<S> <C>
Margaret K. Witte $200,000 (US)
John R. Smrke $ 40,000 (US)
James H. Wood $100,000 (US)
Ross F. Burns $ 20,000 (US)
Edmund Szol $150,000 (US)
</TABLE>
Having regard to the cash flow restrictions facing the Corporation, it was
determined that the above-noted amounts would be used to reduce, effective
September 30, 1998, the existing indebtedness of each of the above-named (other
than Mr. Burns) to the Corporation by an amount equal to the bonus amount less
the amount required to be withheld and remitted under applicable tax laws. As
Mr. Burns is not currently indebted to the Corporation, his bonus will be paid
to him in cash. Any executive whose bonus amount net of withholding exceeds the
amount of indebtedness owed by him or her to the Corporation as of September 30,
1998, will receive a cash payment equal to the excess amount.
STOCK OPTIONS
Stock options may be granted to the Corporation's executive officers and
key employees, including the individuals whose compensation is detailed in this
Proxy Statement. The size of stock option grants are based on a number of
factors, including competitive compensation data, similar to those used to
determine base salaries and annual performance payments. The Compensation
Committee can elect not to award options.
Stock options are intended to align the interests of executives and
directors with those of the shareholders. All stock options granted have been
granted with an exercise price equal to or above the market price of the Common
Shares of the Corporation on the date preceding the date of grant and are
generally exercisable during a five to seven year period. This approach is
designed to provide executives with an incentive for creation of shareholder
value over the long term since the benefit of the compensation package cannot be
realized unless share price appreciation occurs.
During 1997, options to purchase a total of 1,265,000 Common Shares were
granted to the Chief Executive Officer and the other Named Executive Officers.
In recognition of the cash flow restrictions and the budgetary
-27-
<PAGE>
constraints facing the Corporation which restricted the Corporation's ability to
pay cash performance payments or to offer salary increases, the Board of
Directors approved, subject to shareholder approval, the repricing of
substantially all of the Corporation's existing stock options to reflect the
then current market price of the Common Shares. The repricing was primarily to
reward loyal personnel for their past efforts and to act as an ongoing incentive
to its personnel to remain committed to the Corporation as it continues to
transform itself into a low-cost producer of gold and copper during a period of
depressed world prices for such commodities. Full particulars of the repricing
are set out under the heading "Amendment of Stock Options" elsewhere in this
Proxy Circular.
The Compensation Committee believes that significant equity interests in
the Corporation held by the Corporation's management align the interests of
shareholders and management and took this into account in granting options to
the Chief Executive Officer and the senior executives.
OPTION AMENDMENTS/REPRICINGS
By resolution dated March 20, 1998, the Board of Directors determined,
subject to regulatory approval, to amend the terms of options to purchase
5,994,500 Common Shares of the Corporation, being substantially all of the
Corporation's then outstanding stock options (the "Prior Options") so as to
reduce the exercise price on such options to $1.10 per share.
As the Corporation approached the opening of its Kemess Mine, management
believed that it was critical for the Corporation to maintain a dedicated and
committed work force to complete the project. Given the significant decline in
gold prices from a high of US$366 per ounce at the beginning of 1997 to a low of
US$283 per ounce in early December, the Corporation faced severe restrictions on
its cash flow. The Corporation was also met with budgetary constraints which
restricted the Corporation's ability to pay cash performance payments or to
offer salary increases as incentives to its personnel. Faced with the
possibility of losing key personnel, management viewed the repricing of existing
options to reflect then-current market prices as one of the few means available
to not only reward the Corporation's loyal personnel for their past efforts but
also to continue to provide a strong incentive to its personnel to maintain
commitment to the Corporation.
SECTION 162(m) OF THE INTERNAL REVENUE CODE
Section 162(m) of the United States Internal Revenue Code of 1986
generally limits the corporate tax deduction for compensation in excess of $1
million (US) paid to the Corporation's Chief Executive Officer and any of its
four other most highly paid executive officers. This limit applies to long-term
incentive compensation and annual bonuses, as well as base salary. Compensation
that qualifies as performance-based under regulations of the Internal Revenue
Service is exempt from the deduction limit.
CONCLUSION
The Corporation's executive compensation is linked to individual and
corporate performance and to share price appreciation. In 1997, a significant
portion of the Corporation's executive compensation consisted of these
performance-based variable elements as determined in the discretion of the
Compensation Committee and the Board of Directors. The Compensation Committee
intends to continue the policy of linking executive compensation to corporate
and individual performance and returns to shareholders, recognizing that the
rise and fall of the business cycle may result in an imbalance for a particular
period. The Compensation Committee adjusts for factors such as these, which are
beyond an executive's control, by exercising its qualitative judgment.
The foregoing report is submitted by the Compensation Committee of the
Board of Directors.
George Oughtred
William J.V. Sheridan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
William J. V. Sheridan, who serves on the Compensation Committee, is the
Secretary of the Corporation and is a partner of the law firm of Lang Michener,
counsel to the Corporation.
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<PAGE>
PERFORMANCE GRAPH
The following graph compares the yearly percentage change in the
cumulative total shareholder return of the Common Shares of the Corporation over
the past five years with the cumulative total return of The Toronto Stock
Exchange 300 Total Return Stock Index and The Toronto Stock Exchange Gold and
Precious Minerals Index since that date.
[COMPARATIVE PERFORMANCE CHART]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
DEC. 31/92 DEC. 31/93 DEC. 31/94 DEC. 31/95 DEC. 31/96 DEC. 31/97
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Royal Oak Close $ 1.95 $ 6.25 $ 4.60 $ 4.85 $ 4.38 $ 2.15
Royal Oak Value 100.00 320.51 235.90 248.72 224.62 110.26
TSE 300 Close 6,201.72 8,236.00 8,184.33 9,397.97 12,061.95 13,868.54
TSE 300 Value 100.00 132.80 131.97 151.54 194.49 223.62
TSE Gold and Precious Minerals Index Close 7,264.30 15,042.35 13,578.92 14,732.16 16,081.79 9,141.60
TSE Gold and Precious Minerals Index Value 100.00 207.07 186.93 202.80 221.38 125.84
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Assumes $100 invested in the Corporation's Common Shares on December 31,
1992 and in the TSE 300 Total Return Index and in the TSE Gold and
Precious Minerals Index Total Return Index, which assume dividend
reinvestment.
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<PAGE>
COMPENSATION OF DIRECTORS
The directors of the Corporation are entitled to receive an annual fee of
$12,000 plus $1,000 for each meeting of the board or a committee thereof
attended. The Chairperson of each meeting receives an additional $250. The
directors are also entitled to reimbursement from the Corporation for all
reasonable out-of-pocket expenses incurred in connection with their attendance
at meetings of the board or a committee thereof.
INDEBTEDNESS OF DIRECTORS AND OFFICERS
The aggregate amount of indebtedness to the Corporation or its
subsidiaries incurred in connection with the purchase of securities of the
Corporation by all present and former officers, directors and employees of the
Corporation outstanding as at May 8, 1998 was $656,021 (US).
The following table sets forth the indebtedness incurred by directors,
senior officers and executive officers of the Corporation for the purchase of
securities of the Corporation.
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS UNDER
SECURITIES PURCHASE PROGRAMS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Largest Amount
Involvement of Outstanding Amount Outstanding Financially Assisted
Name and Principal Issuer or During 1997 as at May 8, 1998 Securities Purchases Security for
Position Subsidiary $(US) $(US) During 1997 Indebtedness
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
M.K. Witte Loan by 527,741 537,114 312,000 Shares 800,000 Shares
Chairman, President and Subsidiary(1)
Chief Executive Officer
- ---------------------------------------------------------------------------------------------------------------------------------
J.R. Smrke, Loan by 78,510 79,910 -- --
Senior Vice-President Subsidiary(2)
- ---------------------------------------------------------------------------------------------------------------------------------
J. G. Eacott Loan by 38,316 38,997 -- 16,000 Shares
Vice-President, Investor Subsidiary(3)
Relations
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Arctic Precious Metals, Inc., a subsidiary of the Corporation, provided a
loan to Ms. Witte in connection with previous purchases of the
Corporation's shares. The loan bears interest at prescribed rates and is
secured by the pledge of 800,000 Common Shares of the Corporation. The
lender may demand repayment of up to two-thirds of the principal amount in
any one year provided that such repayment shall not exceed the amount of
any bonus payable to Ms. Witte for that particular year.
(2) Arctic Precious Metals, Inc., a subsidiary of the Corporation, provided
loans to Mr. Smrke. The loans bear interest at prescribed rates. They
are secured by Mr. Smrke's ownership interest in real property and
represented by a deed of trust that is, and will be, subordinate to
recorded encumbrances on the real property. The loans are repayable from,
at the discretion of the Corporation, future bonus amounts earned by
Mr. Smrke and from the aggregate net value of any stock options exercised
by Mr. Smrke, at the rate of one-half of the after-tax value to Mr. Smrke
of such amounts.
(3) Arctic Precious Metals, Inc., a subsidiary of the Corporation, provided a
loan to Mr. Eacott. The loan bears interest at prescribed rates and is
secured by the pledge of 16,000 Common Shares to the Corporation. The
loan is repayable from, at the discretion of the Corporation, future bonus
amounts earned by Mr. Eacott and from the aggregate net value of any stock
options exercised by Mr. Eacott at the rate of one-half of the after-tax
value to Mr. Eacott of such amounts.
As at May 8, 1998, the aggregate amount of indebtedness to the Corporation
or its subsidiaries incurred, other than in connection with the purchase of
securities of the Corporation, by all current and former directors, officers and
employees of the Corporation was $1,271,875 (US).
-30-
<PAGE>
The following table sets forth the indebtedness to the Corporation or its
subsidiaries incurred by the executive officers, senior officers and directors
of the Corporation, other than for the purchase of securities of the
Corporation.
<TABLE>
<CAPTION>
INDEBTEDNESS OF DIRECTORS, EXECUTIVE OFFICERS AND SENIOR OFFICERS
OTHER THAN UNDER SECURITIES PURCHASE PROGRAMS
- --------------------------------------------------------------------------------
Largest Amount Amount
Involvement of Outstanding Outstanding as at
Name and Principal Issuer or During 1997 May 8, 1998
Position Subsidiary $(US) $(US)
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
M. K. Witte
Chairman, President and Subsidiary(1) $916,467 $892,356
Chief Executive Officer
E. Szol
Executive Vice- Subsidiary(2) $ 90,000 $ 90,000
President and Chief
Operating Officer
J. R. Smrke
Senior Vice-President Subsidiary(3) $ 24,371 $ 18,152
J. H. Wood
Chief Financial Officer Subsidiary(4) $ 66,300 $ 58,800
J. G. Eacott
Vice-President, Subsidiary(5) $ 42,494 $ 43,248
Investor Relations
- --------------------------------------------------------------------------------
</TABLE>
(1) In 1996 loans were made to Ms. Witte by Arctic Precious Metals, Inc.
("Arctic"), a subsidiary of the Corporation. The loans bear interest at
the prescribed rates and are secured by the pledge of the 800,000 Common
Shares of the Corporation referred to in note (1) on page 30. Ms. Witte's
compensation will be increased to the extent that any interest is paid.
The loans are fully repayable within 30 days of the termination of Ms.
Witte's employment for cause. Prior to that time, up to one-third of the
principal amount per year is repayable on demand from bonus amounts earned
by Ms. Witte for that year. See "Employment Agreements."
(2) During 1997, loans were made to Mr. Szol pursuant to the terms of his
employment agreement by Arctic. The loans do not bear interest and are
secured against Mr. Szol's residence. The loans will be repaid from the
net proceeds of Mr. Szol's 1997 bonus.
(3) In January, 1995, a loan was made to Mr. Smrke by Arctic. The loan bears
interest at prescribed rates. The loan is repayable from, at the
discretion of the Corporation, future bonus amounts earned by Mr. Smrke
and from the aggregate net value of any stock options exercised by Mr.
Smrke, at the rate of one-half of the after-tax value to Mr. Smrke of such
amounts.
(4) In May, 1995, a housing loan was made to Mr. Wood by Arctic. The loan
does not bear interest and is secured against Mr. Wood's residence. The
loan is repayable over a maximum of ten years from, at the discretion of
the Corporation, future bonus amounts earned by Mr. Wood and from the
aggregate net value of any stock options exercised by Mr. Wood, at the
rate of one-half of the after-tax value to Mr. Wood of such amounts. This
loan will be repaid from the net proceeds of Mr. Wood's 1997 bonus.
(5) In April 1997, a loan was made to Mr. Eacott by Arctic. The loan bears
interest at prescribed rates and is secured by the pledge of 10,000 shares
of the Corporation. The loan is repayable from, at the discretion of the
Corporation, future bonus amounts earned by Mr. Eacott and from the
aggregate net value of any stock options exercised by Mr. Eacott at the
rate of one-half of the after-tax value to Mr. Eacott of such amounts.
This loan will be reduced by the after-tax amount of Mr. Eacott's 1997
bonus.
DIRECTORS' AND OFFICERS' INSURANCE
The Corporation maintains liability insurance policies covering directors
and officers of the Corporation acting in their respective capacities as such.
Total coverage is $25,000,000, subject to a corporate deductible of $250,000.
The total premium paid by the Corporation in respect of this coverage during
1997 was $125,000.
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<PAGE>
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
Every company incorporated in Canada or a province thereof whose shares
are listed on The Toronto Stock Exchange ("TSE") is required to disclose on an
annual basis its approach to corporate governance with reference to specified
guidelines which are derived from those set out in the TSE Committee on
Corporate Governance Report (the "TSE Report"). Where a company's system of
corporate governance differs from the guidelines, an explanation of the
differences is required.
Set forth below are the matters required to be addressed, a synopsis of
the related TSE guidelines and a commentary on the Corporation's approach with
respect to each.
1. THE MANDATE OF THE BOARD OF DIRECTORS, INCLUDING ITS DUTIES AND
OBJECTIVES.
GUIDELINE: THE BOARD OF DIRECTORS SHOULD EXPLICITLY ASSUME RESPONSIBILITY
FOR THE STEWARDSHIP OF THE CORPORATION AND AS PART OF THE OVERALL STEWARDSHIP
RESPONSIBILITY SHOULD ASSUME RESPONSIBILITY FOR THE FOLLOWING MATTERS:
(i) ADOPTION OF A STRATEGIC PLANNING PROCESS;
The board of directors of the Corporation (the "Board") meets
annually to review and approve the Corporation's annual business
plan. A portion of each regularly scheduled board meeting is set
aside for a discussion of strategic planning and the Board will be
holding special purpose meetings annually with all senior and
operations management to deal principally with strategic planning.
(ii) THE IDENTIFICATION OF THE PRINCIPAL RISKS OF THE CORPORATION'S
BUSINESS AND ENSURING THE IMPLEMENTATION OF APPROPRIATE SYSTEMS TO
MANAGE THESE RISKS;
The principal risks of the Corporation's business relate primarily
to its mining operations. Detailed systems are in place at each
operating mine site to monitor such risks, including health and
safety and environmental risks and risks relating to mining
methodology. A local manager at each site supervises the
application of such systems and reports regularly to senior
management.
(iii) SUCCESSION PLANNING INCLUDING APPOINTING, TRAINING AND MONITORING
SENIOR MANAGEMENT;
The Board monitors succession planning on an ongoing basis and
adopts responsibility for the appointment and training of new
members of senior management. Responsibility for training new
members of the management team is delegated to the existing senior
management group.
(iv) A COMMUNICATIONS POLICY FOR THE CORPORATION;
The Board specifically reviews and approves the Corporation's annual
financial statements as well as the Corporation's annual report and
shareholders' meeting materials. In addition, various members of
the Corporation's senior management team are charged with the
responsibility of complying with the Corporation's regulatory
disclosure obligations. The Vice-President, Investor Relations is
responsible for dealing on an ongoing basis with inquiries from
shareholders, bondholders, analysts, the media and other interested
parties.
(v) THE INTEGRITY OF THE CORPORATION'S INTERNAL CONTROL AND MANAGEMENT
INFORMATION SYSTEMS.
The integrity of the Corporation's internal control and management
information systems is primarily the responsibility of the Audit
Committee of the Board, which meets with both the Corporation's
financial and accounting personnel and the Corporation's external
auditors to review these matters. The Audit Committee reports to
the full Board with respect to any issues that arise out of such
discussions.
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<PAGE>
2. THE COMPOSITION OF THE BOARD, WHETHER THE BOARD HAS A MAJORITY OF
UNRELATED DIRECTORS AND THE BASIS FOR THIS ANALYSIS; IF THE COMPANY HAS A
SIGNIFICANT SHAREHOLDER, WHETHER THE COMPANY SATISFIES THE REQUIREMENT FOR
FAIRLY REFLECTING THE INVESTMENT OF THE MINORITY SHAREHOLDERS IN THE CORPORATION
AND THE BASIS FOR THIS ANALYSIS.
GUIDELINE: THE BOARD OF DIRECTORS OF EVERY CORPORATION SHOULD BE
CONSTITUTED WITH A MAJORITY OF INDIVIDUALS WHO QUALIFY AS UNRELATED DIRECTORS.
AN UNRELATED DIRECTOR IS A DIRECTOR WHO IS FREE FROM ANY INTEREST AND ANY
BUSINESS OR OTHER RELATIONSHIP WHICH COULD, OR COULD REASONABLY BE PERCEIVED TO,
MATERIALLY INTERFERE WITH THE DIRECTOR'S ABILITY TO ACT WITH A VIEW TO THE BEST
INTERESTS OF THE CORPORATION, OTHER THAN INTERESTS AND RELATIONSHIPS ARISING
FROM SHAREHOLDING. A RELATED DIRECTOR IS A DIRECTOR WHO IS NOT AN UNRELATED
DIRECTOR. IF THE CORPORATION HAS A SIGNIFICANT SHAREHOLDER, IN ADDITION TO A
MAJORITY OF UNRELATED DIRECTORS, THE BOARD SHOULD INCLUDE A NUMBER OF DIRECTORS
WHO DO NOT HAVE INTERESTS IN OR RELATIONSHIPS WITH EITHER THE CORPORATION OR THE
SIGNIFICANT SHAREHOLDER AND WHICH FAIRLY REFLECTS THE INVESTMENT IN THE
CORPORATION BY SHAREHOLDERS OTHER THAN THE SIGNIFICANT SHAREHOLDER. A
SIGNIFICANT SHAREHOLDER IS A SHAREHOLDER WITH THE ABILITY TO EXERCISE A MAJORITY
OF THE VOTES FOR THE ELECTION OF THE BOARD OF DIRECTORS.
GUIDELINE: THE APPLICATION OF THE DEFINITION OF "UNRELATED DIRECTOR" TO
THE CIRCUMSTANCES OF EACH INDIVIDUAL DIRECTOR SHOULD BE THE RESPONSIBILITY OF
THE BOARD WHICH WILL BE REQUIRED TO DISCLOSE ON AN ANNUAL BASIS WHETHER THE
BOARD HAS A MAJORITY OF UNRELATED DIRECTORS OR, IN THE CASE OF A CORPORATION
WITH A SIGNIFICANT SHAREHOLDER, WHETHER THE BOARD IS CONSTITUTED WITH THE
APPROPRIATE NUMBER OF DIRECTORS WHICH ARE NOT RELATED TO EITHER THE CORPORATION
OR THE SIGNIFICANT SHAREHOLDER.
Based on the principles enunciated above, the Board believes that the
following individuals are related directors: Margaret K. Witte (Chairman,
President and Chief Executive Officer); Ross F. Burns (Vice-President, Global
Exploration) and William J.V. Sheridan (Secretary and partner of Lang Michener,
counsel to the Corporation).
The following directors are considered to be unrelated on the basis that
they are not employed by the Corporation, do not have any material business
relationships with the Corporation, directly or indirectly, and do not receive
any remuneration from the Corporation, directly or indirectly, other than
directors' fees: J. Conrad Lavigne and George W. Oughtred.
Based on the foregoing, the Corporation presently has three related and
two unrelated directors.
GUIDELINE: EVERY BOARD OF DIRECTORS SHOULD EXAMINE ITS SIZE WITH A VIEW
TO DETERMINING THE IMPACT OF THE NUMBER UPON EFFECTIVENESS, AND UNDERTAKE WHERE
APPROPRIATE, A PROGRAM TO REDUCE THE NUMBER OF DIRECTORS TO A NUMBER WHICH
FACILITATES MORE EFFECTIVE DECISION-MAKING.
The Board reviews the number of directors on the Board annually with a
view to establishing an optimum number for effective decision-making. The
Governance and Nominating Committee of the Board is charged with the
responsibility of reviewing periodically the size of the Board to ensure its
continued effectiveness. The Board is currently comprised of five directors.
The Board believes that it is able to operate effectively with five directors
and does not believe that a reduction in the number of directors is warranted or
desirable.
3. IF THE BOARD DOES NOT HAVE A CHAIR SEPARATE FROM MANAGEMENT, THE
STRUCTURES AND PROCESSES WHICH ARE IN PLACE TO FACILITATE THE FUNCTIONING OF THE
BOARD INDEPENDENTLY OF MANAGEMENT.
GUIDELINE: EVERY BOARD OF DIRECTORS SHOULD HAVE IN PLACE APPROPRIATE
STRUCTURES AND PROCEDURES TO ENSURE THAT THE BOARD CAN FUNCTION INDEPENDENTLY
OF MANAGEMENT.
The Chairman of the Board is also the Chief Executive Officer of the
Corporation. The Board believes that, given her detailed knowledge of the
Corporation's operations and experience in the mining industry, the Chief
Executive Officer is the most appropriate individual to set the agenda for
meetings of the Board, ensure that adequate information is provided to the Board
and chair the meetings.
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<PAGE>
GUIDELINE: THE BOARD OF DIRECTORS SHOULD IMPLEMENT A SYSTEM WHICH ENABLES
AN INDIVIDUAL DIRECTOR TO ENGAGE OUTSIDE ADVISORS AT THE EXPENSE OF THE
CORPORATION IN APPROPRIATE CIRCUMSTANCES. ENGAGEMENT OF THE OUTSIDE ADVISOR
SHOULD BE SUBJECT TO THE APPROVAL OF AN APPROPRIATE COMMITTEE OF THE BOARD.
In the case of non-arm's-length transactions or other circumstances where
a member or members of the Board may have a conflict of interest with the
Corporation, prudent and established corporate practice dictates that a
committee of independent directors be struck and that such committee be given
the freedom to engage outside advisors at the expense of the Corporation. The
Board concurs with and subscribes to this practice. Although no formal policy
is in place with respect to whether individual directors may retain outside
advisors in other circumstances, any individual director is free to request the
engagement of an outside advisor where he or she feels it appropriate to do so.
The Governance and Nominating Committee, which consists entirely of outside
directors, is responsible for considering and approving such requests.
4. DESCRIPTION OF BOARD COMMITTEES, THEIR MANDATES AND THEIR ACTIVITIES.
GUIDELINE: COMMITTEES OF THE BOARD OF DIRECTORS SHOULD GENERALLY BE
COMPOSED OF OUTSIDE DIRECTORS, A MAJORITY OF WHOM ARE UNRELATED DIRECTORS,
ALTHOUGH SOME BOARD COMMITTEES, INCLUDING THE EXECUTIVE COMMITTEE, MAY INCLUDE
ONE OR MORE INSIDE DIRECTORS.
There are three committees of the Board: the Audit Committee, the
Compensation Committee and the Governance and Nominating Committee. The
composition of each committee is as follows:
a) Audit Committee - During 1997, this committee was comprised of John
May, Conrad Lavigne and George Oughtred, all of whom were unrelated
and outside directors.
b) Compensation Committee - During 1997, this committee consisted of
three outside directors, William Sheridan, Matthew Gaasenbeek and
George Oughtred. One of the three members of the Compensation
Committee is a related director (William Sheridan). The
Compensation Committee reviews directors' fees and retainers,
compensation and benefit packages for senior management, and stock
options.
c) Governance and Nominating Committee - During 1997, this committee
consisted of three outside directors: George Oughtred, Conrad
Lavigne and William Sheridan and one inside director: Ross Burns.
Messrs. Oughtred and Lavigne are unrelated directors. The duties of
the Governance and Nominating Committee include:
(i) recommending nominees for election to the Board and
establishing a process for identifying, recruiting and
appointing new directors;
(ii) establishing a long-term plan for the composition of the
Board;
(iii) reviewing periodically the size of the Board to ensure its
continued effectiveness;
(iv) assessing and making recommendations regarding the
effectiveness of the Board as a whole, the committees of the
Board and the contribution of each individual director;
(v) reviewing periodically the general responsibilities and
functions of the Board and its committees and the procedures
for Board meetings;
(vi) reviewing and approving the annual disclosure of corporate
governance compliance; and
(vii) considering and approving requests from individual directors
or Committees of the Board to engage outside advisors.
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<PAGE>
GUIDELINE: EVERY BOARD OF DIRECTORS SHOULD EXPRESSLY ASSUME
RESPONSIBILITY FOR, OR ASSIGN TO A COMMITTEE OF DIRECTORS THE GENERAL
RESPONSIBILITY FOR, DEVELOPING THE CORPORATION'S APPROACH TO CORPORATE
GOVERNANCE ISSUES. THIS COMMITTEE WOULD, AMONGST OTHER THINGS, BE RESPONSIBLE
FOR THE CORPORATION'S RESPONSE TO THESE GOVERNANCE GUIDELINES.
The Governance and Nominating Committee has been established to assume
responsibility for developing the Corporation's approach to governance issues.
GUIDELINE: THE AUDIT COMMITTEE OF EVERY BOARD OF DIRECTORS SHOULD BE
COMPOSED ONLY OF OUTSIDE DIRECTORS. THE ROLES AND RESPONSIBILITIES OF THE AUDIT
COMMITTEE SHOULD BE SPECIFICALLY DEFINED SO AS TO PROVIDE APPROPRIATE GUIDANCE
TO AUDIT COMMITTEE MEMBERS AS TO THEIR DUTIES. THE AUDIT COMMITTEE SHOULD HAVE
DIRECT COMMUNICATION CHANNELS WITH THE INTERNAL AND EXTERNAL AUDITORS TO DISCUSS
AND REVIEW SPECIFIC ISSUES AS APPROPRIATE. THE AUDIT COMMITTEE DUTIES SHOULD
INCLUDE OVERSIGHT RESPONSIBILITY FOR MANAGEMENT REPORTING ON INTERNAL CONTROL.
WHILE IT IS MANAGEMENT'S RESPONSIBILITY TO DESIGN AND IMPLEMENT AN EFFECTIVE
SYSTEM OF INTERNAL CONTROL, IT IS THE RESPONSIBILITY OF THE AUDIT COMMITTEE TO
ENSURE THAT MANAGEMENT HAS DONE SO.
During 1997, all of the members of the Audit Committee were outside
directors. The duties and responsibilities of the Audit Committee comply in
full with the foregoing guideline.
GUIDELINE: THE BOARD OF DIRECTORS OF EVERY CORPORATION SHOULD APPOINT A
COMMITTEE OF DIRECTORS COMPOSED ENTIRELY OF OUTSIDE, I.E., NON-MANAGEMENT
DIRECTORS, A MAJORITY OF WHOM ARE UNRELATED DIRECTORS, WITH THE RESPONSIBILITY
OF PROPOSING TO THE FULL BOARD NEW NOMINEES TO THE BOARD AND FOR ASSESSING
DIRECTORS ON AN ONGOING BASIS.
The Governance and Nominating Committee, a majority of the members of
which consist of outside directors, has been established to assume
responsibility for proposing to the Board new nominees to the Board and for
assessing directors on an ongoing basis.
5. DESCRIPTION OF DECISIONS REQUIRING PRIOR APPROVAL BY THE BOARD.
GUIDELINE: THE BOARD OF DIRECTORS, TOGETHER WITH THE CEO, SHOULD DEVELOP
POSITION DESCRIPTIONS FOR THE BOARD AND FOR THE CEO INVOLVING THE DEFINITION OF
THE LIMITS TO MANAGEMENT'S RESPONSIBILITIES. IN ADDITION, THE BOARD SHOULD
APPROVE OR DEVELOP THE CORPORATE OBJECTIVES WHICH THE CEO IS RESPONSIBLE FOR
MEETING.
Reference is made to the disclosure under item 1 with respect to the
annual review and approval by the Board of the Corporation's annual business
plan. In addition, any major capital expenditures, acquisitions, divestitures
or other material transactions, whether or not specifically set forth in the
annual business plan, are subject to Board approval. Position descriptions for
the Board and the Chief Executive Officer have been prepared and are expected to
be approved this year.
6. PROCEDURES IN PLACE FOR RECRUITING NEW DIRECTORS AND OTHER
PERFORMANCE-ENHANCING MEASURES, SUCH AS ASSESSMENT OF BOARD PERFORMANCE.
GUIDELINE: EVERY BOARD OF DIRECTORS SHOULD IMPLEMENT A PROCESS TO BE
CARRIED OUT BY THE NOMINATING COMMITTEE OR OTHER APPROPRIATE COMMITTEE FOR
ASSESSING THE EFFECTIVENESS OF THE BOARD AS A WHOLE, THE COMMITTEES OF THE BOARD
AND THE CONTRIBUTION OF INDIVIDUAL DIRECTORS.
The effectiveness of the Board as a whole, the committees of the Board and
the contribution of individual directors is assessed on an ongoing basis by both
the Governance and Nominating Committee and senior management.
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<PAGE>
GUIDELINE: EVERY CORPORATION SHOULD PROVIDE AN ORIENTATION AND EDUCATION
PROGRAM FOR NEW RECRUITS TO THE BOARD.
Any new recruits to the Board will be provided with extensive background
documentation with respect to the Corporation's businesses, visit selected mine
sites and meet with senior management to discuss the Corporation's affairs and
to give the new recruits an opportunity to ask questions.
GUIDELINE: THE BOARD OF DIRECTORS SHOULD REVIEW THE ADEQUACY AND FORM OF
COMPENSATION OF DIRECTORS AND ENSURE THAT COMPENSATION REALISTICALLY REFLECTS
THE RESPONSIBILITIES AND RISKS INVOLVED IN BEING AN EFFECTIVE DIRECTOR.
The Compensation Committee of the Board periodically reviews the adequacy
and form of compensation of directors and makes recommendations to the Board in
this regard.
7. MEASURES FOR RECEIVING SECURITIES-HOLDER FEEDBACK AND MEASURES FOR DEALING
WITH THEIR CONCERNS.
The Corporation maintains an open dialogue with holders of its equity and
debt securities, both institutional and individual. It is part of the duties of
both the Chief Executive Officer and the Vice-President, Investor Relations of
the Corporation to respond to any inquiries from its securities holders or
concerns raised by them.
8. THE BOARD'S EXPECTATIONS OF MANAGEMENT.
Reference is made to items 1 and 5 above.
INTEREST IN MATTERS TO BE ACTED UPON
If the resolutions to approve the grant of stock options to directors and
certain senior officers of the Corporation named under "Stock Options to Senior
Officers and Directors" and "Stock Options to Senior Officers" are approved,
then subject to receipt of listings approval of The Toronto Stock Exchange and
the American Stock Exchange, those persons will be entitled to exercise the
stock options. If the resolution is not approved, those persons will not be
able to exercise the options and the option grants will be cancelled. If the
resolution to approve the repricing of existing stock options is approved, then
the directors and senior officers of the Corporation named under "Amendment of
Stock Options" shall be entitled to exercise the stock options at the amended
price.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Except as set forth in this section or otherwise in this Management
Information Circular (Proxy Statement), to the knowledge of management of the
Corporation, no director or officer of the Corporation or nominee for election
as a director or any shareholder known to the Corporation to own of record or
beneficially more than 5% of the Corporation's outstanding Common Shares or any
member of the immediate family of any of the foregoing persons had any interest
in any material transaction since January 1, 1997.
William J. V. Sheridan, a director and the Secretary of the Corporation,
is a partner in the law firm of Lang Michener, counsel to the Corporation.
8. OTHER MATTERS
The Corporation knows of no other matters which are likely to be brought
before the Meeting. If, however, other matters not now known or determined come
before the Meeting, the persons named in the enclosed proxy or their substitutes
will vote such proxy in accordance with their judgment in such matters.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
The Corporation will review shareholder proposals intended to be included
in proxy material for the 1999 Annual Meeting of Shareholders which are received
by the Corporation at its principal executive offices by no later than March 31,
1999. Such proposals must be in writing and should be addressed to the
attention of Corporate Counsel of the Corporation. A proposal may include
nominations for the election of directors if the proposal is
-36-
<PAGE>
signed by one or more holders of shares representing in the aggregate not less
than 5 per cent of the outstanding Common Shares of the Corporation.
GENERAL
Copies of the Corporation's most recent annual report on Form 10-K,
including comparative financial statements for the year ended December 31, 1997,
are available upon written request from the Vice-President, Investor Relations,
5501 Lakeview Drive, Kirkland, Washington 98033-7314 (telephone: 425-822-8992).
Information contained herein is given as of the 8th day of May, 1998
except as otherwise noted. If any matters which are not now known should
properly come before the Meeting, the accompanying form of proxy will be voted
on such matters in accordance with the best judgment of the person voting it.
The content and sending of this Proxy Statement have been approved by the
directors of the Corporation.
DATED at Toronto, Ontario, Canada this 21st day of May, 1998
BY ORDER OF THE BOARD OF DIRECTORS
/s/William J.V. Sheridan
(Signed) WILLIAM J.V. SHERIDAN
Secretary
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<PAGE>
SCHEDULE "A"
SPECIAL RESOLUTION TO FIX THE NUMBER OF DIRECTORS AT FIVE AND TO EMPOWER THE
DIRECTORS TO FIX THE NUMBER OF DIRECTORS
WHEREAS the Articles of the Corporation provide for a minimum of three (3)
directors and a maximum of fifteen (15) directors of the Corporation;
RESOLVED as a special resolution of the Corporation that the number of directors
be fixed at five (5) and that the directors of the Corporation are hereby
empowered to determine from time to time by resolution the number of directors
of the Corporation and the number of directors of the Corporation to be elected
at the annual meeting of the shareholders of the Corporation within the range
provided by the Articles of the Corporation.
<PAGE>
EXHIBIT 1
ROYAL OAK MINES INC.
AND
MONTREAL TRUST COMPANY OF CANADA
AS RIGHTS AGENT
SHAREHOLDER RIGHTS PLAN AGREEMENT
Dated as of February 25, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 --INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 CERTAIN DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 CURRENCY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.3 HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4 NUMBER AND GENDER . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.5 ACTING JOINTLY OR IN CONCERT. . . . . . . . . . . . . . . . . . . . . . 10
1.6 STATUTORY REFERENCES. . . . . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 2 - THE RIGHTS . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
2.1 LEGEND ON COMMON SHARE CERTIFICATES. . . . . . . . . . . . . . . . . . 10
2.2 INITIAL EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS . . . 11
2.3 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS. . . . . . . . . . . . 13
2.4 DATE ON WHICH EXERCISE IS EFFECTIVE. . . . . . . . . . . . . . . . . . 17
2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS CERTIFICATES. 18
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE. . . . . . . . . . 18
2.7 MUTILATED, DESTROYED, LOST AND STOLEN RIGHT CERTIFICATES . . . . . . . 19
2.8 PERSONS DEEMED OWNERS. . . . . . . . . . . . . . . . . . . . . . . . . 19
2.9 DELIVERY AND CANCELLATION OF RIGHTS CERTIFICATES . . . . . . . . . . . 19
2.10 AGREEMENT OF RIGHTS HOLDERS. . . . . . . . . . . . . . . . . . . . . . 20
2.11 RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER . . . . . . . . . . 20
ARTICLE 3--ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN TRANSACTIONS. . 20
3.1 FLIP-IN EVENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 4--THE RIGHTS AGENT. . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 MERGER OR AMALGAMATION OR CHANGE OF NAME OF RIGHTS AGENT. . . . . . . . 22
4.3 DUTIES OF RIGHTS AGENT. . . . . . . . . . . . . . . . . . . . . . . . . 23
4.4 CHANGE OF RIGHTS AGENT. . . . . . . . . . . . . . . . . . . . . . . . . 24
ARTICLE 5--MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.1 REDEMPTION AND WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.2 EXPIRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.3 ISSUANCE OF NEW RIGHT CERTIFICATES. . . . . . . . . . . . . . . . . . . 26
5.4 SUPPLEMENTS AND AMENDMENTS. . . . . . . . . . . . . . . . . . . . . . . 26
5.5 FRACTIONAL RIGHTS AND FRACTIONAL SHARES . . . . . . . . . . . . . . . . 28
5.6 RIGHTS OF ACTION. . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.7 NOTICE OF PROPOSED ACTIONS. . . . . . . . . . . . . . . . . . . . . . . 28
5.8 NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
5.9 SUCCESSORS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.10 BENEFITS OF THIS AGREEMENT. . . . . . . . . . . . . . . . . . . . . . . 29
5.11 GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.12 SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.13 EFFECTIVE DATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
5.14 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS. . . . . . . . . . 30
5.15 RIGHTS OF BOARD, CORPORATION AND OFFEROR. . . . . . . . . . . . . . . . 30
5.16 REGULATORY APPROVALS. . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.17 DECLARATION AS TO NON-CANADIAN HOLDERS. . . . . . . . . . . . . . . . . 30
5.18 TIME OF THE ESSENCE . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.19 EXECUTION IN COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . 34
<PAGE>
SHAREHOLDER RIGHTS PLAN AGREEMENT
THIS AGREEMENT dated as of the 25th day of February, 1998 between Royal
Oak Mines Inc. (the "Corporation"), a corporation amalgamated under the BUSINESS
CORPORATIONS ACt (Ontario) and Montreal Trust Company of Canada, a trust company
incorporated under the laws of Canada, as Rights Agent (the "Rights Agent"),
which term shall include any successor Rights Agent hereunder.
WHEREAS the Board of Directors has determined that in order to maximize
shareholder value it is advisable and in the best interests of the Corporation
to adopt a shareholder rights plan (the "Rights Plan");
AND WHEREAS in order to implement the adoption of the Rights Plan the
Board of Directors has
(a) authorized the issuance of one Right effective the Record Time in
respect of each Common Share outstanding at the Record Time; and
(b) authorized the issuance of one Right in respect of each Common
Share issued after the Record Time and prior to the earlier of the
Separation Time and the Expiration Time;
AND WHEREAS each Right entitles the holder thereof, after the Separation
Time, to purchase securities of the Corporation (or, in certain cases, of
certain other entities) pursuant to the terms and subject to the conditions set
forth herein;
AND WHEREAS the Corporation desires to appoint the Rights Agent to act on
behalf of the Corporation, and the Rights Agent is willing to so act, in
connection with the issuance, transfer, exchange and replacement of Rights
Certificates, the exercise of Rights, and other matters referred to herein;
NOW THEREFORE in consideration of the foregoing premises and the respective
covenants and agreements set forth herein the parties hereby agree as follows:
ARTICLE 1 --INTERPRETATION
1.1 CERTAIN DEFINITIONS
For purposes of the Agreement, the following terms have the meanings
indicated:
(a) "1933 SECURITIES ACT" means the SECURITIES ACT OF 1933 of the
United States, as amended, and the rules and regulations
thereunder, and any comparable or successor laws or regulations
thereto.
(b) "1934 EXCHANGE ACT" means the SECURITIES EXCHANGE ACT OF 1934 of
the United States, as amended, and the rules and regulations
thereunder, and any comparable or successor laws or regulations
thereto.
(c) "ACQUIRING PERSON" means, any Person who is the Beneficial Owner of
twenty percent (20%) or more of the outstanding Voting Shares of
the Corporation; provided, however, that the term "Acquiring
Person" shall not include:
(i) the Corporation or any Subsidiary of the Corporation;
(ii) any Person who becomes the Beneficial Owner of twenty
percent (20%) or more of the outstanding Voting Shares
of the Corporation as a result of (A) Corporate
Acquisitions, (B) Permitted Bid Acquisitions, (C)
Corporate Distributions or (D) Exempt Acquisitions;
<PAGE>
provided, however, that if a Person shall become the
Beneficial Owner of twenty percent (20%) or more of
the Voting Shares of the Corporation then outstanding
by reason of one or more or any combination of the
operation of a Corporate Acquisition, Permitted Bid
Acquisition, Corporate Distribution or Exempt
Acquisition and, after such Corporate Acquisition,
Permitted Bid Acquisition, Corporate Distribution or
Exempt Acquisition, becomes the Beneficial Owner of an
additional one percent (1%) or more of the outstanding
Voting Shares of the Corporation other than pursuant
to Corporate Acquisitions, Permitted Bid Acquisitions,
Corporate Distributions or Exempt Acquisitions, then
as of the date of such acquisition, such Person shall
become an "Acquiring Person";
(iii) for a period of ten (10) days after the Disqualification
Date (as hereinafter defined), any Person who becomes the
Beneficial Owner of twenty percent (20%) or more of the
outstanding Voting Shares of the Corporation as a result
of such Person becoming disqualified from relying on
Clause 1.1 (g) (vii) hereof solely because such Person
makes or announces an intention to make a Take-over Bid
in respect of securities of the Corporation alone or by
acting jointly or in concert with any other Person (the
first date of public announcement (which, for the
purposes of this definition, shall include, without
limitation, a report filed pursuant to section 101 of the
SECURITIES ACT (Ontario)) by such Person or the
Corporation of the intent to commence such a Take-over
Bid being herein referred to as the "Disqualification
Date"); and
(iv) an underwriter or member of a banking or selling group
which acquires Voting Shares of the Corporation from
the Corporation in connection with a BONA FIDE
distribution to the public of securities of the
Corporation.
(d) "AFFILIATE" when used to indicate a relationship with a specified
Person, means a Person that directly or indirectly through one or
more intermediaries, controls, or is controlled by, or is under
common control with, such specified Person.
(e) "AGREEMENT" means this agreement as amended, modified or
supplemented from time to time.
(f) "ASSOCIATE" when used to indicate a relationship with a specified
Person, means any relative of such specified Person who has the
same residence as such specified Person, a spouse of that Person,
any person of the same or opposite sex with whom such specified
Person is living in a conjugal relationship outside marriage, or
any relative of such spouse or other Person who has the same
residence as such specified Person.
(g) a Person shall be deemed the "BENEFICIAL OWNER", and to have
"BENEFICIAL OWNERSHIP" of, and to "BENEFICIALLY OWN":
(i) any securities as to which such Person or any
Affiliate or Associate of such Person is or may be
deemed to be the owner at law or in equity;
(ii) any securities as to which such Person or any
Affiliate or Associate of such Person has the right to
acquire (whether such right is exercisable immediately
or within a period of 75 days thereafter or upon the
occurrence of a contingency or otherwise) pursuant to
any agreement, arrangement, pledge or understanding,
whether or not in writing (other than customary
agreements with and between underwriters or banking
group or selling group members with respect to a
public offering of securities and other than bona fide
pledges of securities) or upon the exercise of any
conversion right, exchange right, share purchase right
(other than a Right), warrant or option or otherwise;
and
<PAGE>
(iii) any securities which are Beneficially Owned within the
meaning of the foregoing provisions of this Subsection
1.1(g) by any other Person with whom such Person is
acting jointly or in concert;
provided, however, that a Person shall not be deemed the
"BENEFICIAL OWNER", or to have "BENEFICIAL OWNERSHIP" of, or to
"BENEFICIALLY OWN", any security solely because:
(iv) such security has been deposited or tendered pursuant
to any Take-over Bid made by such Person or made by
any Affiliate or Associate of such Person or made by
any other Person acting jointly or in concert with
such Person, unless such deposited or tendered
security has been taken up or paid for, whichever
shall first occur; or
(v) such Person or any Affiliate or Associate of such
Person or any other Person acting jointly or in
concert with such Person has or shares the power to
vote or direct the voting of such security pursuant to
a revocable proxy given in response to a public proxy
solicitation or any such Person has an agreement,
arrangement or understanding with respect to a
particular shareholder proposal or proposals or a
particular matter or matters to come before a meeting
of shareholders, including the election of directors;
or
(vi) such Person or any Affiliate or Associate of such
Person or any other Person acting jointly or in
concert with such Person has or shares the power to
vote or direct the voting of such security in
connection with or in order to participate in a public
proxy solicitation; or
(vii) (A) such Person or any Affiliate or Associate of such
Person or any other Person acting jointly or in concert
with such Person, holds or exercises dispositive power
over such security; provided that the ordinary business
of any such Person (the "Fund Manager") includes the
management of investment funds for others and such
dispositive power over such security is held by the Fund
Manager in the ordinary course of such business in the
performance of such Fund Manager's duties for the account
of any other Person (a "Client"), (B) such Person (the
"Trust Company") is licensed to carry on the business of
a trust company under applicable law and, as such, acts
as trustee or administrator or in a similar capacity in
relation to the estates of deceased or incompetent
Persons or in relation to other accounts and holds or
exercises dispositive power over such security in the
ordinary course of such duties for the estate of any such
deceased or incompetent Person (each an "Estate Account")
or for such other accounts (each an "Other Account"), (C)
the ordinary business of any such Person includes acting
as an agent of the Crown in the management of public
assets (the "Crown Agent"), or (D) the Person, any of
such Person's Affiliates or Associates or any other
Person acting jointly or in concert with such Person
holds or exercises dispositive power over such security,
provided that the Person exercising such dispositive
power is the administrator or the trustee of one or more
pension funds or plans (each a "Pension Fund") registered
under the laws of Canada or any province thereof or the
United States or any state thereof (the "Independent
Person") and holds such securities solely for the
purposes of its activities as an Independent Person, and
further provided that such Person:
(a) does not hold or exercise dispositive power over more
than thirty percent (30%) of the Voting Shares of the
Corporation;
(b) holds such Voting Shares of the Corporation for
investment purposes; and
(c) is not acting jointly or in concert with any other
Person;
<PAGE>
- 4 -
provided, however, that in any of the foregoing cases no
one of the Fund Manager, the Trust Company, the Crown
Agent or the Independent Person makes or proposes to make
a Take-over Bid in respect of securities of the
Corporation alone or by acting jointly or in concert with
any other Person (other than by means of ordinary market
transactions (including prearranged trades) executed
through the facilities of a stock exchange or organized
over-the-counter market); or
(viii) such Person is a Client of the same Fund Manager as
another Person on whose account the Fund Manager holds or
exercises dispositive power over such security, or such
Person is an Estate Account or an Other Account of the
same Trust Company as another Person on whose account the
Trust Company holds or exercises dispositive power over
such security, or such Person is a Pension Fund with the
same Independent Person as another Pension Fund;
(ix) such Person is a Client of a Fund Manager and such
security is owned at law or in equity by the Fund
Manager, or such Person is an Estate Account or an Other
Account of a Trust Company and such security is owned at
law or in equity by the Trust Company, or such Person is
a Pension Fund and such security is owned at law or in
equity by the Independent Person of the Pension Fund; or
(x) such Person is the registered holder of securities as a
result of carrying on the business of, or acting as a
nominee of a securities depository.
For purposes of this Agreement, the percentage of Voting Shares
Beneficially Owned by any Person, shall be and be deemed to be the
product of one hundred (100) and the number of which the numerator is
the number of votes for the election of all directors generally
attaching to the Voting Shares Beneficially Owned by such Person and the
denominator of which is the number of votes for the election of all
directors generally attaching to all outstanding Voting Shares. Where
any Person is deemed to Beneficially Own unissued Voting Shares, such
Voting Shares shall be deemed to be issued and outstanding for the
purpose of calculating the percentage of Voting Shares Beneficially
Owned by such Person.
(h) "BOARD OF DIRECTORS" means, at any time, the duly constituted board of
directors of the Corporation.
(i) "BUSINESS CORPORATIONS ACT (ONTARIO)" means the BUSINESS CORPORATIONS
ACT, R.S.O. 1990, c.B.16, as amended, and the regulations thereunder,
and any comparable or successor laws or regulations thereto.
(j) "BUSINESS DAY" means any day other than a Saturday, a Sunday or a day on
which banking institutions in Toronto or New York are authorized or
obligated by law to close.
(k) "CANADIAN DOLLAR EQUIVALENT" means any amount which is expressed in
United States dollars shall mean on any day the Canadian dollar
equivalent of such amount determined by reference to the U.S. Canadian
Exchange Rate on such date.
(l) "CLOSE OF BUSINESS" on any given date means the time on such date (or,
if such date is not a Business Day, the time on the next succeeding
Business Day) at which the offices of the transfer agent for the Common
Shares (or, after the Separation Time, the offices of the Rights Agent)
is closed to the public in the city in which such transfer agent or
Rights Agent has an office for the purposes of this Agreement.
(m) "COMMON SHARES", when used with reference to the Corporation, means the
common shares in the capital of the Corporation and, when used with
reference to any Person other than the
<PAGE>
- 5 -
Corporation, means the class or classes of shares (or similar equity
interest) with the greatest per share voting power entitled to vote
generally in the election of all directors of such other Person or the
equity securities or other equity interest having power (whether or not
exercised) to control or direct the management of such other Person or,
if such other Person is a Subsidiary of another Person, the Person or
Persons which ultimately control such first-mentioned Person.
(n) "COMPETING PERMITTED BID" means a Take-over Bid which: (i) is made after
a Permitted Bid has been made and prior to the expiry of the Permitted
Bid; (ii) satisfies all the components of the definition of a Permitted
Bid, except that the requirements set out in Clause (ii) of the
definition of a Permitted Bid shall be satisfied if the Take-over Bid
shall contain, and the take up and payment for securities tendered or
deposited thereunder shall be subject to, an irrevocable and unqualified
condition that no Voting Shares shall be taken up or paid for pursuant
to the Competing Permitted Bid prior to the close of business on the
date that is no earlier than the later of: (A) the sixtieth (60th) day
after the date on which the Permitted Bid which preceded the Competing
Permitted Bid was made; and (B) twenty-one (21) days after the date of
the Take-over Bid constituting the Competing Permitted Bid; and only if
at that date, more than fifty percent (50%) of the then outstanding
Voting Shares held by Independent Shareholders have been deposited to
the Competing Permitted Bid and not withdrawn.
(o) "CONTROLLED": a corporation is "controlled" by another Person or two or
more Persons if:
(i) securities entitled to vote in the election of directors
carrying more than fifty percent (50%) of the votes for the
election of directors are held, directly or indirectly, by
or for the benefit of the other Person or Persons; and
(ii) the votes carried by such securities are entitled, if
exercised, to elect a majority of the board of directors of
such corporation;
and "CONTROLS", "CONTROLLING" AND "UNDER COMMON CONTROL WITH" shall be
interpreted accordingly.
(p) "CORPORATE ACQUISITION" means an acquisition by the Corporation or a
Subsidiary of the Corporation or the redemption by the Corporation of
Voting Shares of the Corporation which by reducing the number of Voting
Shares of the Corporation outstanding increases the proportionate number
of Voting Shares Beneficially Owned by any Person.
(q) "CORPORATE DISTRIBUTION" means an acquisition of Voting Shares of the
Corporation as a result of:
(i) a stock dividend or a stock split or other event pursuant
to which a person receives or acquires Voting Shares on the
same PRO RATA basis as all other holders of the same class
of Voting Shares;
(ii) any dividend reinvestment plan or other plan made available
by the Corporation to holders of all of its Voting Shares
(other than holders resident in any jurisdiction where
participation in such plan is restricted or impractical to
the Corporation as a result of applicable law);
(iii) the receipt and/or exercise of rights issued by the
Corporation to purchase Voting Shares distributed to all the
holders of a series or class of Voting Shares of the
Corporation to subscribe for or purchase Voting Shares of the
Corporation, (other than holders resident in any jurisdiction
where the distribution or exercise of such rights is
restricted or impractical as a result of applicable law),
provided that such rights are acquired directly from the
Corporation and not from any other Person; or
<PAGE>
- 6 -
(iii) a distribution of Voting Shares, or securities convertible
into, exchangeable for or carrying the right to acquire Voting
Shares (and the conversion or exchange of such convertible or
exchangeable securities or the exercise of the right to
acquire Voting Shares carried by such securities), made
pursuant to a prospectus or by way of a private placement.
(r) "DISQUALIFICATION DATE" has the meaning ascribed thereto in Clause 1.1
(c)(iii).
(s) "EFFECTIVE DATE" has the meaning ascribed thereto in Section 5.13.
(t) "ELECTION TO EXERCISE" has the meaning ascribed thereto in Subsection
2.2(d).
(u) "EXEMPT ACQUISITION" means an acquisition of Voting Shares of the
Corporation, in respect of which the Board of Directors has waived the
application of Section 3.1 hereof pursuant to the provisions of
Subsections 5.1 (b), (c) or (d) hereof or which was made on or prior to
the Record Time.
(v) "EXERCISE PRICE" means, as of any date, the price at which a holder may
purchase the securities issuable upon exercise of one whole Right. Until
adjustment thereof in accordance with the terms hereof, the Exercise
Price shall be $20.00.
(w) "EXPIRATION TIME" means the earlier of: (i) the Termination Time, and
(ii) the close of business on the date of the Corporation's annual
meeting of Shareholders in 2002.
(x) "FLIP-IN EVENT" means a transaction in or pursuant to which any Person
becomes an Acquiring Person.
(y) "INDEPENDENT SHAREHOLDERS" means holders of Voting Shares of the
Corporation, but shall not include: (i) any Acquiring Person; (ii) any
Offeror (including an Offeror who has announced an intention to make or
who makes a Permitted Bid or Competing Permitted Bid); (iii) any
Affiliate or Associate of such Acquiring Person or Offeror; (iv) any
Person acting jointly or in concert with such Acquiring Person or
Offeror; or (v) any employee benefit plan, stock purchase plan, deferred
profit sharing plan or any similar plan or trust for the benefit of
employees of the Corporation or a Subsidiary of the Corporation, unless
the beneficiaries of any such plan or trust direct the manner in which
the Voting Shares are to be voted or direct whether the Voting Shares
are to be tendered to a Take-over Bid.
(z) "MARKET PRICE" per share of any securities on any date of determination
means the average of the daily closing prices per share of such
securities (determined as described below) on each of the twenty (20)
consecutive Trading Days through and including the Trading Day
immediately preceding such date; provided, however, that if an event of
a type analogous to any of the events described in Section 2.3 hereof
shall have caused the closing prices used to determine the Market Price
on any Trading Days not to be fully comparable with the closing price on
such date of determination or, if the date of determination is not a
Trading Day, on the immediately preceding Trading Day, each such closing
price so used shall be appropriately adjusted in a manner analogous to
the applicable adjustment provided for in Section 2.3 hereof in order to
make it fully comparable with the closing price on such date of
determination or, if the date of determination is not a Trading Day, on
the immediately preceding Trading Day. The closing price per share of
any securities on any date shall be (i) the closing board lot sale price
or, if such price is not available, the average of the closing bid and
asked prices, for each
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share as reported by The Toronto Stock Exchange; or (ii) if for any
reason none of such prices is available on such day or the securities
are not listed or admitted to trading on The Toronto Stock Exchange, the
closing board lot sale price or, if such price is not available, the
average of the closing bid and asked prices, for each share as reported
in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the principal national
securities exchange in the United States on which the securities are
listed or admitted to trading; or (iii) if for any reason none of such
prices is available on such day or the securities are not listed or
admitted to trading on The Toronto Stock Exchange or a national
securities exchange in the United States, the last quoted price, or if
not so quotd, the average of the high bid and low asked prices for each
share of such securities in the over-the-counter market, as reported by
The Canadian Dealing Network Inc. or such other comparable system then
in use; or (iv) if on any such date the securities are not quoted by any
such organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
securities selected in good faith by the Board of Directors; provided,
however, that if on any such date the securities are not traded on any
stock exchange or in the over-the-counter market, the closing price per
share of such securities on such date shall mean the fair value per
share of such securities on such date as determined in good faith by the
Board of Directors, after consultation with a nationally or
internationally recognized investment dealer or investment banker.
The Market Price shall be expressed in Canadian dollars and if initially
determined in respect of any day forming part of the twenty (20)
consecutive trading day period in United States dollars, such amount
shall be translated into Canadian dollars at the Canadian Dollar
Equivalent thereof. Notwithstanding the foregoing, where the Board of
Directors is satisfied that the Market Price of securities as determined
herein was affected by an anticipated or actual Take-over Bid or by
improper manipulation, the Board of Directors may, acting in good faith,
determine the Market Price of securities, such determination to be based
on a finding as to the price of which a holder of securities of that
class could reasonably have expected to dispose of his securities
immediately prior to the relevant date excluding any change in price
reasonably attributable to the anticipated or actual Take-over Bid or to
the improper manipulation.
(aa) "OFFER TO ACQUIRE" shall include:
(i) an offer to purchase, a public announcement of an intention
to make an offer to purchase, or a solicitation of an offer
to sell, Voting Shares of the Corporation; and
(ii) an acceptance of an offer to sell Voting Shares of the
Corporation, whether or not such offer to sell has been
solicited;
or any combination thereof, and the Person accepting an offer to sell
shall be deemed to be making an Offer to Acquire to the Person that made
the offer to sell.
(bb) "OFFEROR" means a Person who has announced an intention to make, or who
makes, a Take-over Bid.
(cc) "OFFEROR'S SECURITIES" means Voting Shares of the Corporation
Beneficially Owned by an Offeror, any Affiliate or Associate of such
Offeror, any Person acting jointly or in concert with the Offeror or
with any Affiliate of the Offeror and any Affiliates or Associates of
such Person so acting jointly or in concert.
(dd) "PERMITTED BID" means a Take-over Bid made by an Offeror which is made
by means of a Take-over Bid circular and which also complies with the
following additional provisions:
(i) the Take-over Bid shall be made to all holders of record of
Voting Shares wherever resident as registered on the books
of the Corporation, other than the Offeror;
(ii) the Take-over Bid shall contain, and the take up and
payment for securities tendered or deposited thereunder
shall be subject to, an irrevocable and unqualified
condition that no
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Voting Shares shall be taken up or paid for pursuant to the
Take-over Bid prior to the close of business on the date
which is not less than sixty (60) days following the date
of the Take-over Bid, and only if at such date, more than
fifty percent (50%) of the then outstanding Voting Shares
held by Independent Shareholders shall have been deposited
to the Take-over Bid and not withdrawn;
(iii) the Take-over Bid shall contain an irrevocable and unqualified
provision that, unless the Take-over Bid is withdrawn in
accordance with applicable law, Voting Shares of the
Corporation may be deposited pursuant to such Take-over Bid at
any time during the period of time described in Clause (ii) of
this Subsection 1.1 (dd) and that any Voting Shares deposited
pursuant to the Take-over Bid may be withdrawn at any time
until taken up and paid for; and
(iv) the Take-over Bid shall contain an irrevocable and
unqualified provision that if, on the date on which Voting
Shares may be taken up and paid for, more than fifty
percent (50%) of the then outstanding Voting Shares held by
Independent Shareholders have been deposited to the
Take-over Bid and not withdrawn, (A) the Offeror will make
a public announcement of that fact on the date the
Take-over Bid would otherwise expire; and (B) the Take-over
Bid will be extended for a period of not less than ten (10)
Business Days from the date it would otherwise expire.
(ee) "PERMITTED BID ACQUISITIONS" means share acquisitions made pursuant to a
Permitted Bid or a Competing Permitted Bid.
(ff) "PERSON" means any individual, firm, partnership, association, trust,
trustee, executor, administrator, legal or personal representative,
government, governmental body, entity or authority, group, body
corporate, corporation, unincorporated organization or association,
syndicate, joint venture or any other entity, whether or not having
legal personality, and any of the foregoing in any derivative,
representative or fiduciary capacity, and pronouns have a similar
extended meaning.
(gg) "RECORD TIME" means 5:00 p.m. (Toronto time) on February 25, 1998.
(hh) "REDEMPTION PRICE" has the meaning ascribed thereto in Subsection
5.1 (a).
(ii) "REGULAR PERIODIC CASH DIVIDENDS" means cash dividends paid at regular
intervals in any fiscal year of the Corporation to the extent that such
cash dividends do not exceed, in the aggregate, the greatest of
(i) two hundred percent (200%) of the aggregate amount of cash
dividends declared payable by the Corporation on its Common
Shares in its immediately preceding fiscal year;
(ii) three hundred percent (300%) of the arithmetic average of
the aggregate amounts of cash dividends declared payable by
the Corporation on its Common Shares in its three
immediately preceding financial years; and
(iii) one hundred percent (100%) of the aggregate consolidated net
income of the Corporation, before extraordinary items, for its
immediately preceding fiscal year.
(jj) "RIGHT" means a right issued pursuant to this Agreement.
(kk) "RIGHTS CERTIFICATE" has the meaning ascribed thereto in Section 2.2(c).
(ll) "RIGHTS REGISTER" has the meaning ascribed thereto in Subsection 2.6(a).
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(mm) "SECURITIES ACT (ONTARIO)" means the SECURITIES ACT, R.S.O. 1990, c.
S.5. as amended, and the regulations, rules, policies, and notices
thereunder, and any comparable or successor laws, regulations, rules,
policies or notices thereto.
(nn) "SEPARATION TIME" means the close of business on the eighth (8th)
Trading Day after the earlier of (i) the Stock Acquisition Date, and
(ii) the date of the commencement of, or first public announcement of
the intent of any person (other than the Corporation or any Subsidiary
of the Corporation) to commence, a Take-over Bid (other than a Permitted
Bid or Competing Permitted Bid) or such later date as may be determined
by the Board of Directors provided that, if any Take-over Bid referred
to in Clause (ii) of this Subsection 1.1(nn) expires, is cancelled,
terminated or otherwise withdrawn prior to the Separation Time, such
Take-over Bid shall be deemed, for the purposes of this Subsection
1.1(nn), never to have been made and provided further that if the Board
of Directors determines pursuant to Subsections 5.1(b), (c) or (d)
hereof to waive the application of Section 3.1 hereof to a Flip-in
Event, the Separation Time in respect of such Flip-in Event shall be
deemed never to have occurred.
(oo) "STOCK ACQUISITION DATE" means the first date of public announcement
(which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to section 101 of the Securities Act
(Ontario) or Section 13(d) of the 1934 Exchange Act) by the Corporation
or an Offeror or Acquiring Person of facts indicating that a Person has
become an Acquiring Person.
(pp) "SUBSIDIARY": a corporation shall be deemed to be a Subsidiary of
another corporation if:
(i) it is controlled by:
(A) that other; or
(B) that other and one or more corporations each of which is
controlled by that other; or
(C) two or more corporations each of which is controlled by
that other; or
(ii) it is a Subsidiary of a corporation that is that other's
Subsidiary.
(qq) "TAKE-OVER BID" means an Offer to Acquire Voting Shares of the
Corporation or securities convertible into or exchangeable for or
carrying a right to purchase Voting Shares of the Corporation where the
Voting Shares of the Corporation subject to the Offer to Acquire,
together with the Voting Shares of the Corporation into which the
securities subject to the Offer to Acquire are convertible, exchangeable
or exercisable, and the Offeror's Securities, constitute in the
aggregate twenty percent (20%) or more of the outstanding Voting Shares
of the Corporation at the date of the Offer to Acquire.
(rr) "TERMINATION TIME" means the time at which the right to exercise Rights
shall terminate pursuant to Subsection 5.1(f) hereof.
(ss) "TRADING DAY", when used with respect to any securities, means a day on
which the principal Canadian stock exchange or American stock exchange
or market on which such securities are listed or admitted to trading is
open for the transaction of business or, if the securities are not
listed or admitted to trading on any Canadian stock exchange or American
stock exchange or market, a Business Day.
(tt) "U.S. - CANADIAN EXCHANGE RATE" means on any date:
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(i) if on such date the Bank of Canada sets an average noon spot
rate of exchange for the conversion of one United States
dollar into Canadian dollars, such rate; and
(ii) in any other case, the rate for such date for the
conversion of one United States dollar into Canadian
dollars which is calculated in the manner which shall be
determined by the Board of Directors from time to time
acting in good faith.
(uu) "VOTING SHARES" means, with respect to any Person, the Common Shares of
such Person and any other shares of capital stock or voting interests of
such Person entitled to vote generally in the election of all directors.
1.2 CURRENCY
All sums of money which are referred to in this Agreement are expressed
in lawful money of Canada, unless otherwise specified.
1.3 HEADINGS
The division of this Agreement into Articles, Sections, Subsections,
Clauses and Subclauses and the insertion of headings, subheadings and a table of
contents are for convenience of reference only and shall not affect the
construction or interpretation of this Agreement.
1.4 NUMBER AND GENDER
Wherever the context so requires, terms used herein importing the
singular number only shall include the plural and vice-versa and words importing
only one gender shall include all others.
1.5 ACTING JOINTLY OR IN CONCERT
For the purposes of this Agreement, a Person shall be deemed to be
acting jointly or in concert with every Person who is a party to an agreement,
commitment or understanding, whether formal or informal, with the first Person
or any Associate or Affiliate of such Person for the purpose of acquiring or
making an Offer to Acquire Voting Shares of the Corporation.
1.6 STATUTORY REFERENCES
Unless the context otherwise requires or except as expressly provided
herein, any reference herein to a specific part, section, subsection, clause or
Rule of any statute or regulation shall be deemed to refer to the same as it may
be amended, re-enacted or replaced or, if repealed and there shall be no
replacement therefor, to the same as it is in effect on the date of this
Agreement.
ARTICLE 2 - THE RIGHTS
2.1 Legend on Common Share Certificates
(a) Certificates issued for Common Shares after the Record Time but
prior to the close of business on the earlier of the Separation
Time and the Expiration Time shall evidence one Right for each
Common Share represented thereby and shall have impressed on,
printed on, written on or otherwise affixed to them, a legend in
substantially the following form:
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UNTIL THE SEPARATION TIME (AS DEFINED IN THE RIGHTS PLAN REFERRED
TO BELOW), THIS CERTIFICATE ALSO EVIDENCES AND ENTITLES THE HOLDER
HEREOF TO CERTAIN RIGHTS AS SET FORTH IN A SHAREHOLDER RIGHTS PLAN
AGREEMENT, DATED AS OF FEBRUARY 25, 1998 (THE "RIGHTS PLAN"),
BETWEEN ROYAL OAK MINES INC. (THE "CORPORATION") AND MONTREAL TRUST
COMPANY OF CANADA, AS RIGHTS AGENT (THE "RIGHTS AGENT"), THE TERMS
OF WHICH ARE HEREBY INCORPORATED HEREIN BY REFERENCE AND A COPY OF
WHICH MAY BE INSPECTED DURING NORMAL BUSINESS HOURS AT THE
PRINCIPAL EXECUTIVE OFFICE OF THE CORPORATION. UNDER CERTAIN
CIRCUMSTANCES, AS SET FORTH IN THE RIGHTS PLAN, SUCH RIGHTS MAY BE
AMENDED OR REDEEMED, MAY EXPIRE, MAY BECOME NULL AND VOID (IF, IN
CERTAIN CASES, THEY ARE ISSUED TO OR "BENEFICIALLY OWNED" BY ANY
PERSON WHO IS, WAS OR BECOMES AN "ACQUIRING PERSON", AS SUCH TERMS
ARE DEFINED IN THE RIGHTS PLAN, WHETHER CURRENTLY HELD BY OR ON
BEHALF OF SUCH PERSON OR ANY SUBSEQUENT HOLDER) OR MAY BE EVIDENCED
BY SEPARATE CERTIFICATES AND MAY NO LONGER BE EVIDENCED BY THIS
CERTIFICATE. THE CORPORATION WILL MAIL OR ARRANGE FOR THE MAILING
OF A COPY OF THE RIGHTS PLAN TO THE HOLDER OF THIS CERTIFICATE
WITHOUT CHARGE UPON RECEIPT OF A WRITTEN REQUEST THEREFOR.
(b) Certificates representing Common Shares that are issued and
outstanding at the Record Time shall evidence one Right for each
Common Share evidenced thereby notwithstanding the absence of the
foregoing legend until the earlier of the Separation Time and the
Expiration Time.
2.2 INITIAL EXERCISE PRICE; EXERCISE OF RIGHTS; DETACHMENT OF RIGHTS
(a) RIGHT TO ENTITLE HOLDER TO PURCHASE ONE COMMON SHARE PRIOR TO
ADJUSTMENT. Subject to adjustment as herein set forth, each Right
will entitle the holder thereof, from and after the Separation Time
and prior to the Expiration Time, to purchase, for the Exercise
Price as at the Business Day immediately preceding the date of
exercise of the Right, one Common Share of the Corporation (which
price and number of Common Shares are subject to adjustment as set
forth below). Notwithstanding any other provision of this
Agreement, any Rights held by the Corporation and any of its
Subsidiaries shall be void.
(b) RIGHTS NOT EXERCISABLE UNTIL SEPARATION TIME. Until the Separation
Time, (i) the Rights shall not be exercisable and no Right may be
exercised, and (ii) for administrative purposes, each Right will be
evidenced by the certificate for the associated Common Share
registered in the name of the holder thereof (which certificate
shall also be deemed to be a Rights Certificate) and will be
transferable only together with, and will be transferred by a
transfer of, such associated Common Share.
(c) DELIVERY OF RIGHTS CERTIFICATE AND DISCLOSURE STATEMENT. From and
after the Separation Time and prior to the Expiration Time: (i) the
Rights shall be exercisable, and (ii) the registration and transfer
of the Rights shall be separate from, and independent of, Common
Shares.
Promptly following the Separation Time, the Corporation will
prepare and the Rights Agent will mail to each holder of record of
Rights as of the Separation Time (other than an Acquiring Person
and other than in respect of any Rights Beneficially Owned by such
Acquiring Person which are not held by such Acquiring Person, the
holder of record of such Rights) at such holder's address as shown
by the records of the Corporation (the Corporation hereby agreeing
to furnish copies of such records to the Rights Agent for this
purpose), (A) a certificate (a "Rights Certificate") in
substantially the form of Exhibit A hereto appropriately completed,
representing the number of Rights held by such holder at the
Separation Time and having such marks of identification or
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designation and such legends, summaries or endorsements printed
thereon as the Corporation may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be
required to comply with any law, rule, regulation or judicial or
administrative order or with any rule or regulation made pursuant
thereto or with any rule or regulation of any self-regulatory
organization, stock exchange or quotation system on which the
Rights may from time to time be listed or traded, or to conform to
usage, and (B) a disclosure statement describing the Rights,
provided that a nominee shall be sent the materials provided for in
(A) and (B) in respect of all Common Shares held of record by it
which are not Beneficially Owned by an Acquiring Person. In order
for the Corporation to determine whether any Person is holding
Common Shares which are Beneficially Owned by another Person, the
Corporation may require such first mentioned Person to furnish it
with such information and documentation as the Corporation
considers advisable.
(d) EXERCISE OF RIGHTS. Rights may be exercised in whole or in part on
any Business Day after the Separation Time and prior to the
Expiration Time by submitting to the Rights Agent the Rights
Certificate evidencing such Rights together with an election to
exercise such Rights (an "Election to Exercise") substantially in
the form attached to the Rights Certificate duly completed,
accompanied by payment in cash, by certified cheque, banker's draft
or money order payable to the order of the Corporation, of a sum
equal to the Exercise Price multiplied by the number of Rights
being exercised and a sum sufficient to cover any transfer tax or
charge which may be payable in respect of any transfer involved in
the transfer or delivery of Rights Certificates or the issuance or
delivery of certificates for Common Shares in a name other than
that of the holder of the Rights being exercised, all of the above
to be received before the Expiration Time by the Rights Agent at
its principal office in any of the cities listed on the Rights
Certificate.
(e) DUTIES OF RIGHTS AGENT UPON RECEIPT OF ELECTION TO EXERCISE. Upon
receipt of a Rights Certificate, which is accompanied by a
completed Election to Exercise that does not indicate that such
Right is null and void as provided by Subsection 3.1(b) hereof, and
payment as set forth in Subsection 2.2(d) above, the Rights Agent
(unless otherwise instructed by the Corporation) will thereupon
promptly:
(i) requisition from the transfer agent for the Common
Shares certificates representing the number of Common
Shares to be purchased (the Corporation hereby
irrevocably authorizing its transfer agent to comply
with all such requisitions);
(ii) when appropriate, requisition from the Corporation the
amount of cash to be paid in lieu of issuing fractional
Common Shares;
(iii) after receipt of such certificates, deliver the same to
or upon the order of the registered holder of such Rights
Certificate, registered in such name or names as may be
designated by such registered holder;
(iv) when appropriate, after receipt, deliver such cash (less
any amounts required to be withheld) to or to the order of
the registered holder of the Rights Certificate; and
(v) tender to the Corporation all payments received on
exercise of the Rights.
(f) PARTIAL EXERCISE OF RIGHTS. In case the holder of any Rights shall
exercise less than all of the Rights evidenced by such holder's
Rights Certificate, a new Rights Certificate evidencing the Rights
remaining unexercised will be issued by the Rights Agent to such
holder or to such holder's duly authorized assigns.
(g) DUTIES OF THE CORPORATION. The Corporation covenants and agrees
that it will:
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(i) take all such action as may be necessary and within
its power to ensure that all Common Shares or other
securities delivered upon exercise of Rights shall, at
the time of delivery of the certificates for such
shares (subject to payment of the Exercise Price), be
duly and validly authorized, executed, issued and
delivered and fully paid and non-assessable;
(iii) use reasonable efforts to cause all Common Shares issued
upon exercise of Rights to be listed upon issuance on the
principal stock exchanges on which the Common Shares were
traded prior to the Stock Acquisition Date;
(iv) cause to be reserved and kept available out of its
authorized and unissued Common Shares, the number of
Common Shares that, as provided in this Agreement,
will from time to time be sufficient to permit the
exercise in full of all outstanding Rights;
(v) pay when due and payable any and all Canadian and, if
applicable, United States, federal, provincial and
state transfer taxes and charges (but for greater
certainty, not including any income or capital taxes
of the holder or exercising holder or any liability of
the Corporation to withhold tax) which may be payable
in respect of the original issuance or delivery of the
Rights Certificates, provided that the Corporation
shall not be required to pay any transfer tax or
charge which may be payable in respect of any transfer
involved in the transfer or delivery of Rights
Certificates or the issuance or delivery of
certificates for shares or other securities in a name
other than that of the registered holder of the Rights
being transferred or exercised; and
(vi) after the Separation Time, except as permitted by
Sections 5.1 or 5.4 hereof, not take (or permit any
Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such
action will diminish substantially or otherwise
eliminate the benefits intended to be afforded by the
Rights.
2.3 ADJUSTMENTS TO EXERCISE PRICE; NUMBER OF RIGHTS
The Exercise Price, the number and kind of Common Shares or other
securities subject to purchase upon exercise of each Right and the number of
Rights outstanding are subject to adjustment from time to time as provided in
this Section 2.3.
(a) ADJUSTMENT TO EXERCISE PRICE UPON CHANGES TO SHARE CAPITAL. In the
event the Corporation shall at any time after the Record Time:
(i) declare or pay a dividend on the Common Shares payable
in Common Shares (or other securities exchangeable for
or convertible into or giving a right to acquire
Common Shares or other securities) other than the
issue of Common Shares or such exchangeable or
convertible securities to holders of Common Shares in
lieu of but not in an amount which exceeds the value
of regular periodic cash dividends;
(ii) subdivide or change the outstanding Common Shares into
a greater number of Common Shares;
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(iii) combine or change the outstanding Common Shares into a
smaller number of Common Shares or;
(iv) issue any Common Shares (or other securities
exchangeable for or convertible into or giving a right
to acquire Common Shares or other securities) in
respect of, in lieu of or in exchange for existing
Common Shares, except as otherwise provided in this
Section 2.3;
the Exercise Price in effect at the time of the record date for
such dividend or of the effective date of such subdivision,
combination or reclassification, and the number and kind of Common
Shares or other securities, as the case may be, issuable on such
date, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive, upon
payment of the Exercise Price then in effect, the aggregate number
and kind of Common Shares or other securities, as the case may be,
which, if such Right had been exercised immediately prior to such
date and at a time when the share transfer books of the Corporation
were open, such holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision,
combination or reclassification. If an event occurs which would
require an adjustment under both this Section 2.3 and Section 3.1
hereof, the adjustment provided for in this Section 3.1 shall be in
addition to, and shall be made prior to, any adjustment required
pursuant to Section 3.1 hereof.
(b) ADJUSTMENT TO EXERCISE PRICE UPON ISSUE OF RIGHTS, OPTIONS AND
WARRANTS. In case the Corporation shall at any time after the
Record Time fix a record date for the issuance of rights, options
or warrants to all holders of Common Shares entitling them (for a
period expiring within forty-five (45) calendar days after such
record date) to subscribe for or purchase Common Shares (or shares
having the same rights, privileges and preferences as Common Shares
("equivalent common shares")) or securities convertible into or
exchangeable for or carrying a right to purchase Common Shares or
equivalent common shares at a price per Common Share or per
equivalent common share (or having a conversion price or exchange
price or exercise price per share, if a security convertible into
or exchangeable for or carrying a right to purchase Common Shares
or equivalent common shares) less than ninety percent (90%) of the
Market Price per Common Share on such record date, the Exercise
Price to be in effect after such record date shall be determined by
multiplying the Exercise Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the
number of Common Shares outstanding on such record date, plus the
number of Common Shares that the aggregate offering price of the
total number of Common Shares and/or equivalent common shares so to
be offered (and/or the aggregate initial conversion, exchange or
exercise price of the convertible or exchangeable securities or
rights so to be offered, including the price required to be paid to
purchase such convertible or exchangeable securities or rights so
to be offered) would purchase at such Market Price per Common
Share, and the denominator of which shall be the number of Common
Shares outstanding on such record date, plus the number of
additional Common Shares and/or equivalent common shares to be
offered for subscription or purchase (or into which the convertible
or exchangeable securities are initially convertible, exchangeable
or exercisable). In case such subscription price may be paid by
delivery of consideration, part or al of which may be in a form
other than cash, the value of such consideration shall be as
determined in good faith by the Board of Directors, whose
determination shall be described in a certificate filed with the
Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Such adjustment shall be made successively
whenever such a record date is fixed, and in the event that such
rights or warrants are not so issued, the Exercise Price shall be
adjusted to be the Exercise Price which would then be in effect if
such record date had not been fixed.
For purposes of this Agreement, the granting of the right to
purchase Common Shares (or equivalent common shares) (whether from
treasury shares or otherwise) pursuant to any dividend or interest
reinvestment plan and/or any Common Share purchase plan providing
for the reinvestment of dividends or interest payable on securities
of the Corporation and/or the
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investment of periodic optional payments or any employee benefit,
stock option or similar plans (so long as such right to purchase is
in no case evidenced by the delivery of rights or warrants) shall
not be deemed to constitute an issue of rights, options or warrants
by the Corporation; provided, however, that, in all such cases, the
right to purchase Common Shares (or equivalent common shares) is at
a price per share of not less than ninety percent (90%) of the
current market price per share (determined as provided in such
plans) of the Common Shares.
(c) ADJUSTMENT TO EXERCISE PRICE UPON CORPORATE DISTRIBUTIONS. In case
the Corporation shall at anytime after the Record Time fix a record
date for a distribution to all holders of Common Shares (including
any such distribution made in connection with a merger,
amalgamation, arrangement, plan, compromise or reorganization in
which the Corporation is the continuing or successor corporation)
of evidences of indebtedness, cash (other than a regular periodic
cash dividend or a regular periodic cash dividend paid in Common
Shares, but including any dividend payable in securities other than
Common Shares), assets or subscription rights, options or warrants
(excluding those referred to in Subsection 2.3(b) above), at a
price per Common Share that is less than ninety percent (90%) of
the Market Price per Common Share on the second Trading Day
immediately preceding such record date, the Exercise Price to be in
effect after such record date shall be determined by multiplying
the Exercise Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the Market Price per
Common Share on such record date, less the fair market value (as
determined in good faith by the Board of Directors, whose
determination shall be described in a statement filed with the
Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights) of the portion of the cash, assets or
evidences of indebtedness so to be distributed or of such
subscription rights, options or warrants applicable to a Common
Share and the denominator of which shall be such Market Price per
Common Share. Such adjustments shall be made successively whenever
such a record date is fixed, and in the event that such
distribution is not so made, the Exercise Price shall be adjusted
to be the Exercise Price which would have been in effect if such
record date had not been fixed.
(d) DE MINIMIS THRESHOLD FOR ADJUSTMENT TO EXERCISE PRICE.
Notwithstanding anything herein to the contrary, no adjustment in
the Exercise Price shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the
Exercise Price; provided, however, that any adjustments which by
reason of this Subsection 2.3(d) are not required to be made shall
be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 2.3 shall be made
to the nearest cent or to the nearest one-hundredth of a Common
Share or other share, as the case may be. Notwithstanding the first
sentence of this Subsection 2.3(d), any adjustment required by this
Section 2.3 shall be made no later than the earlier of: (i) three
(3) years from the date of the transaction which mandates such
adjustment; and (ii) the Expiration Time.
(e) CORPORATION MAY PROVIDE FOR ALTERNATE MEANS OF ADJUSTMENT. Subject
to the prior consent of the holders of Voting Shares or Rights
obtained as set forth in Subsections 5.4(b) or 5.4(c) hereof, as
applicable, in the event the Corporation shall at any time after
the Record Time issue any shares of capital stock (other than
Common Shares), or rights or warrants to subscribe for or purchase
any such capital stock, or securities convertible into or
exchangeable for any such capital stock, in a transaction referred
to in Clauses 2.3(a)(i) or 2.3(a)(iv) or Subsections 2.3(b) or
2.3(c) above, if the Board of Directors acting in good faith
determines that the adjustments contemplated by Subsections 2.3(a),
(b) and (c) above in connection with such transaction will not
appropriately protect the interests of the holders of Rights, the
Corporation shall be entitled to determine what other adjustments
to the Exercise Price, number of Rights and/or securities
purchasable upon exercise of Rights would be appropriate and,
notwithstanding Subsections 2.3(a), (b) and (c) above, such
adjustments, rather than the adjustments contemplated by
Subsections 2.3(a), (b) and (c) above, shall be made. The
Corporation and the Rights Agent shall amend this Agreement as
appropriate to provide for such adjustments.
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(f) ADJUSTMENT TO RIGHTS EXERCISABLE INTO SHARES OTHER THAN COMMON
SHARES. If as a result of an adjustment made pursuant to Section
3.1 hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares other than Common Shares,
thereafter the number of such other shares so receivable upon
exercise of any Right and the Exercise Price thereof shall be
subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to
the Common Shares contained in this Section 2.3, and the provisions
of this Agreement with respect to the Common Shares shall apply on
like terms to any such other shares.
(g) RIGHTS TO EVIDENCE RIGHT TO PURCHASE COMMON SHARES AT ADJUSTED
EXERCISE PRICE. Each Right originally issued by the Corporation
subsequent to any adjustment made to the Exercise Price hereunder
shall evidence the right to purchase, at the adjusted Exercise
Price, the number of Common Shares purchasable from time to time
hereunder upon exercise of such Right, all subject to further
adjustment as provided herein.
(h) ADJUSTMENT TO NUMBER OF COMMON SHARES PURCHASABLE UPON ADJUSTMENT
TO EXERCISE PRICE. Unless the Corporation shall have exercised its
election as provided in Subsection 2.3(i) below, upon each
adjustment of the Exercise Price as a result of the calculations
made in Subsections 2.3 (b) and (c) above, each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Exercise Price,
that number of Common Shares (calculated to the nearest one
ten-thousandth) obtained by: (i) multiplying (A) the number of
shares purchasable upon exercise of a Right immediately prior to
this adjustment by (B) the Exercise Price in effect immediately
prior to such adjustment of the Exercise Price; and (ii) dividing
the product so obtained by the Exercise Price in effect immediately
after such adjustment of the Exercise Price.
(i) ELECTION TO ADJUST NUMBER OF RIGHTS UPON ADJUSTMENT TO EXERCISE
PRICE. The Corporation shall be entitled to elect on or after the
date of any adjustment of the Exercise Price to adjust the number
of Rights, in lieu of any adjustment in the number of Common Shares
purchasable upon the exercise of a Right. Each of the Rights
outstanding after the adjustment in the number of Rights shall be
exercisable for the number of Common Shares for which a Right was
exercisable immediately prior to such adjustment. Each Right held
of record prior to such adjustment of the number of Rights shall
become that number of Rights (calculated to the nearest one ten
thousandth) obtained by dividing the Exercise Price in effect
immediately prior to adjustment of the Exercise Price by the
Exercise Price in effect immediately after adjustment of the
Exercise Price. The Corporation shall make a public announcement of
its election to adjust the number of Rights, indicating the record
date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on
which the Exercise Price is adjusted or any day thereafter, but, if
Rights Certificates have been issued, shall be at least ten (10)
days later than the date of the public announcement. If Rights
Certificates have been issued, upon each adjustment of the number
of Rights pursuant to this Subsection 2.3(i), the Corporation
shall, as promptly as practicable, cause to be distributed to
holders of record of Rights Certificates on such record date Rights
Certificates evidencing, subject to Section 5.5 hereof, the
additional Rights to which such holders shall be entitled as a
result of such adjustment, or, at the option of the Corporation,
shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by
such holders prior to the date of adjustment, and upon surrender
thereof, new Rights Certificates evidencing all the Rights to which
such holders shall be entitled after such adjustment. Rights
Certificates so to be distributed shall be issued, executedand
countersigned in the manner provided for herein and may bear, at
the option of the Corporation, the adjusted Exercise Price and
shall be registered in the names of the holders of record of Rights
Certificates on the record date for the adjustment specified in the
public announcement.
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(j) RIGHTS CERTIFICATES MAY CONTAIN EXERCISE PRICE BEFORE ADJUSTMENT.
Irrespective of any adjustment or change in the Exercise Price or
the number of Common Shares issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued
may continue to express the Exercise Price per share and the number
of Common Shares which were expressed in the initial Rights
Certificates issued hereunder.
(k) CORPORATION MAY IN CERTAIN CASES DEFER ISSUES OF SECURITIES. In any
case in which this Section 2.3 shall require that an adjustment in
the Exercise Price be made effective as of a record date for a
specified event, the Corporation may elect to defer until the
occurrence of such event the issuance to the holder of any Right
exercised after such record date of the number of Common Shares and
other securities of the Corporation, if any, issuable upon such
exercise over and above the number of Common Shares and other
securities of the Corporation, if any, issuable upon such exercise
on the basis of the Exercise Price in effect prior to such
adjustment; provided, however, that the Corporation shall deliver
to such holder an appropriate instrument evidencing such holder's
right to receive such additional Common Shares (fractional or
otherwise) or other securities upon the occurrence of the event
requiring such adjustment.
(l) CORPORATION HAS DISCRETION TO REDUCE EXERCISE PRICE FOR TAX
REASONS. Notwithstanding anything in this Section 2.3 to the
contrary, the Corporation shall be entitled to make such reductions
in the Exercise Price, in addition to those adjustments expressly
required by this Section 2.3 as and to the extent that in their
good faith judgement, the Board of Directors shall determine to be
advisable in order that any: (i) consolidation or subdivision of
the Common Shares; (ii) issuance of any Common Shares at less than
the Market Price; (iii) issuance of securities convertible into or
exchangeable for Common Shares; (iv) stock dividends; or (v)
issuance of rights, options or warrants, referred to in this
Section 2.3 hereafter made by the Corporation to holders of its
Common Shares, shall not be taxable to such shareholders.
2.4 DATE ON WHICH EXERCISE IS EFFECTIVE
Each person in whose name any certificate for Common Shares is issued
upon the exercise of Rights, shall for all purposes be deemed to have become the
holder of record of the Common Shares represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered (together with a duly completed
Election to Exercise) and payment of the Exercise Price for such Rights (and any
applicable transfer taxes and other governmental charges payable by the
exercising holder hereunder) was made, provided, however, that if the date of
such surrender and payment is a date upon which the Common Share transfer books
of the Corporation are closed, such person shall be deemed to have become the
record holder of such shares on, and such certificate shall be dated, the next
succeeding Business Day on which the Common Share transfer books of the
Corporation are open.
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2.5 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS CERTIFICATES
(a) The Rights Certificates shall be executed on behalf of the
Corporation by any of the Chairman, the President, the Chief
Financial Officer, or any Vice President, together with any other
of such Persons or together with any one of its Secretary or
Treasurer. The signature of any of these officers on the Rights
Certificates may be manual or facsimile. Rights Certificates
bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Corporation shall bind the
Corporation, notwithstanding that such individuals or any of them
have ceased to hold such offices prior to the countersignature and
delivery of such Rights Certificates.
(b) Promptly after the Corporation learns of the Separation Time, the
Corporation will notify the Rights Agent of such Separation Time
and will deliver Rights Certificates executed by the Corporation to
the Rights Agent for countersignature, and the Rights Agent shall
manually countersign and send such Rights Certificates to the
holders of the Rights pursuant to Subsection 2.2(c) hereof. No
Rights Certificate shall be valid for any purpose until
countersigned by the Rights Agent as aforesaid.
(c) Each Rights Certificate shall be dated the date of countersignature
thereof.
2.6 REGISTRATION, REGISTRATION OF TRANSFER AND EXCHANGE
(a) After the Separation Time, the Corporation will cause to be kept a
register (the "Rights Register") in which, subject to such
reasonable regulations as it may prescribe, the Corporation will
provide for the registration and transfer of Rights. The Rights
Agent is hereby appointed the "Rights Registrar" for the purpose of
maintaining the Rights Register for the Corporation and registering
Rights and transfers of Rights as herein provided. In the event
that the Rights Agent shall cease to be the Rights Registrar, the
Rights Agent will have the right to examine the Rights Register at
all reasonable times.
After the Separation Time and prior to the Expiration Time, upon
surrender for registration of transfer or exchange of any Rights
Certificate and subject to the provisions of Subsection 2.6(c)
below and the other provisions of this Agreement, the Corporation
will execute and the Rights Agent will manually countersign and
deliver, in the name of the holder or the designated transferee or
transferees as required pursuant to the holder's instructions, one
or more new Rights Certificates evidencing the same aggregate
number of Rights as did the Rights Certificates so surrendered.
(b) All Rights issued upon any registration of transfer or exchange of
Rights Certificates shall be the valid obligations of the
Corporation, and such Rights shall be entitled to the same benefits
under this Agreement as the Rights surrendered upon such
registration of transfer or exchange.
(c) Every Rights Certificate surrendered for registration of transfer
or exchange shall be duly endorsed, or be accompanied by a written
instrument of transfer in form satisfactory to the Corporation or
the Rights Agent, as the case may be, duly executed by the holder
thereof or such holder's attorney duly authorized in writing. As a
condition to the issuance of any new Rights Certificate under this
Section 2.6, the Corporation or the Rights Agent may require the
payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in relation thereto and the Corporation
may require payment of a sum sufficient to cover any other expenses
(including the fees and expenses of the Rights Agent) in connection
therewith.
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2.7 MUTILATED, DESTROYED, LOST AND STOLEN RIGHT CERTIFICATES
(a) If any mutilated Rights Certificate is surrendered to the Rights
Agent prior to the Expiration Time, the Corporation shall execute
and the Rights Agent shall manually countersign and deliver in
exchange therefor a new Rights Certificate evidencing the same
number of Rights as did the Rights Certificate so surrendered.
(b) If there shall be delivered to the Corporation and the Rights Agent
prior to the Expiration Time: (i) evidence to their reasonable
satisfaction of the destruction, loss or theft of any Rights
Certificate; and (ii) such indemnity or other security as may be
required by them to save each of them and any of their agents
harmless, then, in the absence of notice to the Corporation or the
Rights Agent that such Rights Certificate has been acquired by a
BONA FIDE purchaser, the Corporation shall execute and upon its
request the Rights Agent shall countersign and deliver, in lieu of
any such destroyed, lost or stolen Rights Certificate, a new Rights
Certificate evidencing the same number of Rights as did the Rights
Certificate so destroyed, lost or stolen.
(c) As a condition to the issuance of any new Rights Certificate under
this Section 2.7, the Corporation or the Rights Agent may require
the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and the
Corporation may require payment of a sum sufficient to cover any
other expenses (including the fees and expenses of the Rights
Agent) in connection therewith.
(d) Every new Rights Certificate issued pursuant to this Section 2.7 in
lieu of any destroyed, lost or stolen Rights Certificate shall
evidence an original additional contractual obligation of the
Corporation, whether or not the destroyed lost or stolen Rights
Certificate shall be at any time enforceable by anyone, and the
holder thereof shall be entitled to all the benefits of this
Agreement equally and proportionately with any and all other
holders of Rights duly issued by the Corporation.
2.8 PERSONS DEEMED OWNERS
Prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) for registration of
transfer, the Corporation, the Rights Agent and any agent of the Corporation or
the Rights Agent shall be entitled to deem and treat the person in whose name a
Rights Certificate (or, prior to the Separation Time, the associated Common
Share certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby for all purposes whatsoever. As used in this Agreement, unless
the context otherwise requires, the term "holder" of any Rights shall mean the
registered holder of such Rights (or, prior to the Separation Time, the
associated Common Shares).
2.9 DELIVERY AND CANCELLATION OF RIGHTS CERTIFICATES
All Rights Certificates surrendered upon exercise or for redemption,
registration of transfer or exchange shall, if surrendered to any person other
than the Rights Agent, be delivered to the Rights Agent and, in any case, shall
be promptly cancelled by the Rights Agent. The Corporation may at any time
deliver to the Rights Agent for cancellation any Rights Certificates previously
countersigned and delivered hereunder which the Corporation may have acquired in
any manner whatsoever, and all Rights Certificates so delivered shall be
promptly cancelled by the Rights Agent. No Rights Certificate shall be
countersigned in lieu of or in exchange for any Rights Certificates cancelled as
provided in this Section 2.9 except as expressly permitted by this Agreement.
The Rights Agent shall destroy all cancelled Rights Certificates and deliver a
certificate of destruction to the Corporation.
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2.10 AGREEMENT OF RIGHTS HOLDERS
Every holder of Rights, by accepting the same, consents and agrees with
the Corporation and the Rights Agent and with every other holder of Rights:
(i) to be bound by and subject to the provisions of this Agreement,
as amended or supplemented from time to time in accordance with
the terms hereof, in respect of all Rights held;
(ii) that prior to the Separation Time each Right will be
transferable only together with, and will be transferred by a
transfer of, the associated Common Share certificate
representing such Right;
(iii) that after the Separation Time, the Rights Certificates will
be transferable only on the Rights Register as provided
herein;
(iv) that prior to due presentment of a Rights Certificate (or,
prior to the Separation Time, the associated Common Share
certificate) for registration of transfer, the Corporation, the
Rights Agent and any agent of the Corporation or the Rights
Agent shall be entitled to deem and treat the person in whose
name the Rights Certificate (or prior to the Separation Time,
the associated Common Share certificate) is registered as the
absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on such
Rights Certificate or the associated Common Share certificate
made by anyone other than the Corporation or the Rights Agent)
for all purposes whatsoever, and neither the Corporation nor
the Rights Agent shall be affected by any notice to the
contrary;
(v) that such holder of Rights has waived his or her right to receive
any fractional Rights or any fractional Common Shares upon exercise
of Rights except as provided herein; and
(vi) that without the approval of any holder of Rights and upon the sole
authority of the Board of Directors acting in good faith this
Agreement may be supplemented or amended from time to time pursuant
to and as provided herein.
2.11 RIGHTS CERTIFICATE HOLDER NOT DEEMED A SHAREHOLDER
No holder, as such, of any Rights or Rights Certificate shall be
entitled to vote, receive dividends or be deemed for any purpose whatsoever the
holder of any Common Share or any other share or security of the Corporation
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed or deemed to confer upon the holder of any Right or Rights
Certificate, as such, any of the rights, titles, benefits or privileges of a
holder of Common Shares or any other shares or securities of the Corporation or
any right to vote at any meeting of shareholders of the Corporation whether for
the election of directors or otherwise or upon any matter submitted to holders
of shares of the Corporation at any meeting thereof, or to give or withhold
consent to any action of the Corporation, or to receive notice of any meeting or
other action affecting any holder of Common Shares or any other shares or
securities of the Corporation except as expressly provided herein, or to receive
dividends, distributions or subscription rights, or otherwise, until the Right
or Rights evidenced by Rights Certificates shall have been duly exercised in
accordance with the terms and provisions hereof.
ARTICLE 3--ADJUSTMENTS TO THE RIGHTS
IN THE EVENT OF CERTAIN TRANSACTIONS
3.1 FLIP-IN EVENT
(a) Subject to Subsection 3.1(b), and Subsections 5.1(b), 5.1(c) and
5.1(d) hereof, in the event that prior to the Expiration Time a
Flip-in Event shall occur, the Corporation shall take such action
as
<PAGE>
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may be necessary to ensure and provide within eight (8) Trading
Days of such occurrence, or such longer period as may be required
to satisfy all applicable requirements of the SECURITIES ACT
(Ontario), and the securities legislation of each other province of
Canada and, if applicable, of the United States of America that,
except as provided below, each Right shall thereafter constitute
the right to purchase from the Corporation upon exercise thereof in
accordance with the terms hereof that number of Common Shares of
the Corporation having an aggregate Market Price on the date of the
consummation or occurrence of such Flip-in Event equal to twice the
Exercise Price for an amount in cash equal to the Exercise Price
(such Right to be appropriately adjusted in a manner analogous to
the applicable adjustment provided for in Section 2.3 hereof in the
event that after such date of consummation or occurrence an event
of a type analogous to any of the events described in Section 2.3
hereof shall have occurred with respect to such Common Shares).
(b) Notwithstanding anything in this Agreement to the contrary, upon
the occurrence of any Flip-in Event, any Rights that are or were
Beneficially Owned on or after the earlier of the Separation Time,
and the Stock Acquisition Date by: (i) an Acquiring Person (or any
Affiliate or Associate of an Acquiring Person or any Person acting
jointly or in concert with an Acquiring Person or any Affiliate or
Associate of such Acquiring Person); or (ii) a transferee or other
successor in title directly or indirectly of Rights held by an
Acquiring Person (or of any Affiliate or Associate of an Acquiring
Person or of any Person acting jointly or in concert with an
Acquiring Person or any Associate or Affiliate of an Acquiring
Person) who becomes a transferee or successor in title concurrently
with or subsequent to the Acquiring Person becoming an Acquiring
Person; shall become null and void without any further action, and
any holder of such Rights (including transferees or successors in
title) shall not have any rights whatsoever to exercise such Rights
under any provision of this Agreement and shall not have thereafter
any other rights whatsoever with respect to such Rights, whether
under any provision of this Agreement or otherwise.
ARTICLE 4--THE RIGHTS AGENT
4.1 GENERAL
(a) The Corporation hereby appoints the Rights Agent to act as agent
for the Corporation in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The
Corporation may from time to time appoint such co-Rights Agents as
it may deem necessary or desirable. In the event the Corporation
appoints one or more co-Rights Agents, the respective duties of the
Rights Agents and co-Rights Agents shall be as the Corporation may
determine. The Corporation agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder
and, from time to time, on demand of the Rights Agent, its
reasonable expenses and other disbursements incurred in the
administration and execution of this Agreement and the exercise and
performance of its duties hereunder. The Corporation also agrees to
indemnify the Rights Agent for, and to hold it harmless against,
any loss, liability, or expense incurred that is not the result of
negligence, bad faith or wilful misconduct on the part of the
Rights Agent, its officers or employees, for anything done or
omitted by the Rights Agent in connection with the acceptance and
administration of this Agreement, including the costs and expenses
of defending against any claim of liability, which right to
indemnification will survive the termination of this Agreement.
(b) The Rights Agent shall be protected from and shall incur no
liability for or in respect of any action taken, suffered or
omitted by it in connection with its administration of this
Agreement in reliance upon any certificate for Common Shares or any
Rights Certificate or certificate for other securities of the
Corporation, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction,
consent, certificate, statement, or other paper or document
believed by it to be genuine and to be signed, executed and, where
necessary, verified or acknowledged, by the proper Person or
Persons.
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4.2 MERGER OR AMALGAMATION OR CHANGE OF NAME OF RIGHTS AGENT
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or amalgamated or with which it may be
consolidated, or any corporation resulting from any merger,
amalgamation, statutory arrangement or consolidation to which the
Rights Agent or any successor Rights Agent is a party, or any
corporation succeeding to the shareholder or stockholder services
business of the Rights Agent or any successor Rights Agent, will be
the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of
any of the parties hereto, provided that such corporation would be
eligible for appointment as a successor Rights Agent under the
provisions of Section 4.4 hereof. In case at the time such
successor Rights Agent succeeds to the agency created by this
Agreement any of the Rights Certificates have been countersigned
but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such
Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates have not been countersigned, any
successor Rights Agent may countersign such Rights Certificates
either in the name of the predecessor Rights Agent or in the name
of the successor Rights Agent; and in all such cases such Rights
Certificates will have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is changed and at
such time any of the Rights Certificates shall have been
countersigned but not delivered, the Rights Agent may adopt the
countersignature under its prior name and deliver Rights
Certificates so countersigned; and in case at that time any of the
Rights Certificates shall not have been countersigned, the Rights
Agent may countersign such Rights Certificates either in its prior
name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
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4.3 DUTIES OF RIGHTS AGENT
The Rights Agent undertakes the duties and obligations imposed by this
Agreement upon the following terms and conditions, to all of which the
Corporation and the holders of Rights Certificates, by their acceptance thereof,
shall be bound.
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation) and the opinion of such counsel will
be full and complete authorization and protection to the Rights
Agent as to any action taken or omitted to be taken by it in good
faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent deems it necessary or desirable that any fact or
matter be proved or established by the Corporation prior to taking
or suffering any action hereunder, such fact or matter (unless
other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proven and established
by a certificate signed by a person believed by the Rights Agent to
be the Chairman, the President, the Chief Financial Officer, or any
Vice-President, the Treasurer or the Secretary of the Corporation
and delivered to the Rights Agent; and such certificate will be
full authorization to the Rights Agent for any action taken or
suffered in good faith by it under the provisions of this Agreement
in reliance upon such certificate.
(c) The Rights Agent will be liable hereunder only for events which are
the result of its own negligence, bad faith or wilful misconduct
and that of its officers, employees and other representatives.
(d) The Rights Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in
the certificates for Common Shares or the Rights Certificates
(except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and will be deemed
to have been made by the Corporation only.
(e) The Rights Agent will not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof
(except the due authorization, execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any
Common Share certificate or Rights Certificate (except its
countersignature thereof); nor will it be responsible for any
breach by the Corporation of any covenant or condition contained in
this Agreement or in any Rights Certificate; nor will it be
responsible for any change in the exercisability of the Rights
(including the Rights becoming void pursuant to Subsection 3.1(b)
hereof) or any adjustment required under the provisions of Section
2.3 hereof or responsible for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the
exercise of Rights after receipt of the certificate contemplated by
Section 2.3 hereof describing any such adjustment); nor will it by
any act hereunder be deemed to make any representation or warranty
as to the authorization of any Common Shares to be issued pursuant
to this Agreement or any Rights or as to whether any Common Shares
will, when issued, be duly and validly authorized, executed, issued
and delivered or fully paid and non-assessable.
(f) The Corporation agrees that it will perform, execute, acknowledge
and deliver or cause to be performed, executed, acknowledged, and
delivered all such further and other acts, instruments and
assurances as may reasonably be required by the Rights Agent for
the carrying out or performing by the Rights Agent of the
provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties
hereunder from any person believed by the Rights Agent to be the
Chairman, the President, the Chief Financial Officer, any
Vice-President, the Treasurer or the
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Secretary of the Corporation and to apply to such persons for
advice or instructions in connection with its duties, and it shall
not be liable for any action taken or suffered by it in good faith
in accordance with instructions of any such person.
(h) The Rights Agent and any shareholder or stockholder, director,
officer or employee of the Rights Agent may buy, sell or deal in
Common Shares, Rights or other securities of the Corporation or
become pecuniarily interested in any transaction in which the
Corporation may be interested or contract with or lend money to the
Corporation or otherwise act as fully and freely as though it were
not Rights Agent under this Agreement. Nothing herein shall
preclude the Rights Agent from acting in any other capacity for the
Corporation or for any other legal entity.
(i) The Corporation agrees that it shall pay the Rights Agent for the
services provided hereunder in accordance with the tariff of fees
as agreed to in writing by the Corporation and the Rights Agent and
shall reimburse the Rights Agent for all costs and expenses,
including legal fees incurred in the carrying out of duties
hereunder.
4.4 CHANGE OF RIGHTS AGENT
The Rights Agent may resign and be discharged from its duties under
this Agreement upon ninety (90) days' notice (or such lesser notice as is
acceptable to the Corporation) in writing mailed to the Corporation and to each
transfer agent of Voting Shares of the Corporation by registered or certified
mail, and to the holders of the Rights in accordance with Section 5.8 hereof.
The Corporation may remove the Rights Agent upon thirty (30) days' notice in
writing, mailed to the Rights Agent and to each transfer agent of the Voting
Shares of the Corporation by registered or certified mail and to the holders of
the Rights in accordance with Section 5.8 hereof. If the Rights Agent should
resign or be removed or otherwise become incapable of acting, the Corporation
will appoint a successor to the Rights Agent. If the Corporation fails to make
such appointment within a period of sixty (60) days after such removal or after
it has been notified in writing of such resignation or incapacity by the
resigning or incapacitated Rights Agent or by the holder of any Rights (which
holder shall, with such notice, submit such holder's Rights Certificate for
inspection by the Corporation), then the holder of any Rights may apply to any
court of competent jurisdiction for the appointment of a new Rights Agent. Any
successor Rights Agent, whether appointed by the Corporation or by such a court,
shall be a corporation incorporated under the laws of Canada or a province
thereof authorized to carry on the business of a trust company in the Province
of Ontario. After appointment, the successor Rights Agent will be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointmen. the Corporation will file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Voting Shares of the Corporation, and mail a notice thereof in writing to
the holders of the Rights. The cost of giving any notice required under this
Section 4.4 shall be borne solely by the Corporation. Failure to give any notice
provided for in this Section 4.4 however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.
ARTICLE 5--MISCELLANEOUS
5.1 REDEMPTION AND WAIVER
(a) Subject to the prior consent of the holders of Voting Shares or the
holders of Rights obtained as set forth in Subsections 5.4(b) or
5.4(c) hereof, as applicable, the Board of Directors acting in good
faith may, at any time prior to the occurrence of a Flip-in Event
as to which the application of Section 3.1 has not been waived
pursuant to this Section 5.1, elect to redeem all but not less than
all of the then outstanding Rights at a redemption price of $0.0001
per Right appropriately
<PAGE>
- 25 -
adjusted in a manner analogous to the applicable adjustment
provided for in Section 2.3 hereof in the event that an event of
the type described in Section 2.3 hereof shall have occurred (such
redemption price being herein referred to as the "Redemption
Price").
(b) Subject to the prior consent of the holders of Voting Shares
obtained as set forth in Subsection 5.4(b) hereof, the Board of
Directors acting in good faith may, prior to the occurrence of a
Flip-in Event as to which the application of Section 3.1 has not
been waived pursuant to this Section 5.1, and upon prior written
notice to the Rights Agent, determine to waive the application of
Section 3.1 hereof to a Flip-in Event which may occur by reason of
an acquisition of Voting Shares made otherwise than pursuant to a
Take-over Bid made by means of a take-over bid circular to all
holders of record of Voting Shares (which for greater certainty
shall not include the circumstances described in Subsection 5.1(h)
below). In the event that the Board of Directors proposes such a
waiver, the Board of Directors shall extend the Separation Time to
a date subsequent to and not more than ten (10) Business Days
following the meeting of shareholders called to approve such
waiver.
(c) The Board of Directors acting in good faith may, prior to the
occurrence of a Flip-in Event as to which the application of
Section 3.1 has not been waived pursuant to this Section 5.1, and
upon prior written notice delivered to the Rights Agent, determine
to waive the application of Section 3.1 hereof to a Flip-in Event
which may occur by reason of a Take-over Bid made by means of a
take-over bid circular to all holders of Voting Shares (which for
greater certainty shall not include the circumstances described in
Subsection 5.1(h) below); provided that if the Board of Directors
waives the application of Section 3.1 hereof to a particular
Flip-in Event pursuant to this Subsection 5.1(c), the Board of
Directors shall be deemed to have waived the application of Section
3.1 hereof to any other Flip-in Event occurring by reason of any
Take-over Bid made by means of a take-over bid circular to all
holders of record of Voting Shares prior to the expiry of any
Take-over Bid (as the same may be extended from time to time) in
respect of which a waiver is, or is deemed to have been, granted
pursuant to this Subsection 5.1(c).
(d) Notwithstanding the provisions of Subsections 5.1(b) and (c)
hereof, the Board of Directors may, prior to the close of business
on the eighth (8th) day following the Stock Acquisition Date,
determine, upon prior written notice delivered to the Rights Agent,
to waive or to agree to waive the application of Section 3.1 hereof
to a Flip-in Event, provided that both of the following conditions
are satisfied:
(i) the Board of Directors has determined that a Person
became an Acquiring Person by inadvertence and without
any intention to become, or knowledge that Person
would become, an Acquiring Person; and
(ii) such Acquiring Person has reduced its Beneficial
Ownership of Voting Shares (or has entered into a
contractual arrangement with the Corporation, acceptable
to the Board of Directors, to do so within thirty (30)
days of the date on which such contractual arrangement is
entered into) such that at the time the waiver becomes
effective pursuant to this Subsection 5.1(d), such Person
is no longer an Acquiring Person;
and in the event of such a waiver, for the purposes of this
Agreement, the Flip-in Event shall be deemed never to have
occurred, and the Separation Time shall be deemed not to have
occurred as a result of such Person having inadvertently become an
Acquiring Person.
(e) The Board of Directors shall, without further formality, be deemed
to have elected to redeem the Rights at the Redemption Price on the
date that a Person who has made a Permitted Bid, a Competing
Permitted Bid or an Exempt Acquisition under Subsection 5.1(c)
above, takes up and pays for Voting Shares pursuant to the terms
and conditions of such Permitted Bid, Competing Permitted Bid or
Exempt Acquisition, as the case may be.
<PAGE>
- 26 -
(f) If the Board of Directors elects or is deemed to have elected to
redeem the Rights and, in circumstances in which Subsection 5.1(a)
is applicable, such redemption is approved by the holders of Voting
Shares or the holders of Rights in accordance with Subsection
5.4(b) or (c), as the case may be, the right to exercise the Rights
will thereupon, without further action and without notice,
terminate and each Right will after redemption be null and void and
the only right thereafter of the holders of Rights shall be to
receive the Redemption Price.
(g) Within ten (10) days after the Board of Directors electing or
having been deemed to have elected to redeem the Rights or, if
Subsection 5.1(a) applies, within ten (10) Business Days after the
holders of Voting Shares or the holders of Rights have approved the
redemption of Rights in accordance with Subsection 5.4(b) or (c)
hereof, as the case may be, the Corporation shall give notice of
redemption to the holders of the then outstanding Rights by mailing
such notice to all such holders at their last address as they
appear upon the Rights Register or, prior to the Separation Time,
on the registry books of the Transfer Agent for the Common Shares.
Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each
such notice of redemption will state the method by which the
payment of the Redemption Price will be made. The Corporation may
not redeem, acquire or purchase for value any Rights at any time in
any manner other than that specifically set forth in this Section
5.1 and other than in connection with the purchase of Common Shares
prior to the Separation Time.
(h) Where a Take-over Bid that is not a Permitted Bid Acquisition is
withdrawn or otherwise terminated after the Separation Time has
occurred and prior to the occurrence of a Flip-in Event, the Board
of Directors may elect to redeem all the outstanding Rights at the
Redemption Price. Upon the Rights being redeemed pursuant to
this Subsection 5.1(h), all the provisions of this Agreement shall
continue to apply as if the Separation Time had not occurred and
Rights Certificates representing the number of Rights held by each
holder of record of Common Shares as of the Separation Time had not
been mailed to each such holder and for all purposes of this
Agreement the Separation Time shall be deemed not to have occurred.
5.2 EXPIRATION
No person shall have any rights whatsoever pursuant to or arising out of
this Agreement or in respect of any Right after the Expiration Time, except the
Rights Agent as specified in Subsection 4.1(a) hereof.
5.3 ISSUANCE OF NEW RIGHT CERTIFICATES
Notwithstanding any of the provisions of this Agreement or of the Rights
to the contrary, the Corporation may, at its option, issue new Rights
Certificates evidencing Rights in such form as may be approved by its Board of
Directors to reflect any adjustment or change in the number or kind or class of
shares purchasable upon exercise of Rights made in accordance with the
provisions of this Agreement.
5.4 SUPPLEMENTS AND AMENDMENTS
(a) The Corporation may from time to time supplement or amend this
Agreement without the approval of any holders of Rights or Voting
Shares to correct any clerical or typographical error or to
maintain the validity of the Agreement as a result of a change in
any applicable legislation or regulations thereunder. The
Corporation, at or prior to the meeting of the shareholders, or any
adjournment or postponement thereof, to be held for shareholders of
the Corporation to consider and if deemed advisable, to adopt a
resolution approving, ratifying and confirming this Agreement and
the Rights issued pursuant thereto, may supplement or amend this
Agreement without the approval of any holders of Rights or Voting
Shares in order to make changes which the Board of Directors acting
in good faith may deem necessary or desirable.
<PAGE>
- 27 -
Notwithstanding anything in this Section 5.4 to the contrary, no
supplement or amendment shall be made to the provisions of Article
4 hereof except with the written concurrence of the Rights Agent to
such supplement or amendment.
(b) Subject to Subsection 5.4(a), the Corporation may, with the prior
consent of the holders of the Voting Shares obtained as set forth
below, at any time prior to the Separation Time, amend, vary or
rescind any of the provisions of this Agreement and the Rights
(whether or not such action would materially adversely affect the
interests of the holders of Rights generally). Such consent shall
be deemed to have been given if provided by the holders of Voting
Shares at a meeting of the holders of Voting Shares, which meeting
shall be called and held in compliance with applicable laws and
regulatory requirements and the requirements in the articles and
by-laws of the Corporation. Subject to compliance with any
requirements imposed by the foregoing, consent shall be given if
the proposed amendment, variation or revision is approved by the
affirmative vote of a majority of the votes cast by Independent
Shareholders present in person or represented by proxy and entitled
to be voted at a meeting of the holders of Voting Shares.
(c) Subject to Subsection 5.4(a), the Corporation may, with the prior
consent of the holders of Rights obtained as set forth below, at
any time after the Separation Time and before the Expiration Time,
amend, vary or rescind any of the provisions of this Agreement and
the Rights (whether or not such action would materially adversely
affect the interests of the holders of Rights generally). Any
approval of the holders of Rights shall be deemed to have been
given if the action requiring such approval is authorized by the
affirmative votes of the holders of Rights present in person or
represented by proxy and entitled to be voted at a meeting of the
holders of Rights and representing a majority of the votes cast in
respect thereof. For the purposes hereof, each outstanding Right
(other than Rights which are void pursuant to the provisions
hereof) shall be entitled to one vote, and the procedures for the
calling, holding and conduct of the meeting shall be those, as
nearly as may be, which are provided in the Corporation's by-laws
and the BUSINESS CORPORATIONS ACT (Ontario) with respect to a
meeting of shareholders of the Corporation.
(d) Any supplements or amendments made by the Corporation to this
Agreement pursuant to Subsection 5.4(a) above which are required to
maintain the validity of this Agreement as a result of any change
in any applicable legislation or regulations thereunder shall:
(i) if made before the Separation Time, be submitted to
the shareholders of the Corporation at the next
meeting of shareholders and the shareholders may, by
the majority referred to in Subsection 5.4(b), confirm
or reject such amendment; and
(ii) if made after the Separation Time, be submitted to the
holders of Rights at a meeting to be called for on a
date not later than immediately following the next
meeting of shareholders of the Corporation and the
holders of Rights may, by resolution passed by the
majority referred to in Subsection 5.4(c), confirm or
reject such amendment.
A supplement or amendment shall be effective from the date of the
resolution of the Board of Directors adopting such supplement or amendment until
it is confirmed or rejected or until it ceases to be effective (as described in
the next sentence) and, where such supplement or amendment is confirmed, it
continues in effect in the form so confirmed. If such supplement or amendment is
rejected by the shareholders or the holders of Rights or is not submitted to the
shareholders or holders of Rights as required, then such supplement or amendment
shall cease to be effective from and after the termination of the meeting at
which it was rejected or to which it should have been but was not submitted or
from and after the date of the meeting of holders of Rights that should have
been but was not held, and no subsequent resolution of the Board of Directors to
amend, vary or delete any provision of this Agreement to substantially the same
effect shall be effective until confirmed by the shareholders or holders of
Rights, as the case may be.
<PAGE>
- 28 -
5.5 FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(a) The Corporation shall not be required to issue fractions of Rights
or to distribute Rights Certificates which evidence fractional
Rights. Any such fractional Right shall be null and void and the
Corporation will not have any obligation or liability in respect
thereof.
(b) The Corporation shall not be required to issue fractions of Common
Shares or other securities upon exercise of the Rights or to
distribute certificates which evidence fractional Common Shares or
other securities. In lieu of issuing fractional Common Shares or
other securities, the Corporation shall pay to the registered
holders of Rights Certificates at the time such Rights are
exercised as herein provided, an amount in cash equal to the same
fraction of the Market Price of one Common Share.
5.6 RIGHTS OF ACTION
Subject to the terms of this Agreement, all rights of action in respect
of this Agreement, other than rights of action vested solely in the Rights
Agent, are vested in the respective registered holders of the Rights; and any
registered holder of any Rights, without the consent of the Rights Agent or of
the registered holder of any other Rights, may, on such holder's own behalf and
for such holder's own benefit and the benefit of other holders of Rights
enforce, and may institute and maintain any suit, action or proceeding against
the Corporation to enforce such holder's right to exercise such holder's Rights
in the manner provided in such holder's Rights Certificate and in this
Agreement. Without limiting the foregoing or any remedies available to the
holders of Rights, it is specifically acknowledged that the holders of Rights
would not have an adequate remedy at law for any breach of this Agreement and
will be entitled to specific performance of the obligations under, and
injunctive relief against, actual or threatened violations of the obligations of
any Person subject to this Agreement.
5.7 NOTICE OF PROPOSED ACTIONS
In case the Corporation shall propose after the Separation Time and
prior to the Expiration Time to effect or permit (in cases where the
Corporation's permission is required) any Flip-in Event or to effect the
liquidation, dissolution or winding-up of the Corporation or the sale of
substantially all of the Corporation's assets, then, in each such case, the
Corporation shall give to each holder of a Right, in accordance with Section 5.8
hereof, a notice of such proposed action, which shall specify the date on which
such Flip-in Event, liquidation, dissolution, winding-up or sale is to take
place, and such notice shall be so given at least twenty (20) Business Days
prior to the date of taking of such proposed action.
5.8 NOTICES
Notices or demands authorized or required by this Agreement to be given
or made by the Rights Agent or by the holder of any Rights to or on the
Corporation shall be sufficiently given or made if delivered or sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) or sent by facsimile (in the case of facsimile,
an original copy of the notice or demand sent by first class mail, postage
prepaid, to the Corporation following the giving of the notice or demand by
facsimile), or other form of recorded electronic communication, charges prepaid
and confirmed in writing, as follows:
Royal Oak Mines Inc.
5501 Lakeview Drive
Kirkland, Washington 98033
Attention: Chief Executive Officer and President
Any notice or demand authorized or required by this Agreement to be
given or made by the Corporation or by the holder of any Rights to or on the
Rights Agent shall be sufficiently given or made if delivered or sent by first-
<PAGE>
- 29 -
class mail, postage prepaid, addressed (until another address is filed in
writing with the Corporation) or sent by facsimile (in the case of facsimile, an
original copy of the notice or demand sent by first class mail, postage prepaid,
to the Rights Agent following the giving of the notice or demand by facsimile),
or other form of recorded electronic communication, charges prepaid and
confirmed in writing, as follows:
Montreal Trust Company of Canada
510 Burrard Street
Vancouver, British Columbia V6C 3B9
Attention: Manager, Client Services Department
Notices or demands authorized or required by this Agreement to be given
or made by the Corporation or the Rights Agent to or on the holder of any Rights
shall be sufficiently given or made if delivered or sent by first-class mail,
postage prepaid, addressed to such holder at the address of such holder as it
appears upon the Rights Register or, prior to the Separation Time, on the
registry books of the transfer agent for the Common Shares. Any notice which is
mailed in the manner herein provided shall be deemed given, whether or not the
holder receives the notice.
5.9 SUCCESSORS
All the covenants and provisions of this Agreement by or for the benefit
of the Corporation or the Rights Agent shall bind and enure to the benefit of
their respective successors and assigns hereunder.
5.10 BENEFITS OF THIS AGREEMENT
Nothing in this Agreement shall be construed to give to any Person other
than the Corporation, the Rights Agent and the holders of the Rights any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Corporation, the Rights Agent
and the holders of the Rights.
5.11 GOVERNING LAW
This Agreement and each Right issued hereunder shall be deemed to be a
contract made under the laws of the Province of Ontario and for all purposes
shall be governed by and construed in accordance with the laws of such province
applicable to contracts to be made and performed entirely within such province.
5.12 SEVERABILITY
If any Section, Subsection, Clause, Subclause, term or provision hereof
or the application thereof to any circumstances or any right hereunder shall, in
any jurisdiction and to any extent, be invalid or unenforceable, such Section,
Subsection, Clause, Subclause, term or provision or such right shall be
ineffective only in such jurisdiction and to the extent of such invalidity or
unenforceability in such jurisdiction without invalidating or rendering
unenforceable or ineffective the remaining Sections, Subsections, Clauses,
Subclauses, terms and provisions hereof or rights hereunder in such jurisdiction
or the application of such Section, Subsection, Clause, Subclause, term or
provision or rights hereunder in any other jurisdiction or to circumstances
other than those as to which it is specifically held invalid or unenforceable.
5.13 EFFECTIVE DATE
This Agreement is effective and in full force and effect in accordance
with its terms as of the date hereof (the "Effective Date"). If the Rights Plan
is not ratified by resolution passed by a majority of the votes cast by
Independent Shareholders present or represented by proxy at a meeting of
shareholders of the Corporation to be
<PAGE>
- 30 -
held within six months of the Effective Date, then, without further formality,
this Agreement and all outstanding Rights shall terminate and be void and be of
no further force and effect on and from the earlier of: (i) the close of such
meeting of shareholders; and (ii) 5:00 p.m. (Toronto time) on the date which is
six (6) months after the Effective Date.
5.14 DETERMINATIONS AND ACTIONS BY THE BOARD OF DIRECTORS
The Board of Directors shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board of Directors or to the Corporation as may be necessary or
advisable in the administration of this Agreement.
All such actions, calculations and determinations (including all
omissions with respect to the foregoing) which are done or made by the Board of
Directors, in good faith, shall not subject the Board of Directors or any
director of the Corporation to any liability to the holders of the Rights.
5.15 RIGHTS OF BOARD, CORPORATION AND OFFEROR
Without limiting the generality of the foregoing, nothing contained
herein shall be construed to suggest or imply that the Board of Directors shall
not be entitled to recommend that holders of Voting Shares reject or accept an
Take-over Bid or take any other action (including, without limitation, the
commencement, prosecution, defence or settlement of any litigation and the
submission of additional or alternative Take-over Bids or other proposals to the
Shareholders of the Corporation) with respect to any Take-over Bid or otherwise
that the Board of Directors believes is necessary or appropriate in the exercise
of its fiduciary duties.
5.16 REGULATORY APPROVALS
Any obligation of the Corporation or action or event contemplated by
this Agreement shall be subject to the prior receipt of any requisite approval
or consent from any governmental or regulatory authority including, without
limiting the generality of the foregoing, any necessary approval of any
securities regulatory authority, The Toronto Stock Exchange or any other stock
exchange.
5.17 DECLARATION AS TO NON-CANADIAN HOLDERS
If in the opinion of the Board of Directors (who may rely upon the
advice of counsel) any action or event contemplated by this Agreement would
require compliance with the securities laws or comparable legislation of a
jurisdiction outside Canada, the Board of Directors acting in good faith may
take such actions as it may deem appropriate to ensure such compliance. In no
event shall the Corporation or the Rights Agent be required to issue or deliver
Rights or securities issuable on exercise of Rights to Persons who are citizens,
residents or nationals of any jurisdiction other than Canada or the United
States in which such issue or delivery would be unlawful without registration of
the relevant Persons or securities for such purposes.
5.18 TIME OF THE ESSENCE
Time shall be of the essence in this Agreement.
<PAGE>
- 31 -
5.19 EXECUTION IN COUNTERPARTS
This Agreement may be executed in any number of counterparts and each of
such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
ROYAL OAK MINES INC.
By:
-------------------------------------------
MONTREAL TRUST COMPANY OF CANADA
By:
-----------------------------------------
By:
-------------------------------------------
<PAGE>
EXHIBIT A
[FORM OF RIGHTS CERTIFICATE]
Certificate No. Rights
---------------- ----------------------
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION
OFTHE CORPORATION, ON THE TERMS SET FORTH IN THE
RIGHTSAGREEMENT. UNDER CERTAIN CIRCUMSTANCES,
RIGHTSBENEFICIALLY OWNED BY AN ACQUIRING PERSON,
ANYPERSON ACTING JOINTLY OR IN CONCERT WITH
ANACQUIRING PERSON OR THEIR RESPECTIVE ASSOCIATES
ANDAFFILIATES (AS SUCH TERMS ARE DEFINED IN THE
RIGHTSAGREEMENT) AND THEIR RESPECTIVE TRANSFEREES
SHALLBECOME VOID WITHOUT ANY FURTHER ACTION.
RIGHTS CERTIFICATE
This certifies that _______________________________ or registered
assigns, is the registered holder of the number of Rights set forth above,
each of which entitles the registered holder thereof, subject to the terms,
provisions and conditions of the Shareholder Rights Plan Agreement dated as
of the 25th day of February, 1998 (the "Rights Agreement") between Royal Oak
Mines Inc., a corporation amalgamated under the Business Corporations Act
(Ontario) (the "Corporation"), and Montreal Trust Company of Canada, a trust
company incorporated under the laws of Canada, as rights agent (the "Rights
Agent", which term shall include any successor Rights Agent under the Rights
Agreement) to purchase from the Corporation at any time after the Separation
Time and prior to the Expiration Time (as such terms are defined in the
Rights Agreement) one fully paid and non-assessable Common Share of the
Corporation (a "Common Share") at the Exercise Price referred to below, upon
presentation and surrender of this Rights Certificate together with the Form
of Election to Exercise duly executed and submitted to the Rights Agent at
its principal office in any of the cities of Vancouver and Toronto. The
Exercise Price shall initially be $20.00 (Canadian) per Right and shall be
subject to adjustment in certain events as provided in the Rights Agreement.
In certain circumstances described in the Rights Agreement, each Right
evidenced hereby may entitle the registered holder thereof to purchase or
receive assets, debt securities or other equity securities of the Corporation
(or a combination thereof) all as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions
are hereby incorporated herein by reference and made a part hereof and to
which Rights Agreement reference is hereby made for a full description of the
rights, limitations of rights, obligations, duties and immunities thereunder
of the Rights Agent, the Corporation and the holders of the Rights. Copies of
the Rights Agreement are on file at the registered head office of the
Corporation and are available upon written request.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at any of the offices of the Rights Agent designated for such
purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing an aggregate number of Rights
entitling the holder to purchase a like aggregate number of Common Shares as
the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the
<PAGE>
- 2 -
registered holder shall be entitled to receive, upon surrender hereof,
another Rights Certificate or Rights Certificates for the number of whole
Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Rights Certificate (i) may be, and under certain circumstances are
required to be, redeemed by the Corporation at a redemption price of $0.0001
per Right; and (ii) may be exchanged at the option of the Corporation for
cash, debt or equity securities or other assets of the Corporation.
No fractional Common Shares will be issued upon the exercise of any
Right or Rights evidenced hereby.
No holder of this Rights Certificate, as such, shall be entitled to
vote, receive dividends or be deemed for any purpose the holder of Common
Shares or of any other securities of the Corporation which may at any time be
issuable upon the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, any of the
rights of a shareholder of the Corporation or any right to vote for the
election of directors or upon any matter submitted to shareholders of the
Corporation at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders of the Corporation (except as expressly provided in the Rights
Agreement), or to receive dividends, distributions or subscription rights, or
otherwise until the Rights evidenced by this Rights Certificate shall have
been exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been manually countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the
Corporation.
Date:
-----------------------------------
ROYAL OAK MINES INC.
By: By:
------------------------------------- ----------------------------------
President Secretary
Countersigned
MONTREAL TRUST COMPANY OF CANADA
Transfer Agent and Registrar
By:
-------------------------------------
Authorized Signature
<PAGE>
(To be attached to each Rights Certificate)
FORM OF ELECTION TO EXERCISE
TO: ROYAL OAK MINES INC.
The undersigned hereby irrevocably elects to exercise
____________________ whole Rights represented by the attached Rights
Certificate to purchase the Common Shares issuable upon the exercise of such
Rights and requests that certificates for such Shares be issued to:
-------------------------------------------
(Name)
-------------------------------------------
(Address)
-------------------------------------------
(City and State or Province)
-------------------------------------------
Social Insurance, Social Security or Other Taxpayer Number
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
-------------------------------------------
(Name)
-------------------------------------------
(Address )
-------------------------------------------
(City and State or Province)
-------------------------------------------
Social Insurance, Social Security or Other Taxpayer Number
Date
---------------------------------
Signature Guaranteed
------------------------------------------
Signature
(Signature must correspond to name as
written upon the face of this Rights
Certificate in every particular without
alteration or enlargement or any change
whatsoever)
Signature must be guaranteed by a Canadian chartered bank, a
Canadian trust company or a member of a recognized stock exchange or
a member of the Transfer Association Medallion (Stamp) Program.
<PAGE>
[To be completed if true]
The undersigned hereby represents, for the benefit of all holders of
Rights and Common Shares, that the Rights evidenced by this Rights
Certificate are not, and, to the knowledge of the undersigned, have never
been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate
thereof or any Person acting jointly or in concert with any of the foregoing
(as defined in the Rights Agreement).
--------------------------------------
Signature
NOTICE
In the event the certification set forth in the Form of Election to
Exercise is not completed, the Corporation will deem the Beneficial Owner of
the Rights evidenced by this Rights Certificate to be an Acquiring Person or
an Affiliate or Associate thereof (as defined in the Rights Agreement) and
accordingly such Rights shall be null and void.
<PAGE>
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate)
FOR VALUE RECEIVED_____________________________________________________________
hereby sells, assigns and transfers unto_______________________________________
_______________________________________________________________________________
(Please print name and address of transferee)
the Rights represented by this Rights Certificate, together with all right,
title and interest therein and does hereby irrevocably constitute and appoint
_______________ as attorney to transfer the within Rights on the books of the
Corporation, with full power of substitution.
Dated______________________
Signature Guaranteed _____________________________________
Signature
(Signature must correspond to name as
written upon the face of this Rights
Certificate in every particular.
without alteration or enlargement or
any change whatsoever)
Signature must be guaranteed by a Canadian chartered bank, a Canadian
trust company or a member of a recognized stock exchange or a member of the
Transfer Association Medallion (Stamp) Program.
[To be completed if true]
The undersigned hereby represents, for the benefit of all holders of
Rights and Common Shares, that the Rights evidenced by this Rights
Certificate are not, and, to the knowledge of the undersigned, have never
been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate
thereof or any Person acting jointly or in concert with any of the foregoing
(as defined in the Rights Agreement).
_____________________________________
Signature
NOTICE
In the event the certification set forth in the Form of Assignment is
not completed, the Corporation will deem the Beneficial Owner of the Rights
evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Rights Agreement) and
accordingly such Rights shall be null and void.
<PAGE>
[LETTERHEAD]
May 20, 1998
Dear Shareholder:
This year we are mailing our 1997 annual report on Form 10-K to shareholders
instead of the more familiar color version of the annual report that you have
received in previous years. We estimate a cost saving of over $250,000 which is
significant given our short-term liquidity problem. Later this year we plan to
mail to shareholders a brochure describing the operations of our new Kemess
Mine.
The last 16 months have been among the most challenging for our Company since
its inception in mid-1991. In my letter to shareholders a year ago, I outlined
our plans to become a million-ounce gold producer by the year 2000, largely
through internal growth, thereby achieving one of our strategic objectives set
several years earlier. In mid-1997, we had to revise our plans due to the
significant fall in the price of gold, which adversely impacted operating cash
flow, and postpone the development of all projects, except for Kemess, in order
to conserve cash. We also closed our Hope Brook and Colomac mines and have
placed them on care and maintenance.
KEMESS IS THE KEY TO IMPROVED OPERATING PERFORMANCE AND FUTURE GROWTH
Notwithstanding these setbacks, we commenced production at our new Kemess
gold-copper mine on May 19. Kemess is Royal Oak's core asset that should
increase operating margins and cash flow due to significantly reduced cash
costs. The Company expects to produce an average of approximately 250,000
ounces of gold per year at Kemess at an estimated cash cost of US$133 per ounce
of gold, net of copper credits at US$0.80 per pound. The estimated mineable ore
reserve of 4.2 million ounces of gold at Kemess is expected to support a mine
life of 16 years. We anticipate that reserves will increase and mine life will
be extended given the promising exploration potential on our extensive Kemess
property.
Kemess is expected to be the foundation for the future growth of the Company.
Our long-range plan is to continue to grow by developing and acquiring low-cost
gold production.
RESULTS OF OPERATIONS ADVERSELY AFFECTED BY SEVERAL FACTORS IN 1997
In 1997, the Company's results of operations were adversely affected by the
dramatic fall in the gold price, lower production, and by one-time charges
against income. Revenue of $191.2 million was down 25% from $255.2 million in
1996; operating loss was $62.8 million compared with operating income of $29.5
million in 1996; and net loss increased to $135.2 million from a net loss of
$6.0 million in the previous year. Cash provided by operating activities in
1997 increased by 17% to $67.3 million, mainly due to a large increase in
accounts payable on the Kemess project which partially offset the net loss for
the year.
The combined impacts of the net loss and capital expenditures on the Kemess
project last year severely weakened the balance sheet. There was a working
capital deficiency of $126.9 million at the end of 1997. At the end of May we
expect to draw down funds from a US$120 million debt financing which will
resolve the Company's short-term liquidity problem.
GOLD PRODUCTION AND ORE RESERVES DECREASE IN 1997
Gold production was on budget in 1997 but declined for the first time since the
Company was formed in 1991 as a result of the closure of the Colomac and Hope
Brook mines. Production of 351,495 ounces was 10% less than the record 389,203
ounces of gold produced in 1996. Cash costs decreased by 4% to US$330 per ounce
in 1997 from US$343 per ounce in the prior year, mainly due to the closure of
the high cost Colomac and Hope Brook mines and a 15% reduction in costs at the
Giant Mine. The mining and processing of low-grade ores, relatively high costs
and declining ore reserves at the Pamour and Giant mines continue to present
operating challenges. In late 1997, we implemented major cost cutting
initiatives
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at these two mines that reduced their average cash cost to US$285 per ounce in
the fourth quarter, and US$280 per ounce in the first quarter of this year which
contributed to earnings of $2.3 million.
The year-end ore reserve estimate was calculated at a gold price of US$350 per
ounce compared with US$390 per ounce at the end of 1996 which reflected the
decline in gold price and the Company's expectation of gold prices and operating
costs over the next two years. Consequently, the Company's estimate of mineable
ore reserves decreased from 9.9 million ounces of gold at year-end 1996 to 7.0
million ounces at the end of 1997, a fall of 29%. The Company's estimated total
gold resources increased by 13%, from approximately 17.3 million ounces at the
end of 1996 to 19.5 million ounces at year-end 1997.
EXPLORATION TO START ON NAMOSI PROPERTY IN 1998
In 1997, we acquired the mineral licenses on the large Namosi property that is
favorably located 30 kilometers from Suva, the port and capital city of Fiji.
The property hosts a number of major porphyry copper deposits with gold
potential that has been explored by several companies since 1970. Feasibility
studies have also been carried out which indicate that further exploration is
required for the Namosi project to be viable. The Waisoi deposit is estimated
to contain a resource of approximately 9 billion pounds of copper and 4 million
ounces of gold with the potential to double in size. We plan to commence an
exploration program at Namosi and undertake power generation studies in 1998.
The experience gained by our project management team in developing the remote
Kemess property into production will be applicable in developing the Namosi
property.
OUTLOOK
We are encouraged by the long-term prospects for the Company. Our priority in
1998 is to ensure that the operating performance of our new Kemess Mine meets
expectations.
In the long term, we anticipate continuing the development of our other projects
when the gold price recovers to the point where project economics meet our
investment criteria and when the Company has sufficient capital resources to
commit to these projects. We are encouraged by the recent increase in gold and
copper prices from the lows of last year, which have an immediate impact on the
Company's operating results as our production is currently unhedged.
EMPLOYEE AND SHAREHOLDER APPRECIATION
We appreciate the hard work and commitment of our employees in what was a
difficult year as we responded to the impact of low gold prices on our operating
performance and took measures to resolve our short-term liquidity problem. Mine
closures have an unsettling effect on the workforce, but we are pleased that we
have been able to relocate some of our former Hope Brook and Colomac employees
at Kemess where we will create nearly 350 new permanent jobs that will benefit
the people of British Columbia.
The relative performance of Royal Oak's share price compared with our industry
peer group has been disappointing as the market has discounted the risks and
uncertainties surrounding the funding of the Kemess project to production. We
appreciate the support of our institutional and individual shareholders, many of
which purchased their interest in the Company at much higher prices. As
committed shareholders ourselves, management anticipates a higher market
valuation of the Company when Kemess meets its operating targets.
I look forward to sharing with you during the remainder of this year the results
of operations at our new Kemess Mine as it reaches its operating targets.
On behalf of the Board of Directors,
/s/ Margaret K. Witte
Margaret K. Witte
Chairman, President and Chief Executive Officer
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ROYAL OAK MINES INC.
PROXY SOLICITED BY THE MANAGEMENT OF THE CORPORATION
FOR THE ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS TO BE HELD ON JUNE 26, 1998
The undersigned shareholder of ROYAL OAK MINES INC. hereby appoints
MARGARET K. WITTE, President, or, failing her, ROSS F. BURNS, Vice-President,
Global Exploration, or, failing him, WILLIAM J.V. SHERIDAN, Secretary, or
instead of any of the foregoing, ________________________________ as PROXY of
the undersigned, with full power of substitution, to attend, vote and otherwise
act for and on behalf of the undersigned at the Annual and Special Meeting of
Shareholders of the Corporation to be held on the date set out above and at
every adjournment thereof in the same manner, to the same extent and with the
same power as if the undersigned were present at the said meeting or any
adjournment thereof, and the undersigned hereby revokes any former instrument
appointing a proxy for the undersigned at the said meeting or any adjournment or
adjournments thereof.
Without limiting the general authorization and power hereby given, all of
the shares registered in the name of the undersigned are to be voted as
indicated below:
1. FOR / / (or if no specification is made "FOR") approval of the
special resolution fixing the number of directors at
five (5) and authorizing the Board of Directors to
determine the number of directors within the minimum
and maximum numbers provided for in the Articles of the
Corporation.
AGAINST / /
2. VOTE / / (or if no specification is made "VOTE") for all of the
following nominees for election of directors (EXCEPT
THOSE WHOSE NAMES I HAVE DELETED): Margaret K. Witte,
Ross F. Burns, William J.V. Sheridan, J. Conrad Lavigne
and George W. Oughtred.
WITHHOLD VOTE / /
3. VOTE / / (or if no specification is made "VOTE") for the
appointment of Arthur Andersen & Co. as auditors of the
Corporation and authorizing the directors to fix the
auditors' remuneration.
WITHHOLD VOTE / /
4. FOR / / (or if no specification is made "FOR") adoption by the
Corporation of the Shareholder Rights Plan.
AGAINST
5. FOR / / (or if no specification is made "FOR") approval of the
stock options previously granted to certain senior
officers and directors of the Corporation to purchase,
in aggregate, up to 1,810,000 common shares of the
Corporation.
AGAINST / /
6. FOR / / (or if no specification is made "FOR") approval of the
amendment to reduce the exercise prices of stock
options previously granted by the Corporation to $1.10
per share.
AGAINST / /
7. FOR / / (or if no specification is made "FOR") approval of the
stock options granted to certain senior officers of the
Corporation to purchase, in aggregate, up to 300,000
common shares of the Corporation at a price of $1.55
per share.
AGAINST / /
DATED this _________ day of ___________, 1998.
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NOTES:
1. Shareholders are entitled to vote at the meeting either in person or by
proxy. A proxy must be dated and signed by the shareholder or his attorney
duly authorized in writing or, if the shareholder is a corporation, by an
officer or attorney thereof duly authorized. Signature should agree with
the name on this proxy. If this proxy is not dated in the above space, it
will be deemed to bear the date on which it was mailed.
2. EACH SHAREHOLDER HAS THE RIGHT TO APPOINT A PERSON TO REPRESENT HIM OR HER
AT THE MEETING OTHER THAN THE PERSONS SPECIFIED ABOVE. SUCH RIGHT MAY BE
EXERCISED BY INSERTING IN THE SPACE PROVIDED THE NAME OF THE PERSON TO BE
APPOINTED, WHO NEED NOT BE A SHAREHOLDER OF THE CORPORATION.
3. THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED ON ITEMS 1 TO 7
INCLUSIVE AS THE SHAREHOLDER MAY HAVE SPECIFIED BY MARKING AN "X" IN THE
SPACES PROVIDED FOR THAT PURPOSE. IF NO CHOICE IS SPECIFIED, THE SHARES
WILL BE VOTED AS IF THE SHAREHOLDER HAD SPECIFIED AN AFFIRMATIVE VOTE.
4. THIS PROXY CONFERS AUTHORITY FOR THE ABOVE-NAMED TO VOTE IN HIS OR HER
DISCRETION WITH RESPECT TO AMENDMENTS OR VARIATIONS TO THE MATTERS
IDENTIFIED IN THE NOTICE OF MEETING ACCOMPANYING THIS FORM OF PROXY AND
OTHER MATTERS WHICH MAY PROPERLY COME BEFORE THE MEETING.
<PAGE>
[LETTERHEAD]
TO NON REGISTERED HOLDERS (BENEFICIAL HOLDERS)
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In accordance with National Policy Statement No. 41/Shareholder Communication,
beneficial shareholders may elect annually to have their names added to an
issuer's supplemental mailing list in order to receive interim financial
statements. If you are interested in receiving such statements, please complete
and return this form.
NAME OF CORPORATION: (if applicable)
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NAME:
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ADDRESS:
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POSTAL CODE:
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(I certify that I am a beneficial shareholder) SIGNATURE:
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MONTREAL TRUST COMPANY OF CANADA
Corporate Services Division
Montreal Trust Centre
510 Burrard Street
Vancouver, B.C.
V6C 3B9
Canada
