AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 17, 1997.
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ECHO BAY MINES LTD.
and
ECHO BAY RESOURCES INC.
(Exact names of registrants as specified in charters)
ECHO BAY MINES LTD. - CANADA ECHO BAY MINES LTD. - NONE
ECHO BAY RESOURCES INC. - DELAWARE ECHO BAY RESOURCES INC. - 52-1872784
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6400 SOUTH FIDDLERS GREEN CIRCLE, SUITE 1000
ENGLEWOOD, COLORADO, 80111-4957
(303) 714-8600
(Address, including zip code, and telephone
number, including area code, of
registrants' principal executive offices)
------------------------------------
ROBERT L. LECLERC, Q.C.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SUITE 1000, 6400 SOUTH FIDDLERS GREEN CIRCLE
ENGLEWOOD, COLORADO, 80111-4957
(303) 714-8600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------------
COPIES TO:
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RONALD R. LEVINE, II, ESQUIRE MICHAEL GLUCKMAN, ESQUIRE WILLIAM P. ROGERS, JR., ESQUIRE
Davis, Graham & Stubbs LLP Milner Fenerty Cravath, Swaine & Moore
370 - Seventeenth Street 2900 Manulife Place 825 Eighth Avenue
Denver, Colorado, 80201 10180-101 Street New York, New York 10019
(303) 892-9400 Edmonton, Alberta T5J 3V5 (212) 474-1000
(403) 423-7100
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFERING: FROM TIME TO TIME
AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT, AS DETERMINED BY THE
REGISTRANTS.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
CALCULATION OF REGISTRATION FEE
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Proposed Proposed
Amount maximum maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered(1) per unit(2) offering price(3) registration fee(3)
- --------------------------------------------------------------------------------------------------
Debt Securities(4)
Common Shares
(without par value)(5)(6)
Preferred Stock, par value
$1.00 per share(7)
Warrants(8)
Guarantees(9)
TOTAL $200,000,000(10) 100% $200,000,000(10) $30,304(10)
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(1) In US dollars or the equivalent thereof in one or more foreign currencies
or currency units or composite currencies, including the European Currency
Unit.
(2) The proposed maximum initial offering price per unit will be determined,
from time to time, by the Registrants.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o). In no event will the aggregate initial offering
price of all securities issued from time to time pursuant to this
Registration Statement exceed $200,000,000.
(4) Subject to Footnote (3), there are being registered hereunder an
indeterminate principal amount of Debt Securities as may be sold from time
to time by each of the Registrants. If any such Debt Securities are issued
at an original issue discount, then the offering price shall be in such
greater principal amount as shall result in an aggregate initial offering
price of up to $200,000,000. There is also being registered hereunder an
indeterminate principal amount of Debt Securities as may be issuable upon
the conversion of Debt Securities or Preferred Stock, or the exercise of
Warrants, registered hereby.
(5) Subject to Footnote (3), there are being registered hereunder an
indeterminate number of Common Shares as may be sold from time to time by
Echo Bay Mines Ltd. There are also being registered hereunder an
indeterminate number of Common Shares as may be issuable upon conversion of
the Debt Securities or Preferred Stock, or exercise of Warrants, registered
hereby.
(6) This Registration Statement also applies to Rights under the Company's
Stockholders' Rights Plan, which are attached to and tradeable only with
the Common Shares registered hereby. No registration fees are required for
such rights and the shares underlying such rights as they will be issued
for no additional consideration.
(7) Subject to Footnote (3), there are being registered hereunder an
indeterminate number of shares of Preferred Stock as may be sold from time
to time by Echo Bay Resources Inc. There are also being registered
hereunder an indeterminate number of shares of Preferred Stock of Echo Bay
Resources Inc. as may be issuable upon the conversion of Debt Securities,
or exercise of Warrants registered hereby.
(8) Subject to Footnote (3), there are being registered hereunder an
indeterminate number of Warrants as may be sold from time to time by Echo
Bay Mines Ltd. There are also being registered hereunder an indeterminate
number of Common Shares or shares of Preferred Stock and indeterminate
principal amount of Debt Securities as may be issuable upon the exercise of
the Warrants registered hereby.
(9) Each of the Debt Securities and shares of Preferred Stock issued by Echo
Bay Resources Inc. will be accompanied by a Guaranty to be issued by Echo
Bay Mines Ltd. None of the proceeds will be received by Echo Bay Mines Ltd.
in consideration of the Guarantees.
(10) Of the $200,000,000 of securities registered hereby, $100,000,000 of such
securities were registered pursuant to Registration Statement No. 33-77738
and are unissued as of the date hereof. A registration fee of $34,482.70
was previously paid with respect to such unissued securities and is not
included in the amount stated above.
---------------------------
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
included in this Registration Statement will also be used in connection with the
issuance of securities registered pursuant to Registration Statement No.
33-77738 previously filed by the Registrants on Form S-3 and declared effective
on July 15, 1994. This Registration Statement, which is a new registration
statement, also constitutes Post-Effective Amendment No. 1 to Registration
Statement No. 33-77738, and such Post-Effective Amendment shall hereafter become
effective concurrently with the effectiveness of this Registration Statement and
in accordance with Section 8(c) of the Securities Act of 1933. A fee of
$34,482.70 paid in connection with Registration Statement No. 33-77738 is
carried over to this Registration Statement.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
SUBJECT TO COMPLETION, Dated September 17, 1997
PROSPECTUS
$200,000,000
ECHO BAY MINES LTD.
DEBT SECURITIES
GUARANTEES
COMMON SHARES
WARRANTS
ECHO BAY RESOURCES INC.
GUARANTEED DEBT SECURITIES
GUARANTEED PREFERRED STOCK
Echo Bay Mines Ltd. (the "Company" or "Echo Bay") may offer from time to
time (i) debt securities ("Debt Securities"), consisting of debentures, notes,
bonds and/or other unsecured evidences of indebtedness in one or more series,
(ii) full, unconditional and irrevocable guarantees ("Guarantees") of Debt
Securities and shares of guaranteed preferred stock ("Preferred Stock") issued
by Echo Bay Resources Inc. ("EBR"), a wholly-owned subsidiary of the Company,
(iii) shares of the Company's common stock, without par value ("Common Shares"),
or (iv) warrants to purchase Debt Securities, Preferred Stock or Common Shares.
EBR may offer from time to time guaranteed Debt Securities, consisting of
debentures, notes or other unsecured evidences of indebtedness in one or more
series and guaranteed Preferred Stock in one or more series, each guaranteed by
the Company. The foregoing securities are collectively referred to as the
"Securities". Any Securities may be offered with other Securities or separately
(except for Guarantees which may only be offered with Debt Securities or
Preferred Stock of EBR). The Securities will be offered at an aggregate initial
offering price not to exceed US $200,000,000 or the equivalent (based on the
applicable exchange rate at the time of sale), if Debt Securities of the Company
or EBR are issued in principal amounts denominated in one or more foreign
currencies or currency units as shall be designated by the Company or EBR, as
the case may be, at prices and on terms to be determined at the time of sale.
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE SECURITIES.
This Prospectus will be supplemented by one or more accompanying Prospectus
Supplements, which will set forth with regard to the particular Securities in
respect of which this Prospectus is being delivered (i) in the case of Debt
Securities, the Issuer (which may be the Company or EBR); title; aggregate
principal amount; currency of denomination (which may be in US dollars, in any
other currency, currencies or currency unit, including the European Currency
Unit); maturity; interest rate, if any (which may be fixed or variable), or
method of calculation thereof; time of payment of any interest; form of payment
of any interest whether in the form of cash, additional Debt Securities, Common
Shares or some combination thereof; any terms for redemption at the option of
the Company, EBR or the holder; any terms for sinking fund payments; any index
or other method used to determine the amounts payable; the ranking of such Debt
Securities (whether senior, senior subordinated or subordinated); any conversion
or exchange rights, at the option of the Company, EBR or the holder; any listing
on a securities exchange; whether such Debt Securities will be guaranteed by the
Company; the initial public offering price and any other terms in connection
with the offering and sale of such Debt Securities; (ii) in the case of Common
Shares, the number of Common Shares and the terms of the offering thereof; (iii)
in the case of Preferred Stock, the designation, aggregate principal amount, and
stated value and liquidation preference per share; the initial public offering
price; dividend rate (or method of calculation); dates on which dividends shall
be payable and dates from which dividends shall accrue; any redemption or
sinking fund provisions; any conversion or exchange rights; any listing of the
Preferred Stock on a securities exchange; and any other terms in connection with
the offering and sale of such Preferred Stock; and (iv) in the case of Warrants,
the number and terms thereof, the designation and the number of Securities
issuable and/or cash consideration payable upon their exercise; the exercise
price; any listing of the Warrants or the underlying Securities on a securities
exchange and any other terms in connection with the offering, sale and exercise
of the Warrants. The Prospectus Supplement will also contain information, as
applicable, about certain United States and Canadian Federal income tax
considerations relating to the Securities in respect of which this Prospectus is
being delivered.
The Company's Common Shares are listed on the American Stock Exchange
(Symbol: "ECO") and The Toronto Stock Exchange (Symbol: "ECO"). Any Common
Shares offered will be listed, subject to notice of issuance, on such exchanges.
The Company and EBR may sell Securities to or through one or more
underwriters, and may also sell Securities directly to other purchasers or
through agents. See "Plan of Distribution." Each Prospectus Supplement will set
forth the names of any underwriters, dealers or agents involved in the sale of
the Securities in respect of which this Prospectus is being delivered, and any
applicable fee, commission or discount arrangements with them.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES
UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
The date of this Prospectus is , 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Company is currently subject to the periodic reporting and other
informational requirements of the Exchange Act. Such reports and other
information may be inspected and copied at the public reference facilities of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the following Regional Offices: 7 World Trade Center,
Suite 1300, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Commission by mail at prescribed rates. Requests should be
directed to the Commission's Public Reference Section, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. The Commission also
maintains a website at http://www.sec.gov that contains reports, proxy
statements, and other information. The Company's Common Shares are listed on the
American Stock Exchange (the "AMEX"). Reports proxy and information statements
and other information relating to the Company can be inspected at the offices of
the AMEX at 86 Trinity Place, New York, New York 10006.
EBR is a wholly-owned subsidiary of the Company. It currently is not
independently subject to the information requirements of the Exchange Act. EBR
expects to receive a conditional exemption pursuant to Section 12(h) of the
Exchange Act from the informational requirements of such Act and anticipates
that no independent reports concerning EBR will be sent to holders of Debt
Securities or Preferred Stock issued by EBR.
The Company and EBR have filed with the Commission a Registration Statement
on Form S-3 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect to the securities covered by this Prospectus. This
Prospectus, which forms part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company, EBR and such
securities, reference is hereby made to such Registration Statement, including
the exhibits filed therewith. The Registration Statement and the exhibits
thereto can be obtained by mail from or inspected and copied at the public
reference facilities maintained by the Commission as provided above.
ENFORCEMENT OF CERTAIN CIVIL LIABILITIES
The Company is a Canadian corporation and certain of its directors and
officers, as well as certain of the experts named herein, are neither citizens
nor residents of the United States. A substantial part of the assets of several
of such persons and of the Company are located outside the United States. As a
result, it may be difficult for investors to effect service of process within
the United States upon such persons or to enforce against them or the Company
within the United States judgment of courts of the United States predicated upon
the civil liability provisions of the federal securities laws of the United
States. Milner Fenerty, Canadian counsel to the Company, has advised the Company
that there is doubt as to the enforceability against such persons and the
Company in Canada, in original actions or in actions to enforce judgments of
United States courts, of liabilities predicated solely upon the federal
securities laws of the United States.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the year ended December 31, 1996;
(2) Quarterly Report on Form 10-Q for the period ended March 31, 1997;
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(3) Quarterly Report on Form 10-Q for the period ended June 30, 1997;
(4) Current Report on Form 8-K, dated January 15, 1997;
(5) Current Report on Form 8-K, dated March 6, 1997;
(6) Current Report on Form 8-K, dated March 26, 1997;
(7) Current Report on Form 8-K, dated March 31, 1997;
(8) Current Report on Form 8-K, dated April 17, 1997;
(9) Current Report on Form 8-K, dated April 25, 1997;
(10) Registration Statement on Form 8-A (File No. 1-8542), dated September
12, 1994, relating to the Company's Shareholder Rights Plan;
(11) The description of the Common Shares contained in the Company's
Registration Statement on Form 8-A dated August 2, 1983, and any
amendment or report filed for the purpose of updating such
description; and
(12) The Company's Proxy Circular dated March 31, 1997 for its Annual and
Special Meeting of Shareholders held on May 14, 1997.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the securities offered hereby shall be deemed to be incorporated by reference
in this prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference shall be deemed to be modified or superseded for
purposes of this Prospectus to the extent that a statement contained herein or
in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the oral or written request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits, unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to the Secretary,
Echo Bay Mines Ltd., 6400 South Fiddlers Green Circle, Suite 1000, Englewood,
Colorado 80111-4957, telephone (303) 714-8600, facsimile: (303) 714-8999.
CANADIAN PROSPECTUSES
The Company has filed with Canadian securities regulatory authorities a
shelf prospectus relating to the potential offering in Canada of up to
10,000,000 common shares (including the Common Shares offered hereunder) and a
shelf prospectus relating to the potential offering in Canada of debt securities
at an aggregate initial offering price of up to US $125,000,000 (including the
Debt Securities offered hereunder). Canadian securities laws do not permit the
use of an unallocated (as between common shares and debt securities) shelf
prospectus.
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THE COMPANY
The Company is a major North American gold mining company with interests in
four operating mines, two new gold mines under development, and a number of
active exploration and development projects. The Company mines, processes and
explores for gold, and also produces a significant amount of silver. In 1996,
the Company produced a total of approximately 769,000 ounces of gold and
7,100,000 ounces of silver. As of December 31, 1996, the Company reported proven
and probable ore reserves of 8,573,000 ounces of gold and 53,858,000 ounces of
silver, as well as other mineralization consisting of 283.5 million tons at a
grade of 0.019 ounces of gold per ton, 1.5 million tons at a grade of 1.36
ounces of silver per ton and 225.5 million tons at a grade of 0.46% copper.
The Company has refocused its exploration activities in North, Central and
South America, where it has extensive gold mining infrastructure. As a result of
the Company's program of acquisition, exploration and development activities
over the last two years, the Company now has a promising pipeline of projects in
these areas. It is also engaged in exploration activities in the Philippines,
Africa and other developing countries.
In 1996, the Company achieved revenues of $337.3 million and working
capital from operations (before cash development and exploration expenses) of
$82.3 million, and incurred a net loss of $176.7 million after taking into
account provisions totaling $107.1 million related to the write-off of and
provision for the Alaska-Juneau development property and the provision for the
McCoy/Cove pit wall stabilization.
The Company is currently conducting a major review of life-of-mine plans
for the Company's four producing gold mines and two planned gold mines, and a
complete evaluation of the feasibility studies for the Company's portfolio of
development projects, exploration properties and other assets. On completion of
this work, currently expected in the third quarter of 1997, the Company will
assess the carrying values of all of the Company's assets in light of both
short-term and long-term views of precious metals prices. Although no
determinations can be made before completion of the review, it is possible that
material write downs of some assets may be required. The Company recently
deferred final construction decisions on two planned gold mines, Paredones
Amarillos in Mexico and Aquarius in Canada and has deferred further development
of the Ulu satellite deposit near the Lupin mine pending the results of this
review.
The Company was incorporated in Canada in 1964. Its executive office is
located at 6400 South Fiddlers Green Circle, Suite 1000, Englewood, CO
80111-4957, telephone (303) 714-8600, and its registered office is located at
Suite 1210 Manulife Place, 10180 - 101 Street, Edmonton, Alberta, Canada , T5J
3S4, telephone (403) 496-9002.
EBR is a wholly-owned subsidiary of the Company which was incorporated
under the laws of the state of Delaware on April 6, 1994. The primary purpose of
EBR is to issue guaranteed Debt Securities and guaranteed Preferred Stock and to
loan to or invest the proceeds in the Company or its subsidiaries. EBR will be
prohibited from issuing any common stock to any person other than the Company
and its subsidiaries. EBR does not now, and in the near future does not expect
to, lease or own any material facilities or operating property. EBR's principal
executive offices are located at 6400 South Fiddlers Green Circle, Suite 1000,
Englewood, CO 80111-4957, telephone (303) 714-8600.
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RISK FACTORS
Purchasers of the Securities being offered hereby should carefully read
this entire Prospectus and the documents incorporated by reference herein.
Purchasers should consider, among other things, the risk factors set forth below
as well as any additional risk factors contained in any Prospectus Supplement
delivered herewith.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements that are not historical facts contained or incorporated by
reference in this Prospectus and the accompanying Prospectus Supplement are
forward-looking statements. Such forward-looking statements include statements
regarding targets for gold and silver production, cash operating costs and
certain significant expenses, percentage increases and decreases in production
from the Company's principal mines, schedules for completion of detailed
feasibility studies and initial feasibility studies, potential increases in
reserves and production, the timing and scope of future drilling and other
exploration activities, expectations regarding receipt of permits and
commencement of mining or production, anticipated recovery rates and potential
acquisitions or increases in property interests. Factors that could cause actual
results to differ materially include, among others, changes in gold, silver and
other metals prices, unanticipated grade, geological, metallurgical, processing,
access, transportation of supplies, water availability or other problems,
results of current exploration activities, results of pending and future
feasibility studies, changes in project parameters as plans continue to be
refined, political, economic and operational risks of foreign operations, joint
venture relationships, availability of materials and equipment, the timing of
receipt of governmental permits, force majeure events, the failure of plant,
equipment or processes to operate in accordance with specifications or
expectations, accidents, labor disputes, delays in start-up dates, environmental
costs and risks, the outcome of acquisition negotiations and general domestic
and international economic and political conditions and other factors described
in this Prospectus and the accompanying Prospectus Supplement and in the
Company's annual reports on Form 10-K, quarterly reports on Form 10-Q and
current reports on Form 8-K filed with the Securities and Exchange Commission.
Many of such factors are beyond the Company's ability to control or predict.
Actual results may differ materially from those projected. Prospective
investors are cautioned not to put undue reliance on forward-looking statements,
and should not infer that there has been no change in the affairs of the Company
since the date of this Prospectus that would warrant any modification of any
forward-looking statement made in this Prospectus or the accompanying Prospectus
Supplement. For a discussion of certain of such risks and uncertainties, see the
"Risk Factors" set forth below, those in the accompanying Prospectus Supplement,
and the discussions contained in the Company's annual reports on Form 10-K,
quarterly reports on Form 10-Q and current reports on Form 8-K filed with the
Securities and Exchange Commission. The Company disclaims any intent or
obligation to update publicly these forward-looking statements, whether as a
result of new information, future events or otherwise.
RECENT LOSSES
In the fiscal years ended December 31, 1996 and 1995, the Company incurred
net losses of $176.7 million and $50.1 million, respectively. The loss in 1996
included a $77.1 million write-down of and reclamation and closure provision for
the Alaska-Juneau development property and a $30.0 million provision for
McCoy/Cove pit wall stabilization. During those years, the Company incurred
exploration and development costs of $63.6 million and $69.8 million,
respectively. Operating costs increased from $212.2 million in 1995 to $221.1
million in 1996 and from $102.5 million for the six months ended June 30, 1996
to $107.8 million for the six months ended June 30, 1997, as the Company
experienced higher costs of mining and the Company mined and processed greater
volumes to offset the effects of lower grades at McCoy/Cove. In the six months
ended June 30, 1997 and 1996, the Company incurred net losses of $37.5 million
and $30.8 million, respectively. The Company expects that it will continue to
incur losses in the near future, and that its return to profitability will
depend on, among other things, the price of gold, the ability to bring into
commercial production the projects that have been the subject of the Company's
exploration and development program and the profitability of production at
existing and new mines.
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MINING AND PROCESSING
The Company's business operations are subject to risks and hazards inherent
in the mining industry, including but not limited to unanticipated variations in
grade and other geological problems, water conditions, surface or underground
conditions, metallurgical and other processing problems, mechanical equipment
performance problems, the unavailability of materials and equipment, accidents,
labor force disruptions, force majeure factors, unanticipated transportation
costs, and weather conditions, any of which can materially and adversely affect,
among other things, the development of properties, production quantities and
rates, costs and expenditures and production commencement dates.
The Company's processing facilities are dependent on continuous mine feed
to remain in operation. Insofar as the Company's mines may not maintain material
stockpiles of ore or material in process, any significant disruption in either
mine feed or processing throughput, whether due to equipment failures, adverse
weather conditions, supply interruptions, labor force disruptions or other
issues, may have an immediate adverse effect on the results of operations of the
Company. A significant reduction in mine feed or processing throughput at a
particular mine could cause the unit cost of production to increase to the point
where the Company could determine that some or all of the Company's reserves
were uneconomic to exploit.
The Company periodically reviews mining schedules, production levels and
asset lives in its life-of-mine planning for all of its operating and
development properties. The Company is currently conducting a major review of
life-of-mine plans for the Company's four producing gold mines and two planned
gold mines, and a complete evaluation of the feasibility studies for its
portfolio of development projects, exploration properties and other assets.
Significant changes in the life-of-mine plans can occur as a result of mining
experience, new ore discoveries, changes in mining methods and rates, process
changes, investments in new equipment and technology, precious metals price
assumptions, and other factors. Based on this analysis, the Company reviews its
accounting estimates and in the event of an impairment, may be required to
write-down the carrying value of a mine or mines. It is possible that, upon
completion of the current review, material write-downs of some assets may be
required. This complex process continues for the life of every mine.
As a result of the foregoing risks, among other things, expenditures on any
and all projects, actual production quantities and rates, and cash costs may be
materially and adversely affected and may differ materially from anticipated
expenditures, production quantities and rates, and costs, just as estimated
production dates may be delayed materially, in each case especially to the
extent development projects are involved. Any such events can materially and
adversely affect the Company's business, financial condition, results of
operations and cash flows.
MINE DEVELOPMENT RISKS
The Company's ability to maintain, or increase, its annual production of
gold and silver will be dependent in significant part on its ability to bring
new mines into production, including the Aquarius project in Canada and the
Paredones Amarillos project in Mexico, and to expand existing mines. Recently
the Company deferred final construction decisions on Aquarius and Paredones
Amarillos and deferred further development of the Ulu satellite deposit in
Canada. Although the Company utilizes the operating history of its existing
mines to derive estimates of future operating costs and capital requirements,
such estimates may differ materially from actual operating results at new mines
or at expansions of existing mines. The economic feasibility analysis with
respect to any individual project is based upon, among other things, the
interpretation of geological data obtained from drill holes and other sampling
techniques, feasibility studies (which derive estimates of cash operating costs
based upon anticipated tonnage and grades of ore to be mined and processed),
precious metals price assumptions, the configuration of the ore body, expected
recovery rates of metals from the ore, comparable facility and equipment costs,
anticipated climatic conditions, estimates of labor productivity, royalty or
other ownership burdens and other factors. In addition, many of the risks
identified below at "--Exploration Risks" are also applicable to the Company's
development projects. Such development projects also are subject to the
successful completion of final feasibility studies, issuance of necessary
permits and receipt of adequate financing. Although the Company's feasibility
studies
-6-
<PAGE>
are completed with the Company's knowledge of the operating history of similar
ore bodies in the region, the actual operating results of its development
projects may differ materially from those anticipated, and uncertainties related
to operations are even greater in the case of development projects.
METAL PRICE VOLATILITY
The profitability of the Company's current operations is directly related
and sensitive to the market price of gold and silver. Future operations may also
be sensitive to changes in the price of other metals. Gold, silver and other
metal prices fluctuate widely and are affected by numerous factors beyond the
Company's control, including global supply and demand, expectations with respect
to the rate of inflation, the exchange rates of the dollar to other currencies,
interest rates, forward selling by producers, central bank sales and purchases,
production and cost levels in major gold-producing regions such as South Africa
and the former Soviet Union, global or regional political, economic or financial
situations and a number of other factors.
The current demand for, and supply of, gold and silver affect the prices of
such metals, but not necessarily in the same manner as current demand and supply
affect the prices of other commodities. The potential supply of gold consists of
new mine production plus existing stocks of bullion and fabricated gold held by
governments, financial institutions, industrial organizations and individuals.
Since mine production in any single year constitutes a very small portion of the
total potential supply of gold, normal variations in current production do not
necessarily have a significant effect on the supply of gold or on its price. If
gold or silver prices should decline below the Company's cash costs of
production and remain at such levels for any sustained period, the Company could
determine that it is not economically feasible to continue commercial production
at any or all of its mines. Although the Company has a hedging program in place
to reduce the risk associated with gold and silver price volatility, there is no
assurance that the Company's hedging strategies will be successful.
Spot market prices and futures prices for gold are currently higher than
the Company's cash operating costs ($262 per ounce for the three-month period
ended June 30, 1997), but such prices are lower than Echo Bay's total production
costs ($379 per ounce for the three-month period ended June 30, 1997).
The volatility of gold and silver prices is illustrated in the following
table which sets forth the average of the daily closing prices for gold and
silver for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
<S> <C> <C> <C> <C> <C> <C>
1997(1) 1996 1995 1994 1993 1992
------- ---- ---- ---- ---- ----
Gold(2) ($ per ounce)......................... 339.98 388 384 384 360 344
Silver(3) ($ per ounce)....................... 4.77 5.18 5.19 5.29 4.30 3.94
(1) For the period from January 1, 1997 to September 15, 1997
(2) On the London Bullion Market
(3) As quoted by Handy and Harman
</TABLE>
As of September 15, 1997, the closing prices for the metals described
above were:
Gold: $322.30 per ounce
Silver: $4.71 per ounce
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<PAGE>
UNCERTAINTY OF RESERVE AND OTHER MINERALIZATION ESTIMATES
There are numerous uncertainties inherent in estimating proven and probable
reserves and other mineralization, including many factors beyond the control of
the Company. The estimation of reserves and other mineralization involves
subjective judgments about many relevant factors, and the accuracy of any such
estimate is a function of the quality of available data and of engineering and
geological interpretation and judgment. Results of drilling, testing and
production subsequent to the date of an estimate may justify revision of such
estimate. Assumptions about prices are subject to great uncertainty and gold and
silver prices have fluctuated widely in recent years. See "--Metal Price
Volatility." No assurance can be given that the volume and grade of reserves
mined and processed and recovery rates will not be less than anticipated.
Declines in the market price of gold and silver also may render reserves or
other mineralization containing relatively lower grades of mineralization
uneconomic to exploit. The prices used in estimating the Company's ore reserves
at December 31, 1996 were $375 per ounce of gold and $5.00 per ounce of silver.
The market prices were $369 per ounce of gold and $4.87 per ounce of silver at
December 31, 1996 and were $322.30 per ounce of gold and $4.71 per ounce of
silver at September 15, 1997, which are below the price at which the Company has
estimated its reserves. If the Company were to determine that its reserves and
future cash flows should be calculated at a significantly lower gold price than
that used at December 31, 1996, there would likely be a material reduction in
the amount of gold reserves. In addition, if the price realized by the Company
for its gold or silver bullion were to decline substantially below the price at
which ore reserves were calculated for a sustained period of time, the Company
potentially could experience material write-downs of its investment in mining
properties. Under certain of such circumstances, the Company may discontinue the
development of a project or mining at one or more of its properties. For
example, the Company recently deferred final construction decisions on two
planned gold mines (Paredones Amarillos and Aquarius), deferred further
development of the Ulu satellite deposit, and is undertaking a review of the
carrying values of its assets in response to recent gold price levels. Further,
changes in operating and capital costs and other factors, including but not
limited to short-term operating factors such as the need for sequential
development of ore bodies and the processing of new or different ore grades and
ore types, may materially and adversely affect reserves.
EXPLORATION RISKS
Since mines have limited lives based on proven and probable ore reserves,
the Company continually seeks to replace and expand its reserves. Moreover, two
of the Company's mines, McCoy/Cove and Lupin (without taking into account
supplemental production from Ulu) are entering a period of declining production
as the existing ore reserves are depleted, which has led to significant emphasis
on the Company's exploration program. Mineral exploration, at both newly
acquired properties and existing mining operations, is highly speculative in
nature, involves many risks and frequently does not result in the discovery of
minable reserves. There can be no assurance that the Company's exploration
efforts will result in the discovery of significant gold or silver
mineralization or that any mineralization discovered will result in an increase
of the Company's proven or probable reserves. If proven or probable reserves are
developed, it may take a number of years and substantial expenditures from the
initial phases of drilling until production is possible, during which time the
economic feasibility of production may change. For example, a new feasibility
study completed in December 1996 on the Alaska-Juneau project concluded that the
project was uneconomic as designed, and the Company recorded a $77.1 million
provision in connection with the decision not to proceed. No assurance can be
given that the Company's exploration programs will result in the replacement of
current production with new reserves or that the Company's development program
will be able to extend the life of the Company's existing mines. In the event
that new reserves are not developed, the Company will not be able to sustain any
mine's current level of gold or silver production beyond the life of its
existing reserve estimates.
The Company encounters strong competition from other mining companies in
connection with the acquisition of properties producing or capable of producing
precious metals. As a result of this competition, some of which is with
companies with greater financial resources than the Company, the Company may be
unable to acquire attractive mining properties on terms it considers acceptable.
In addition, there are a number of uncertainties inherent in any program
relating to the location of economic ore reserves, the development of
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<PAGE>
appropriate metallurgical processes, the receipt of necessary governmental
permits and the construction of mining and processing facilities. Accordingly,
there can be no assurance that the Company's acquisition and exploration
programs will yield new reserves to replace and expand current reserves.
RISKS RELATED TO JOINT VENTURE RELATIONSHIPS
The Company has entered into a number of strategic alliances and joint
venture relationships as part of its expanded exploration and development
activities and expects to enter into additional such relationships in the
future. The terms of these relationships vary, but in many cases the Company is
dependent on its co-venturer for expertise in operating in environments outside
of North America as well as its relationships with governmental officials and
the indigenous people generally. In addition, under certain of the Company's
arrangements, including Santa Elina, the co-venturer has approval rights with
respect to capital and/or operating budgets and expenditures; in these
circumstances, the constraints of the capital available to the co-venturer from
third parties and/or other exploration and development or other opportunities
available to the co-venturer may affect its willingness to proceed with the
Company's projects on terms acceptable to the Company. Further, in connection
with the development of a property, particularly for copper-gold properties, the
Company may be required to seek a partner or partners for technical expertise in
the development and operation phases of the project, and, in certain instances,
for financing until cash flow is generated from the project for the Company's
account. There can be no assurance that the Company will be successful in
partnering with companies on terms that are commercially attractive.
MINING RISKS AND INSURANCE
The business of gold and silver mining is generally subject to a number of
risks and hazards, including environmental conditions, industrial accidents,
labor disputes, unusual or unexpected geological conditions, ground or slope
failures, cave-ins, changes in the regulatory environment and natural phenomena
such as inclement weather conditions, floods, blizzards and earthquakes. Such
occurrences could result in damage to, or destruction of, mineral properties or
production facilities, personal injury or death, environmental damage to the
Company's properties or the properties of others, delays in mining, monetary
losses and possible legal liability. The Company maintains insurance against
certain risks that are typical in the gold mining industry and in amounts that
the Company believes to be reasonable, but which may not provide adequate
coverage in certain circumstances. However, insurance against certain risks
(including certain liabilities for environmental pollution or other hazards as a
result of exploration and production) is not generally available to the Company
or to other companies in the industry on acceptable terms. During 1996, the
Company recorded a $30.0 million provision related to estimated costs to remove
waste rock from an unstable portion of the pit wall at McCoy/Cove.
GOVERNMENTAL REGULATION
The Company's mining operations and exploration activities are subject to
extensive foreign or US federal, state and local laws and regulations governing
exploration, development, production, exports, taxes, labor standards, waste
disposal, protection and remediation of the environment, reclamation, historic
and cultural resources preservation, mine safety and occupational health, toxic
substances and other matters. The costs of discovering, evaluating, planning,
designing, developing, constructing, operating and closing the Company's mines
and other facilities in compliance with such laws and regulations is
significant. It is possible that the costs and delays associated with compliance
with such laws and regulations could become such that the Company would not
proceed with the development or operation of a mine.
As part of its normal course operating and development activities, the
Company has expended significant resources, both financial and managerial, to
comply with governmental regulations and permitting requirements, and will
continue to do so in the future. Moreover, it is possible that future regulatory
developments, such as increasingly strict environmental protection laws,
regulations and enforcement policies thereunder, and claims for damages to
property and persons resulting from the Company's operations, could result in
substantial costs and liabilities in the future.
-9-
<PAGE>
The Company is required to obtain governmental permits to develop its
reserves and for expansion or advanced exploration activities at its operating
and exploration properties. Obtaining the necessary governmental permits is a
complex and time-consuming process involving numerous foreign or US federal,
state and local agencies. The duration and success of each permitting effort are
contingent upon many variables not within the Company's control. In the case of
foreign operations, governmental approvals, licenses and permits are, as a
practical matter, subject to the discretion of the applicable governments or
governmental officials. In the context of environmental protection permitting,
including the approval of reclamation plans, the Company must comply with known
standards, existing laws and regulations that may entail greater or lesser costs
and delays depending on the nature of the activity to be permitted and the
interpretation of the laws and regulations implemented by the permitting
authority. The failure to obtain certain permits, or the imposition of extensive
conditions upon certain permits, could have a material adverse effect on the
Company's business, operations and prospects.
In past sessions of the United States Congress, both the House of
Representatives and Senate have considered legislation that seeks to reform the
General Mining Law of 1872, as amended (the "Mining Law"), which governs the
location and maintenance of unpatented mining claims and related activities on
federal lands. As part of the most recent budget reconciliation process, each of
the Senate and the House of Representatives passed separate legislation that
sought to reform the Mining Law, although such legislation was not enacted into
law. Similar legislation has also been proposed in the current session of the US
Congress, as has other legislation which could have the effect of increasing
costs of operations. The Company anticipates that if Congress were to enact
legislation modifying the Mining Law, such legislation may impose a royalty on
production of minerals from unpatented mining claims, and could contain new
requirements for mined land reclamation and other environmental control
measures. The Bureau of Land Management of the US Department of the Interior has
commenced a program to revise the federal regulations applicable to activities
on unpatented mining claims to impose more stringent reclamation and
environmental protection requirements on those activities. The extent to which
any such new legislation or administrative action would affect existing
unpatented mining claims or mining operations thereon is unclear at this time.
Any reform of the Mining Law based on these initiatives could increase the costs
of mining activities on unpatented mining claims, and as a result could have an
adverse effect on the Company and its results of operations, particularly the
Company's operations at McCoy/Cove and, to a lesser extent, Round Mountain.
Until such time, if any, as new reform legislation is enacted or administrative
action is taken, the ultimate effects and costs of compliance on the Company
cannot be estimated.
RISK OF INTERNATIONAL OPERATIONS
Many of the mineral rights and interests of the Company are subject to
government approvals, licenses and permits. Such approvals, licenses and permits
are, as a practical matter, subject to the discretion of the applicable
governments or governmental officials. No assurance can be given that the
Company will be successful in obtaining any or all of the various approvals,
licenses and permits that it seeks, that it will obtain them in a timely fashion
or that it will be able to maintain them in full force and effect without
modification or revocation.
In certain countries in which the Company has assets and operations, such
assets and operations are subject to various political, economic and other
uncertainties, including, among other things, the risks of war or civil unrest,
expropriation, nationalization, renegotiation or nullification of existing
concessions, licenses, permits, approvals and contracts, taxation policies,
foreign exchange and repatriation restrictions, changing political conditions,
international monetary fluctuations, currency controls and foreign governmental
regulations that favor or require the awarding of contracts to local contractors
or require foreign contractors to employ citizens of, or purchase supplies from,
a particular jurisdiction. In addition, in the event of a dispute arising from
foreign operations, the Company may be subject to the exclusive jurisdiction of
foreign courts or may not be successful in subjecting foreign persons to the
jurisdiction of courts in the United States or Canada. The Company also may be
hindered or prevented from enforcing its rights with respect to a governmental
instrumentality because of the doctrine of sovereign immunity. It is not
possible for the Company to accurately predict such developments or changes in
law or policy or to what extent any such developments or changes may have a
material adverse effect on the Company's operations.
-10-
<PAGE>
TITLE TO PROPERTIES
Certain of the Company's United States mineral rights, including at the
McCoy/Cove, Round Mountain and Kilgore properties, consist of unpatented lode
mining claims. Unpatented mining claims may be located on US federal public
lands open to appropriation, and may be either lode claims or placer claims
depending upon the nature of the deposit within the claim. In addition,
unpatented millsite claims, which may be used for processing operations or other
activities ancillary to mining operations, may be located on federal public
lands that are non-mineral in character. Unpatented mining claims and millsites
are unique property interests, and are generally considered to be subject to
greater title risk than other real property interests because the validity of
unpatented mining claims is often uncertain and is always subject to challenges
of third parties or contests by the federal government. The validity of an
unpatented mining claim, in terms of both its location and its maintenance, is
dependent on strict compliance with a complex body of federal and state
statutory and decisional law. In addition, there are few public records that
definitively control the issues of validity and ownership of unpatented mining
claims.
At Lupin in Canada, the Company's surface lease on most of the acreage
expired by its terms in March 1996. The mineral leases on this acreage extend to
2009 and 2013. The Company has applied for renewal of the surface lease, and
taken the steps necessary for renewal, but has not received notice of renewal
from the applicable governmental authorities. The Company expects such renewal
to be granted; however, there can be no assurance that such renewal will be
granted or that the lease, as renewed, will not contain modified terms relating
to reclamation and other environmental matters.
INFLATION AND CURRENCY RISKS
The Company directly or indirectly holds mining interests in several
countries, including Mexico, the Philippines, Brazil, Russia, Burkina Faso,
Mali, Ghana, Bolivia, Chile, Honduras and Peru, which historically have had
unstable currencies as a result of inflation, currency controls or other
reasons. Although the production resulting from such mining interests is
generally sold in US dollars, the Company is vulnerable to the effects of
inflation in its operations in certain countries, and profitability levels may
be eroded by unfavorable exchange rates. None of the countries in which the
Company holds mineral interests currently restricts the repatriation of profits,
other than through the requirement to register such distributions. While recent
years have seen a generally positive trend toward lowering inflation and
stabilizing exchange rates in these countries, there is no assurance that
governments will continue with current economic policies or that inflation will
be lower than it has been historically.
SUBORDINATED NATURE OF CERTAIN DEBT SECURITIES
Certain Debt Securities may be subordinated in right of payment to all
Senior Indebtedness of the Company or EBR whether now outstanding or hereafter
created, incurred, assumed or guaranteed by the Company or EBR, as the case may
be. The Guarantees may be subordinated in right of payment to all Senior
Indebtedness of the Company. The Indentures under which any Debt Securities will
be issued may not limit the amount of Senior Indebtedness or other indebtedness
that the Company or EBR may incur. In addition, the Debt Securities and the
Guarantees may be effectively subordinated to all liabilities of the Company's
other consolidated subsidiaries. See "The Company" and "Description of Debt
Securities and Guarantees."
USE OF PROCEEDS
Unless a Prospectus Supplement indicates otherwise, the net proceeds to be
received by the Company, or EBR, as the case may be, from the issue and sale
from time to time of the Securities will be added to the general funds of the
Company to be used to finance the Company's operations and for other general
corporate purposes. Pending such application, such net proceeds may be invested
in short-term marketable securities. Each Prospectus Supplement will contain
specific information concerning the use of proceeds from the sale of Securities
to which it relates.
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<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
The Company's earnings were insufficient to cover fixed charges by $36.7
million for the six months ended June 30, 1997. The Company's earnings were also
insufficient to cover fixed charges for each of the following years ended
December 31, as follows: by $176.1 million in 1996, by $44.7 million in 1995 and
by $31.1 million in 1992. For the years ended December 31, 1994 and 1993, the
ratio of earnings to fixed charges was 2.8 and 2.3, respectively.
The ratio of earnings to fixed charges (or deficiency) has been computed
based on the Company's results of operations as determined under accounting
principles generally accepted in Canada. Had the calculations been performed
under accounting principles generally accepted in the United States, earnings
would have been insufficient to cover fixed charges by $43.2 million for the six
months ended June 30, 1997. The Company's earnings would also have been
insufficient to cover fixed charges for each of the following years ended
December 31, as follows: by $173.9 million in 1996, by $41.1 million in 1995 and
by $31.1 million in 1992. For the years ended December 31, 1994 and 1993, the
ratio of earnings to fixed charges would have been 2.7 and 3.0, respectively.
Earnings were insufficient to cover combined fixed charges and preferred
stock dividends of a subsidiary net of the interest income/expense from the
related interest rate swap for the six months ended June 30, 1997 by $36.7
million. Earnings were also insufficient to cover combined fixed charges and
preferred stock dividends for each of the following years ended December 31, as
follows: by $176.1 million in 1996, by $59.7 million in 1995, by $3.3 million in
1994, by $1.6 million in 1993 and by $38.4 million in 1992.
Had the calculations been performed under accounting principles generally
accepted in the United States, earnings would have been insufficient to cover
combined fixed charges and preferred stock dividends by $43.2 million for the
six months ended June 30, 1997. Earnings would also have been insufficient to
cover combined fixed charges and preferred stock dividends for each of the
following years ended December 31, as follows: by $173.9 million in 1996, by
$56.1 million in 1995, by $4.0 million in 1994 and by $38.4 million in 1992. For
the year ended December 31, 1993, the ratio of earnings to combined fixed
charges and preferred stock dividends would have been 1.2.
As used in the above calculations, "earnings" means earnings before income
taxes and fixed charges, and "fixed charges" means interest on all indebtedness
and that portion of rental expense that management believes to be representative
of interest expense and capitalized interest. In addition, for purposes of
calculating the ratio of earnings to fixed charges (or deficiency) on amounts as
determined under accounting principles generally accepted in Canada, the portion
of interest included in shareholders' equity related to the capital securities
financing ($2.6 million for the six months ended June 30, 1997) has not been
included.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
Debt Securities may be issued from time to time in one or more series by
the Company or by EBR. In the event that any series of Debt Securities is issued
by EBR, such Debt Securities will be offered together with full, unconditional
and irrevocable guarantees issued by the Company. In the following description,
references to the Issuer refer to the Company, in the case of a series of Debt
Securities issued by the Company, and to the Company and EBR, in the case of a
series of Debt Securities issued by EBR and Guaranteed by the Company.
The Debt Securities will constitute either indebtedness designated as
Senior Indebtedness ("Senior Debt Securities"), indebtedness designated as
Senior Subordinated Indebtedness ("Senior Subordinated Debt Securities") or
indebtedness designated as Subordinated Indebtedness ("Subordinated Debt
Securities"). The particular terms of each series of Debt Securities offered by
a particular Prospectus Supplement and, if such Debt Securities are offered by
EBR, the particular terms of the Guarantees offered in connection therewith,
will be described therein. Senior Debt Securities, Senior Subordinated Debt
Securities and Subordinated Debt Securities will each be issued
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under a separate indenture (individually an "Indenture" and collectively the
"Indentures") to be entered into prior to the issuance of such Debt Securities.
The Indentures will be substantially identical, except for provisions relating
to subordination and Guarantees. See "Subordination of Senior Subordinated Debt
Securities, Subordinated Debt Securities and Guarantees". There will be a
separate Trustee (individually a "Trustee" and collectively the "Trustees")
under each Indenture. Information regarding the Trustee under an Indenture will
be included in any Prospectus Supplement relating to the Debt Securities issued
thereunder.
The following discussion includes a summary description of the material
terms of the Indentures, other than terms which are specific to a particular
series of Debt Securities and which will be described in the Prospectus
Supplement relating to such series. The following summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indentures, including the definitions therein
of certain terms capitalized in this Prospectus. Wherever particular Sections,
Articles or defined terms of the Indentures are referred to herein or in a
Prospectus Supplement, such Sections, Articles or defined terms are incorporated
herein or therein by reference.
GENERAL
The Debt Securities will be general unsecured obligations of the Company.
The Indentures do not limit the aggregate amount of Debt Securities which may be
issued thereunder, and Debt Securities may be issued thereunder from time to
time in separate series up to the aggregate amount from time to time authorized
for each series. Debt Securities of a series may be issuable in registered form
without coupons ("Registered Debt Securities"), in bearer form with or without
coupons attached ("Bearer Debt Securities") or in the form of one or more Global
Securities in registered or bearer form (each, a "Global Security"). Bearer Debt
Securities, if any, will be offered only to non-United States persons and to
offices located outside the United States of certain United States financial
institutions.
Any Debt Security issued by EBR will be fully, unconditionally and
irrevocably guaranteed by the Company as to payment of principal, premium, if
any, and interest.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Debt Securities in respect of
which this Prospectus is being delivered: (1) the Issuer (which may be the
Company or EBR) and title of such Debt Securities; (2) any limit on the
aggregate principal amount of such Debt Securities; (3) whether such Debt
Securities will be issued as Registered Debt Securities, Bearer Debt Securities
or any combination thereof, and any limitation on issuance of such Bearer Debt
Securities and any provisions regarding the transfer or exchange of such Bearer
Debt Securities, including exchange for Registered Debt Securities of the same
series; (4) whether any of such Debt Securities are to be issuable in permanent
global form ("Global Security") and, if so, the terms and conditions, if any,
upon which interests in such Debt Securities in global form may be exchanged, in
whole or in part, for the individual Debt Securities represented thereby; (5)
the person to whom any interest on any Debt Security of the series shall be
payable, if other than the person in whose name the Debt Security is registered
on the Regular Record Date; (6) the date or dates on which such Debt Securities
will mature; (7) the rate or rates of interest (which may be fixed or variable),
if any, or the method of calculation thereof, which such Debt Securities will
bear, and the basis upon which interest will be calculated if other than that of
a 360-day year of twelve 30-day months; (8) the date or dates from which any
such interest will accrue, the Interest Payment Dates on which any such interest
on such Debt Securities will be payable, the Regular Record Date for any
interest payable on any Interest Payment Date and any provision for the deferral
of interest payments; (9) whether any such interest will be payable in cash,
through the issuance of additional Debt Securities, through the issuance of
Common Shares, through some combination of cash and additional Debt Securities
or through some combination of cash and Common Shares; (10) the place or places
where the principal of, premium, if any, and interest on such Debt Securities
will be payable; (11) the period or periods within which, the events upon the
occurrence of which, and the price or prices at which, such Debt Securities may,
pursuant to any optional or mandatory provisions, be redeemed or purchased, in
whole or in part, by the Issuer and any terms and conditions relevant thereto;
(12) the obligations of the Issuer, if any, to redeem or repurchase such Debt
Securities pursuant
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<PAGE>
to any sinking fund or analogous provisions or at the option of the Holders
thereof; (13) the denominations in which any such Debt Securities will be
issuable, if other than denominations of US $1,000 and any integral multiple
thereof; (14) the units of payment of principal of, premium, if any, and
interest on such Debt Securities if other than US dollars, which units may
consist of currency, currencies, currency unit or units, or securities and the
manner of determining the U.S. dollar equivalent of foreign currency; (15) any
index or formula to be used to determine the amount of payments of principal,
premium, if any, and interest on such Debt Securities, and any commodities,
currencies, currency units or indices, or value, rate or price, relevant to such
determination; (16) if the principal of, premium, if any, or interest on such
Debt Securities is to be payable, at the election of the Issuer or a Holder
thereof, in one or more currencies or currency units other than that or those in
which such Debt Securities are stated to be payable, the currencies or currency
units in which payment of the principal of, premium, if any, and interest on
such Debt Securities as to which election is made shall be payable, and the
periods within which and the terms and conditions upon which such election is to
be made; (17) if other than the principal amount thereof, the portion of the
principal amount of such Debt Securities of the series which will be payable
upon acceleration of the Maturity thereof; (18) whether such Debt Securities are
subordinate in right of payment to any Senior Indebtedness of the Issuer and, if
so, the terms and conditions of such subordination and the aggregate principal
amount of such Senior Indebtedness outstanding as of a recent date; (19) any
covenants to which the Issuer may be subject with respect to such Debt
Securities, including whether the Issuer is required to offer to purchase all
Debt Securities of a series upon a change of control; (20) the applicability of
the provisions described under "--Defeasance" below; (21) the terms and
conditions, if any, pursuant to which such Debt Securities are convertible into
or exchangeable for Common Shares or other securities; (22) United States and
Canadian Federal income tax consequences, if any; (23) the provisions for the
payment of additional amounts with respect to any Canadian withholding taxes in
certain cases; and (24) any other terms of such Debt Securities.
Debt Securities may be issued at a discount from their principal amount.
United States and Canadian Federal income tax considerations and other special
considerations applicable to any such Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
If the purchase price of any series of Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of, premium, if any, and interest on any series of Debt Securities are
payable in a foreign currency or currencies, a foreign currency unit or units or
in securities, the restrictions, elections, general tax considerations, specific
terms and other information with respect to such series of Debt Securities will
be set forth in the applicable Prospectus Supplement.
Debt Securities may be issued from time to time with payment terms which
are calculated by reference to the value, rate or price of one or more
commodities, currencies, currency units or indices. Holders of such Debt
Securities may receive a principal amount (including premium, if any) on any
principal payment date, or a payment of interest on any interest payment date,
that is greater than or less than the amount of principal (including premium, if
any) or interest otherwise payable on such dates, depending upon the value, rate
or price on the applicable dates of the applicable currency, currency unit,
commodity or index. Information as to the methods for determining the amount of
principal, premium, if any, or interest payable on any date, the currencies,
currency units, commodities or indices to which the amount payable on such date
is linked and any additional tax considerations will be set forth in the
applicable Prospectus Supplement.
Except as may be set forth in the applicable Prospectus Supplement, Holders
of Debt Securities will not have the benefit of any specific covenants or
provisions in the applicable Indenture or such Debt Securities in the event that
the Issuer engages in or becomes the subject of a highly leveraged transaction,
other than the limitations on mergers, consolidations and transfers of
substantially all of the Issuer's properties and assets as an entirety to any
person as described below under "--Consolidation, Merger and Sale of Assets."
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GUARANTEES
The Company will fully, unconditionally and irrevocably guarantee, on a
senior, senior subordinated or subordinated basis, the due and punctual payment
of principal of, premium, if any, and interest on any Debt Securities that are
issued by EBR, and the due and punctual payment of any sinking fund payments
thereon, when and as the same shall become due and payable, whether at the
maturity date, by declaration of acceleration, call for redemption or otherwise.
See "--Subordination of Senior Subordinated Debt Securities, Subordinated Debt
Securities and Guarantees."
SENIOR DEBT SECURITIES
The Senior Debt Securities will rank pari passu with all other unsecured
and unsubordinated debt of the Issuer and senior to the Senior Subordinated Debt
Securities and Subordinated Debt Securities.
SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES, SUBORDINATED DEBT
SECURITIES AND GUARANTEES
The payment of the principal of, premium, if any, and interest on the
Senior Subordinated Debt Securities and the Subordinated Debt Securities will,
to the extent set forth in the respective Indentures governing such Senior
Subordinated Debt Securities and Subordinated Debt Securities, be subordinated
in right of payment to the prior payment in full of all Senior Indebtedness.
Upon any payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Issuer, the holders of all Senior Indebtedness will be
entitled to receive payment in full of all amounts due or to become due thereon
before the Holders of the Senior Subordinated Debt Securities or the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, premium, if any, or interest on such Senior Subordinated
Debt Securities or Subordinated Debt Securities, as the case may be. In the
event of the acceleration of the maturity of any Senior Subordinated Debt
Securities or Subordinated Debt Securities, the holders of all Senior
Indebtedness will be entitled to receive payment in full of all amounts due or
to become due thereon before the Holders of the Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be, will be entitled
to receive any payment upon the principal of, premium, if any, or interest on
such Senior Subordinated Debt Securities or Subordinated Debt Securities, as the
case may be. No payments on account of principal, premium, if any, or interest
in respect of the Senior Subordinated Debt Securities or Subordinated Debt
Securities may be made if there shall have occurred and be continuing a default
in the payment of principal of (or premium, if any) or interest on any Senior
Indebtedness beyond any applicable grace period, or a default with respect to
any Senior Indebtedness permitting the holders thereof to accelerate the
maturity thereof, or if any judicial proceedings shall be pending with respect
to any such default. For purposes of the subordination provisions, the payment,
issuance or delivery of cash, property or securities (other than stock, and
certain subordinated securities, of the Issuer) upon conversion or exchange of a
Senior Subordinated Debt Security or Subordinated Debt Security will be deemed
to constitute payment on account of the principal of such Senior Subordinated
Debt Security or Subordinated Debt Security, as the case may be.
By reason of such provisions, in the event of insolvency, holders of Senior
Subordinated Debt Securities and Subordinated Debt Securities may recover less,
ratably, than holders of Senior Indebtedness with respect thereto.
The term "Senior Indebtedness", when used with respect to any series of
Senior Subordinated Debt Securities or Subordinated Debt Securities, is defined
to include all amounts due on and obligations in connection with any of the
following, whether outstanding at the date of execution of the Indenture or
thereafter incurred, assumed, guaranteed or otherwise created (including,
without limitation, interest accruing on or after a bankruptcy or other similar
event, whether or not an allowed claim therein):
(a) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Issuer for money borrowed or evidenced by
securities, bonds, debentures, notes or similar instruments;
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(b) reimbursement obligations and other liabilities (contingent or
otherwise) of the Issuer with respect to letters of credit or bankers'
acceptances issued for the account of the Issuer and interest rate
protection agreements and currency exchange or purchase agreements;
(c) obligations and liabilities (contingent or otherwise) of the Issuer
related to capitalized lease obligations;
(d) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Issuer related to agreements or arrangements
designed to protect the Issuer against fluctuations in commodity
prices, including without limitation, interest rate swaps, commodity
futures contracts or similar hedging instruments;
(e) indebtedness of others of the kinds described in the preceding clauses
(a) through (d) that the Issuer has assumed, guaranteed or otherwise
assured the payment of, directly or indirectly;
(f) indebtedness of another Person of the type described in the preceding
clauses (a) through (e) secured by any mortgage, pledge, lien or other
encumbrance on property owned or held by the Issuer; and
(g) deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or
liability described in the preceding clauses (a) through (f) whether
or not there is any notice to or consent of the Holders of such series
of Senior Subordinated Debt Securities or Subordinated Debt
Securities, as the case may be;
except that, with respect to the Senior Subordinated Debt Securities, any
particular indebtedness, obligation, liability, guaranty, assumption, deferral,
renewal, extension or refunding shall not constitute "Senior Indebtedness" if it
is expressly stated in the governing terms, or in the assumption or guarantee,
thereof that the indebtedness involved is not senior in right of payment to the
Senior Subordinated Debt Securities or that such indebtedness is pari passu with
or junior to the Senior Subordinated Debt Securities and, with respect to
Subordinated Debt Securities, any particular indebtedness, obligation,
liability, guaranty, assumption, deferral, renewal, extension or refunding shall
not constitute "Senior Indebtedness" if it is expressly stated in the governing
terms, or in the assumption or guarantee, thereof that the indebtedness involved
is not senior in right of payment to the Subordinated Debt Securities or that
such indebtedness is pari passu with or junior to the Subordinated Debt
Securities.
In certain circumstances, such as the bankruptcy or insolvency of the
Issuer, Canadian or US bankruptcy or insolvency legislation may be applicable
and the application of such legislation may lead to different results with
respect to, for example, payments to be made to Holders of Debt Securities, or
priorities between Holders of the Debt Securities and holders of Senior
Indebtedness, than those provided for in the applicable Indenture.
If this Prospectus is being delivered in connection with a series of Senior
Subordinated Debt Securities or Subordinated Debt Securities, the accompanying
Prospectus Supplement or the information incorporated herein by reference will
set forth the approximate amount of Senior Indebtedness outstanding as of the
end of the Issuer's most recent fiscal quarter.
In the event that Senior Subordinated Debt Securities or Subordinated Debt
Securities are issued by EBR, the related Guarantees issued by the Company will
be subordinate and junior in right of payment to Senior Indebtedness of the
Company on substantially the same terms and conditions as the obligations of EBR
under the Senior Subordinated Debt Securities or the Subordinated Debt
Securities, as the case may be, will be subordinate and junior in right of
payment to Senior Indebtedness of EBR.
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CONVERSION OR EXCHANGE OF DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, such series will be convertible or
exchangeable into Common Shares or other securities of the Company, or Debt
Securities or Preferred Stock of EBR (including rights to receive payments in
cash or securities based on the value, rate or price of one or more specified
commodities, currencies, currency units or indices) on the terms and conditions
set forth therein.
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Debt Securities are issuable in definitive form as Registered Debt
Securities, as Bearer Debt Securities or both. Unless otherwise indicated in an
applicable Prospectus Supplement, Bearer Debt Securities will have interest
coupons attached. Debt Securities are also issuable in temporary or permanent
global form.
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. In addition, with
respect to any series of Bearer Debt Securities, at the option of the holder,
subject to the terms of the Indenture, such Bearer Debt Securities (with all
unmatured coupons, except as provided below, and all matured coupons in default)
will be exchangeable into Registered Debt Securities of the same series of any
authorized denominations and of a like aggregate principal amount and tenor.
Bearer Debt Securities surrendered in exchange for Registered Debt Securities
between a Regular Record Date or a Special Record Date and the relevant date for
payment of interest shall be surrendered without the coupon relating to such
date for payment of interest, and interest accrued as of such date will not be
payable in respect of the Registered Debt Security issued in exchange for such
Bearer Debt Security, but will be payable only to the holder of such coupon when
due in accordance with the terms of the Indenture.
In connection with its sale during the restricted period (as defined
below), no Bearer Debt Security (including a Debt Security in permanent global
form that is either a Bearer Debt Security or exchangeable for Bearer Debt
Securities) shall be mailed or otherwise delivered to any location in the United
States (as defined under "--Limitations on Issuance of Bearer Debt Securities")
and a Bearer Debt Security may be delivered outside the United States in
definitive form in connection with its original issuance only if prior to
delivery the person entitled to receive such Bearer Debt Security furnishes
written certification, in the form required by the Indenture, to the effect that
such Bearer Debt Security is owned by: (a) a person (purchasing for its own
account) who is not a United States person (as defined under "--Limitations on
Issuance of Bearer Debt Securities"); (b) a United States person who (i) is a
foreign branch of a United States financial institution purchasing for its own
account or for resale or (ii) acquired such Bearer Debt Security through the
foreign branch of a United States financial institution and who for purposes of
the certification holds such Bearer Debt Security through such financial
institution on the date of certification and, in either case, such United States
financial institution certifies to the Issuer or the distributor selling the
Bearer Debt Security within a reasonable time stating that it agrees to comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder, or (c) a United States or foreign financial institution for purposes
of resale within the "restricted period" as defined in United States Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7). A financial institution described in
clause (c) of the preceding sentence (whether or not also described in clauses
(a) and (b)) must certify that it has not acquired the Bearer Debt Security for
purpose of resale, directly or indirectly, to a United States person or to a
person within the United States or its possessions. In the case of a Bearer Debt
Security in permanent global form, such certification must be given in
connection with notation of a beneficial owner's interest therein in connection
with the original issuance of such Debt Security or upon exchange of a portion
of a temporary global Debt Security.
Debt Securities may be presented for exchange as provided above, and
Registered Debt Securities may be presented for registration of transfer (with
the form of transfer endorsed thereon duly executed), at the office or agency of
the Issuer maintained for such purposes and at any other office or agency
maintained for such purpose
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with respect to any series of Debt Securities and referred to in the applicable
Prospectus Supplement, without a service charge and upon payment of any taxes
and other governmental charges as described in the Indenture. Such transfer or
exchange will be effected upon the Issuer or its agent, as the case may be,
being satisfied with the documents of title and identity of the person making
the request.
In the event of any redemption in part, the Issuer shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and ending on the
close of business on (A) if Debt Securities of the series are issued only as
Registered Debt Securities, the day of mailing of the relevant notice of
redemption and (B) if Debt Securities of the series are issued as Bearer Debt
Securities, the day of the first publication of the relevant notice of
redemption except that, if Securities of the series are also issued as
Registered Debt Securities and there is no publication, the day of mailing of
the relevant notice of redemption; (ii) register the transfer of or exchange any
Registered Debt Security, or portion thereof, called for redemption, except the
unredeemed portion of any Registered Debt Security being redeemed in part; or
(iii) exchange any Bearer Debt Security called for redemption, except to
exchange such Bearer Debt Security for a Registered Debt Security of that series
and like tenor which is simultaneously surrendered for redemption.
FORM OF INTEREST PAYMENTS
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, any interest payable on such series will
be payable (i) in cash, (ii) through the issuance of additional Debt Securities,
(iii) through the issuance of the Company's Common Shares, or (iv) some
combination of either (i) and (ii) or (i) and (iii), above, and on the terms and
conditions set forth in such Prospectus Supplement.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and interest on Bearer Debt Securities
will be payable, subject to any applicable laws and regulations, in the
designated currency or currency unit, at the offices of such Paying Agents
("Paying Agents") outside the United States as the Issuer may designate from
time to time, at the option of the holder, by check or by transfer to an account
maintained by the payee with a bank located outside the United States; provided,
however, that the written certification described above under "-- Form,
Exchange, Registration, Conversion, Transfer and Payment" has been delivered
prior to the first actual payment of interest. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of interest on Bearer Debt Securities
on any Interest Payment Date will be made only against surrender to the Paying
Agent of the coupon relating to such Interest Payment Date. No payment with
respect to any Bearer Debt Security will be made at any office or agency of the
Issuer in the United States or by check mailed to any address in the United
States or by transfer to any account maintained with a bank located in the
United States, nor shall any payments be made in respect of Bearer Debt
Securities upon presentation to the Issuer or its designated Paying Agents
within the United States. Notwithstanding the foregoing, payments of principal
of (and premium, if any) and interest on Bearer Debt Securities denominated and
payable in US dollars will be made at the office of the Issuer's Paying Agent in
the United States, if (but only if) payment of the full amount thereof in US
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and interest on Registered Debt Securities
will be made in the designated currency or currency unit at the office of such
Paying Agent or Paying Agents as the Issuer may designate from time to time,
except that at the option of the Issuer payment of any interest may be made by
check mailed to the address of the person entitled thereto as such address shall
appear in the Security Register. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Registered Debt
Securities will be made to the person in whose name such Registered Debt
Security is registered at the close of business on the Regular Record Date for
such interest.
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Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee will be designated as a Paying Agent for
the Trustee for payments with respect to Debt Securities which are issuable
solely as Registered Debt Securities, and the Issuer will maintain a Paying
Agent outside the United States for payments with respect to Debt Securities
(subject to limitations described above in the case of Bearer Debt Securities)
which are issued solely as Bearer Debt Securities, or as both Registered Debt
Securities and Bearer Debt Securities. Any Paying Agents outside the United
States and any other Paying Agents in the United States initially designated by
the Issuer for the Debt Securities will be named in an applicable Prospectus
Supplement. The Issuer may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that, if Debt Securities of a series
are issued solely as Registered Debt Securities, the Issuer will be required to
maintain a Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series are issued as Bearer Securities, the Issuer will be
required to maintain (i) a Paying Agent in the United States for principal
payments with respect to any Registered Debt Securities of the series (and for
payments with respect to Bearer Debt Securities of the series in the
circumstances described above, but not otherwise), and (ii) a Paying Agent in a
Place of Payment located outside the United States where Securities of such
series and any coupons appertaining thereto may be presented and surrendered for
payment.
All monies paid by the Issuer to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Issuer and the holder of such Debt Security or any coupon will
thereafter look only to the Issuer for payment thereof.
TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Debt Securities of a series which are issuable as Bearer Debt Securities
will initially be represented by one or more temporary global Debt Securities,
without interest coupons, to be deposited with a common depository in London for
the Euroclear System ("Euroclear") and CEDEL S.A. ("CEDEL") for credit to the
designated accounts. On and after the date determined as provided in any such
temporary global Debt Security and described in the applicable Prospectus
Supplement, each such temporary global Debt Security will be exchangeable for
definitive Bearer Debt Securities, definitive Registered Debt Securities or all
or a portion of a permanent global security, or any combination thereof, as
specified in the applicable Prospectus Supplement, but, unless otherwise
specified in the applicable Prospectus Supplement, only upon written
certification in the form and to the effect described under "-- Form, Exchange,
Registration, Conversion, Transfer and Payment." No Bearer Debt Security
delivered in exchange for a portion of a temporary global Debt Security will be
mailed or otherwise delivered to any location in the United States in connection
with such exchange.
Unless otherwise specified in the applicable Prospectus Supplement,
interest in respect of any portion of a temporary global Debt Security payable
in respect of an Interest Payment Date occurring prior to the issuance of
definitive Debt Securities or a permanent global Debt Security will be paid to
each of Euroclear and CEDEL with respect to the portion of the temporary global
Debt Security held for its account. Each of Euroclear and CEDEL will undertake
in such circumstances to credit such interest received by it in respect of a
temporary global Debt Security to the respective accounts for which it holds
such temporary global Debt Security only upon receipt in each case of written
certification in the form and to the effect described above under "-- Form,
Exchange, Registration, Conversion, Transfer and Payment" as of the relevant
Interest Payment Date regarding the portion of such temporary global Debt
Security on which interest is to be so credited.
PERMANENT GLOBAL SECURITIES
If any Debt Securities of a series are issuable in permanent global form,
the applicable Prospectus Supplement will describe the circumstances, if any,
under which beneficial owners of interests in any such permanent global Debt
Securities may exchange such interests for Debt Securities of such series and of
like tenor and principal amount in any authorized form and denomination. No
Bearer Debt Security delivered in exchange
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for a portion of a permanent global Debt Security shall be mailed or otherwise
delivered to any location in the United States in connection with such exchange.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary ("Depositary") or its nominee identified in the applicable
Prospectus Supplement. In such a case, one or more Global Securities will be
issued in a denomination or aggregate denomination equal to the portion of the
aggregate principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered form, a Global
Security may not be registered for transfer or exchange except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any nominee to a successor Depositary or a
nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Issuer expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its
book-entry registration and transfer system, the respective principal amounts of
the Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Issuer, if such Debt
Securities are offered and sold directly by the Issuer. Ownership of beneficial
interests in such Global Security will be limited to participants or Persons
that may hold interests through participants. Ownership of beneficial interests
by participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by Persons that hold through participants will
be shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. The foregoing
limitations and such laws may impair the ability to transfer beneficial
interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Unless otherwise specified in the applicable Prospectus
Supplement, owners of beneficial interests in such Global Security will not be
entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form and
will not be considered the Holders thereof for any purposes under the applicable
Indenture. Accordingly, each Person owning a beneficial interest in such Global
Security must rely on the procedures of the Depositary for such Global Security
and, if such Person is not a participant, on the procedures of the participant
through which such Person owns its interest, to exercise any rights of a Holder
under the applicable Indenture. The Issuer understands that under existing
industry practices, if the Issuer requests any action of Holders or an owner of
a beneficial interest in such Global Security desires to give notice or take any
action a Holder is entitled to give or take under an Indenture, the Depositary
for such Global Security would authorize the participants to give such notice or
take such action, and participants would authorize beneficial owners owning
through such participants to give
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such notice or take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
Principal of, premium, if any, and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any series of Debt Securities represented by a Global Security is
at any time unwilling or unable to continue as Depositary or ceases to be a
clearing agency registered or in good standing under the Exchange Act and a
successor Depositary is not appointed by the Issuer within 90 days after the
Issuer receives notice or becomes aware of such condition, the Issuer will issue
such Debt Securities in definitive certificated form in exchange for such Global
Security. In addition, the Company may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Global Securities and, in such event, will issue Debt Securities of such
series in definitive certificated form in exchange for all of the Global
Security or Securities representing such Debt Securities.
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
In compliance with United States Federal tax laws and regulations, Bearer
Debt Securities (including securities in permanent global form that are either
Bearer Debt Securities or exchangeable for Bearer Debt Securities) will not be
offered or sold during the restricted period (as defined in United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)) (generally, the first 40
days after the closing date, and, with respect to unsold allotments, until sold)
within the United States or to United States persons (each as defined below)
other than to an office located outside the United States of a United States
financial institution (as defined in Section 1.165-12(c)(1)(v) of the United
States Treasury Regulations), purchasing for its own account or for resale or
for the account of certain customers, that provides a certificate stating that
it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the Code and the United States Treasury Regulations thereunder, or to certain
other persons described in Section 1.163-5(c)(2)(i)(D)(1)(iii)(B) of the United
States Treasury Regulations. Moreover, such Bearer Debt Securities will not be
delivered in connection with their sale during the restricted period within the
United States. Any underwriters and dealers participating in the offering of
Bearer Debt Securities must covenant that they will not offer or sell during the
restricted period any Bearer Debt Securities within the United States or to
United States persons (other than the persons described above) or deliver in
connection with the sale of Bearer Debt Securities during the restricted period
any Bearer Debt Securities within the United States and that they have in effect
procedures reasonably designed to ensure that their employees and agents who are
directly engaged in selling the Bearer Debt Securities are aware of the
restrictions described above. No Bearer Debt Security (other than a temporary
global Bearer Debt Security) will be delivered in connection with its original
issuance nor will interest be paid on any Bearer Debt Security until receipt by
the Issuer of the written certification described above under "--Form, Exchange,
Registration, Conversion, Transfer and Payment." Each Bearer Debt Security,
other than a temporary global Bearer Debt Security, will bear a legend to the
following effect: "Any United States person who holds this obligation will be
subject to limitations under the United States Federal income tax laws,
including the limitations provided in Sections 165(j) and 1287(a) of the
Internal Revenue Code."
As used herein, "United States person" means any citizen or resident of the
United States, any corporation, partnership or other entity created or organized
in or under the laws of the United States and any estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source, and "United States" means the United States of America (including the
states and the District of Columbia) and its possessions.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
Debt Securities of any series: (a) failure to pay principal (or premium, if any)
on any Debt Security of that series when due, whether or not such failure is a
result of the subordination provisions of the Indenture with respect to such
series; (b) failure to pay any
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interest on any Debt Security of that series when due, continued for 30 days,
whether or not such failure is a result of the subordination provisions of the
Indenture with respect to such series; (c) failure to make any sinking fund
payment, when due, in respect of any Debt Security of that series; (d) failure
to perform any other covenant of the Issuer in the applicable Indenture or any
other covenant to which the Issuer may be subject with respect to Debt
Securities of that series (other than a covenant solely for the benefit of a
series of Debt Securities other than that series), continued for 90 days after
written notice as provided in the applicable Indenture; (e) certain events of
bankruptcy, insolvency or reorganization; and (f) any other Event of Default
provided with respect to Debt Securities of that series.
If an Event of Default with respect to Outstanding Debt Securities of any
series shall occur and be continuing, either the Trustee or the Holders of at
least 25% in principal amount of the Outstanding Debt Securities of that series,
by notice as provided in the applicable Indenture, may declare the principal
amount (or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all Debt Securities of that series to be due and
payable immediately, except that upon the occurrence of an Event of Default
specified in (f) above, the principal amount (or in the case of Original Issue
Discount Securities, such portion) of all Debt Securities shall be immediately
due and payable without notice. However, at any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before judgment or decree based on such acceleration has been obtained, the
Holders of a majority in principal amount of the Outstanding Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration. For information as to waiver of defaults, see "--Modification and
Waiver" below.
The Indentures will provide that, subject to the duty of the respective
Trustees thereunder during an Event of Default to act with the required standard
of care, each such Trustee will be under no obligation to exercise any of its
rights or powers under the respective Indentures at the request or direction of
any of the Holders, unless such Holders shall have offered to such Trustee
reasonable security or indemnity. Subject to certain provisions, including those
requiring security or indemnification of the applicable Trustee, the Holders of
a majority in principal amount of the Outstanding Debt Securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to such Trustee, or exercising any trust or
power conferred on such Trustee, with respect to the Debt Securities of that
series.
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the applicable Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the applicable
Trustee written notice of a continuing Event of Default and unless also the
Holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of the same series shall have written requests, and offered
reasonable indemnity, to such Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of the same series
a direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of a Debt Security for enforcement of payment of the
principal of and interest on such Debt Security on or after the respective due
dates expressed in such Debt Security.
The Issuer will be required to furnish to the Trustees annually a statement
as to the performance by the Issuer of its obligations under the respective
Indentures and as to any default in such performance.
MODIFICATION AND WAIVER
Without the consent of any Holder of Outstanding Debt Securities, the
Issuer and the Trustees may amend or supplement the Indentures or the Debt
Securities to cure any ambiguity, defect or inconsistency, or to make any change
that does not adversely affect the rights of any Holder of Debt Securities.
Other modifications and amendments of the respective Indentures may be made by
the Issuer and the applicable Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the Outstanding Debt
Securities of each series affected thereby; provided, however, that no such
modification or amendment may, without the consent of
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the Holder of each Outstanding Debt Security affected thereby: (a) change the
Stated Maturity of the principal of, or any instalment of principal of, or
premium, if any, or interest on any Debt Security; (b) reduce the principal
amount of, the rate of interest on, or the premium, if any, payable upon the
redemption of, any Debt Security; (c) reduce the amount of principal of an
Original Issue Discount Security payable upon acceleration of the Maturity
thereof; (d) change the place or currency of payment of principal of, premium,
if any, or interest on any Debt Security; (e) impair the right to institute suit
for the enforcement of any payment on or with respect to any Debt Security on or
after the Stated Maturity or Redemption Date thereof; (f) modify the conversion
or exchange provisions applicable to convertible or exchangeable Debt Securities
in a manner adverse to the holders thereof; (g) modify the subordination
provisions applicable to Senior Subordinated Debt Securities or Subordinated
Debt Securities in a manner adverse to the Holders thereof; (h) reduce the
percentage in principal amount of Outstanding Debt Securities of any series, the
consent of the Holders of which is required for modification or amendment of the
applicable Indenture or for waiver of compliance with certain provisions of the
applicable Indenture or for waiver of certain defaults or (i) modify any of the
provisions of certain sections as specified in the Indenture including the
provisions summarized in this paragraph, except to increase any such percentage
or to designate additional provisions of the Indenture, which, with respect to
such series, cannot be modified or waived without the consent of the Holder of
each Outstanding Debt Security affected thereby.
The Holders of at least a majority in principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned, compliance
by the Company with certain covenants of the applicable Indenture. The Holders
of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may, on behalf of the Holders of all Debt Securities of
that series, waive any past default under the applicable Indenture with respect
to that series, except a default in the payment of the principal of, premium, if
any, or interest on, any Debt Security of that series or in respect of a
provision which under the applicable Indenture cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security of that
series affected.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Issuer, without the consent of any Holders of any series of outstanding
Debt Securities, may not consolidate with or merge into, or transfer or lease
its assets substantially as an entirety (treating the Issuer and each of its
Subsidiaries as a single consolidated entity) to, any corporation, and any other
corporation may not consolidate with or merge into, or transfer or lease its
assets substantially as an entirety to, the Issuer, unless the corporation (if
other than the Issuer) formed by such consolidation or into which the Issuer is
merged or which acquires or leases the assets of the Issuer substantially as an
entirety is organized and existing under the laws of the United States of
America or Canada or any political subdivision of either, and assumes the
Issuer's obligations under each series of Outstanding Debt Securities and the
Indentures applicable thereto and unless the Trustee is satisfied that the
transaction will not result in the successor being required to make any
deduction or withholding on account of certain Canadian taxes from any payments
in respect of the Securities, and unless, after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, and unless the Issuer delivers an officer's certificate and an
opinion of counsel with respect to compliance with the foregoing requirements.
DEFEASANCE
If so indicated in the applicable Prospectus Supplement with respect to the
Debt Securities of a series, the Issuer at its option (i) will be discharged
from any and all obligations in respect of the Debt Securities of such series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, to replace destroyed, stolen, lost or mutilated Debt
Securities of such series, and to maintain an office or agency in respect of the
Debt Securities and hold moneys for payment in trust) or (ii) will be released
from its obligations to comply with certain covenants specified in the
applicable Prospectus Supplement with respect to the Debt Securities of such
series, and the occurrence of an event described in clause (d) under "Events of
Default" above with respect to any defeased covenants, and clauses (e) and (g)
under "Events of Default" above shall no longer be an Event of Default,
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if in either case the Issuer irrevocably deposits with the applicable Trustee,
in trust, money, Government Obligations of the government issuing the currency
in which the Debt Securities of the relevant series are denominated or a
combination thereof that through the payment of interest thereon and principal
thereof in accordance with the terms will provide money in an amount sufficient
to pay all the principal of and premium, if any, and interest on the Securities
of such series on the dates such payments are due (up to the Stated Maturity
Date, or the Redemption Date, as the case may be) in accordance with the terms
of such Debt Securities. Such a trust may only be established if, among other
things, (a) no Event of Default described under "Events of Default" above or
event that, after notice or lapse of time, or both, would become an Event of
Default under the applicable Indenture, shall have occurred and be continuing on
the date of such deposit, or, with regard to an Event of Default described under
clause (f) under "Events of Default" above or an event that, after notice or
lapse of time, or both, would become an Event of Default described under such
clause (f), shall have occurred and be continuing at any time during the period
ending on the 123rd day following such date of deposit, (b) the Issuer shall
have delivered an Opinion of Counsel to the effect that the Holders of the Debt
Securities will not recognize gain or loss for United States Federal income tax
purposes as a result of such deposit or defeasance and will be subject to United
States Federal income tax in the same manner as if such defeasance had not
occurred, and (c) such defeasance or covenant defeasance will not result in the
trust being in violation of the Investment Company Act of 1940. Such opinion, in
the case of defeasance under clause (i) above, must refer to and be based upon a
ruling of the Internal Revenue Service or a change in applicable Federal income
tax law occurring after the date of the applicable Indenture. In the event the
Issuer omits to comply with its remaining obligations under the applicable
Indenture after a defeasance of such Indenture with respect to the Debt
Securities of any series as described under clause (ii) above and the Debt
Securities of such series are declared due and payable because of the occurrence
of any undefeased Event of Default, the amount of money and Government
Obligations on deposit with the applicable Trustee may be insufficient to pay
amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. However, the Issuer will
remain liable in respect to such payments.
Notwithstanding the description set forth under "--Subordination of Senior
Subordinated Debt Securities, Subordinated Debt Securities and Guarantees"
above, in the event that the Issuer deposits money or Government Obligations in
compliance with the Indenture that governs any Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be, in order to
defease all or certain of its obligations with respect to the applicable series
of Debt Securities, the money or Government Obligations so deposited will not be
subject to the subordination provisions of the applicable Indenture and the
indebtedness evidenced by such series of Debt Securities will not be
subordinated in right of payment to the holders of applicable Senior
Indebtedness to the extent of the money or Government Obligations so deposited.
GOVERNING LAW
The Indentures, the Debt Securities and the Guarantees will be governed by,
and construed in accordance with, the laws of the State of New York.
ENFORCEABILITY OF JUDGMENTS
Since a significant portion of the assets of the Company and its
subsidiaries are outside the United States, any judgment obtained in the United
States against the Company, including judgments with respect to the payment of
principal, premium, if any, or interest on the Debt Securities or with respect
to the Guarantees may not be collectible within the United States.
The Company has been informed by its Canadian counsel, Milner Fenerty, that
the laws of the Province of Alberta (the "Relevant Province") permit an action
to be brought against the Company in a court of competent jurisdiction in the
Relevant Province on any final and conclusive judgment in personam of any
federal or state court located in The City of New York ("New York Court") that
has not been stayed and is not impeachable as void or voidable under the
internal laws of the State of New York and that is for a sum certain if (i) the
New York Court rendering such judgment has jurisdiction over the judgment
debtor, as recognized by the courts of the Relevant
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Province (and submission by the Company in the applicable Indenture to the
jurisdiction of the New York Court will be sufficient for the purpose); (ii)
such judgment was not obtained by fraud or in a manner contrary to natural
justice and the enforcement thereof would not be inconsistent with public
policy, as such term is understood under the laws of the Relevant Province;
(iii) the enforcement of such judgment does not constitute, directly or
indirectly, the enforcement of foreign revenue, exproprietory or penal laws;
(iv) no new admissible evidence relevant to the action is discovered prior to
the rendering of judgment by the court in the Relevant Province; (v) the action
to enforce such judgment is commenced within 6 years after the date of such
judgment; and (vi) subject to the discretion of the courts in the Relevant
Province to find that the choice of the laws of the New York Court is not bona
fide (in the sense that it was made with a view to avoiding the consequences
of the law of any other jurisdiction). In the opinion of such counsel, there are
no reasons under present law of the Relevant Province for avoiding recognition
of a judgment of the New York Court under the Indenture or on the Debt
Securities and Guarantees based upon public policy.
REGARDING THE TRUSTEES
The Indentures contain certain limitations on the right of each Trustee,
should it become a creditor of the Issuer, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. Each Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Debt Securities issued
under the applicable Indenture, it must eliminate such conflict or resign.
DESCRIPTION OF EBR PREFERRED STOCK
The following is a description of certain general terms and provisions of
the EBR Preferred Stock. The particular terms of any series of Preferred Stock
will be described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below.
The summary of terms of EBR's preferred stock (including the Preferred
Stock) contained in this Prospectus does not purport to be complete and is
subject to, and qualified in its entirety by, the provisions of EBR's
Certificate of Incorporation and the certificate of designations relating to
each series of the Preferred Stock (the "Certificate of Designations"), which
will be filed as an exhibit to or incorporated by reference in the Registration
Statement of which this Prospectus is a part at or prior to the time of issuance
of such series of the Preferred Stock.
EBR's Certificate of Incorporation permits its preferred stock to be issued
from time to time in one or more series, without stockholder approval. Subject
to limitations prescribed by law, the Board of Directors of EBR is authorized to
determine the voting powers (if any), designation, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof, for each series of preferred stock that may be issued,
and to fix the number of shares of each such series.
The Preferred Stock issued by EBR shall have the dividend, liquidation,
redemption and voting rights set forth in the applicable Prospectus Supplement,
except as specifically provided below. The applicable Prospectus Supplement will
describe the following terms of the series of Preferred Stock in respect of
which this Prospectus is being delivered: (1) the designation and stated value
per share of such Preferred Stock and the number of shares offered; (2) the
amount of liquidation preference per share; (3) the initial public offering
price at which such Preferred Stock will be issued; (4) the dividend rate (or
method of calculation), the dates on which dividends shall be payable, the
option, if any, to extend the period for dividend payment or to pay partial
dividends, and the dates from which dividends shall commence to cumulate, if
any; (5) any redemption or sinking fund provisions; (6) any conversion or
exchange rights; and (7) any additional voting, dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions.
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GENERAL
The Preferred Stock offered hereby will be issued in one or more series.
The holders of Preferred Stock will have no preemptive rights. Preferred Stock,
upon issuance against full payment of the purchase price therefor, will be fully
paid and nonassessable. Neither the par value nor the liquidation preference is
indicative of the price at which the Preferred Stock will actually trade on or
after the date of issuance. The applicable Prospectus Supplement will contain a
description of certain United States and Canadian Federal income tax
consequences relating to the purchase and ownership of the series of Preferred
Stock offered by such Prospectus Supplement.
RANK
The Preferred Stock shall, with respect to dividend rights and rights on
liquidation, winding up and dissolution of EBR, rank prior to EBR's Common Stock
and to all other classes and series of equity securities of the Issuer now or
hereafter authorized, issued or outstanding (the Common Stock and such other
classes and series of equity securities collectively may be referred to herein
as the "Junior Stock"), other than any classes or series of equity securities of
the Issuer ranking on a parity with (the "Parity Stock") or senior to (the
"Senior Stock") the Preferred Stock as to dividend rights and rights upon
liquidation, winding up or dissolution of the Issuer. The Preferred Stock shall
be junior to all outstanding debt of EBR. The Preferred Stock shall be subject
to creation of Senior Stock, Parity Stock and Junior Stock to the extent not
expressly prohibited by EBR's Certificate of Incorporation.
DIVIDENDS
Holders of shares of Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds of EBR legally available
for payment, cash dividends, payable at such dates and at such rates per share
per annum as set forth in the applicable Prospectus Supplement. Such rate may be
fixed or variable or both. Each declared dividend shall be payable to holders of
record as they appear at the close of business on the stock books of EBR on such
record dates, not more than 60 calendar days preceding the payment dates
therefor, as are determined by the Board of Directors (each of such dates, a
"Record Date").
Such dividends may be cumulative or noncumulative, as provided in the
Prospectus Supplement. If dividends on a series of Preferred Stock are
noncumulative and if the Board of Directors fails to declare a dividend in
respect of a dividend period with respect to such series, then holders of such
Preferred Stock will have no right to receive a dividend in respect of such
dividend period, and EBR will have no obligation to pay the dividend for such
period, whether or not dividends are declared payable on any future Dividend
Payment Dates. Dividends on the shares of each series of Preferred Stock for
which dividends are cumulative will accrue from the date on which EBR initially
issues shares of such series.
No full dividends shall be declared or paid or set apart for payment on
preferred stock of EBR of any series ranking, as to dividends, on a parity with
or junior to the series of Preferred Stock offered by the Prospectus Supplement
attached hereto for any period unless full dividends for the immediately
preceding dividend period on such Preferred Stock (including any accumulation in
respect of unpaid dividends for prior dividend periods, if dividends on such
Preferred Stock are cumulative) have been or contemporaneously are declared and
paid or declared and a sum sufficient for the payment thereof is set apart for
such payment. When dividends are not so paid in full (or a sum sufficient for
such full payment is not so set apart) upon such Preferred Stock and any other
preferred stock of EBR ranking on a parity as to dividends with the Preferred
Stock, dividends upon shares of such Preferred Stock and dividends on such other
preferred stock shall be declared pro rata so that the amount of dividends
declared per share on such Preferred Stock and such other preferred stock shall
in all cases bear to each other the same ratio that accrued dividends for the
then-current dividend period per share on the shares of such Preferred Stock
(including any accumulation in respect of unpaid dividends for prior dividend
periods, if dividends on such Preferred Stock are cumulative) and accrued
dividends, including required or permitted accumulations, if any, on shares of
such other preferred stock, bear to each other. Unless full dividends on the
series of Preferred
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Stock offered by the Prospectus Supplement attached hereto have been declared
and paid or set apart for payment for the immediately preceding dividend period
(including any accumulation in respect of unpaid dividends for prior dividend
periods, if dividends on such Preferred Stock are cumulative) (a) no cash
dividend or distribution (other than in shares of Junior Stock) may be declared,
set aside or paid on the Junior Stock, (b) EBR may not repurchase, redeem or
otherwise acquire any shares of its Junior Stock (except by conversion into or
exchange for Junior Stock) and (c) EBR may not, directly or indirectly,
repurchase, redeem or otherwise acquire any shares of Preferred Stock or Parity
Stock otherwise than pursuant to certain pro rata offers to purchase or a
concurrent redemption of all, or a pro rata portion, of the outstanding shares
of such Preferred Stock and Parity Stock (except by conversion into or exchange
for Junior Stock). EBR currently has no outstanding Parity Stock.
CONVERTIBILITY
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted (mandatorily or otherwise) into Common Shares or
other securities of the Company, or Debt Securities of EBR, will be set forth in
the Prospectus Supplement relating thereto. See "Description of Echo Bay Share
Capital."
REDEMPTION
The terms, if any, on which shares of Preferred Stock of any series may be
redeemed will be set forth in the related Prospectus Supplement.
LIQUIDATION
Unless otherwise specified in the applicable Prospectus Supplement, in the
event of a voluntary or involuntary liquidation, dissolution or winding up of
the affairs of EBR, the holders of a series of Preferred Stock will be entitled,
subject to the rights of creditors, but before any distribution or payment to
the holders of Common Stock or any other security ranking junior to the
Preferred Stock on liquidation, dissolution or winding up of EBR, to receive an
amount per share as set forth in the related Prospectus Supplement plus accrued
and unpaid dividends for the then-current dividend period (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such series of Preferred Stock are cumulative). If the amounts
available for distribution with respect to the Preferred Stock and all other
outstanding stock of EBR ranking on a parity with the Preferred Stock upon
liquidation are not sufficient to satisfy the full liquidation rights of all the
outstanding Preferred Stock and stock ranking on a parity therewith, then the
holders of each series of such stock will share ratably in any such distribution
of assets in proportion to the full respective preferential amount (which in the
case of preferred stock may include accumulated dividends) to which they are
entitled. After payment of the full amount of the liquidation preference, unless
otherwise specified in the applicable Prospectus Supplement, the holders of
shares of Preferred Stock will not be entitled to any further participation in
any distribution of assets by EBR.
VOTING
The Preferred Stock of a series will not be entitled to vote, except as
provided in the applicable Prospectus Supplement, the Certificate of
Incorporation, the applicable certificate of designations and as required by
applicable law.
GUARANTEES
The Company will fully, unconditionally and irrevocably guarantee the
payment of accumulated and unpaid dividends, and payments due on liquidation or
redemption, as and when due, regardless of any defense, right of set-off or
counterclaim that EBR may have or assert. This obligation will rank junior to
all other obligations of the Company, and may be subject to the ability of the
Company to pay such amounts as a dividend on its own capital stock from funds
legally available therefor. The obligation will effectively rank senior to the
Company's common stock.
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NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the related Prospectus Supplement, the
Certificate of Incorporation and in the certificate of designations or as
otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be designated in
the related Prospectus Supplement.
DESCRIPTION OF ECHO BAY SHARE CAPITAL
GENERAL
The authorized share capital of the Company consists of an unlimited number
of Common Shares, without par value, of which 139,370,031 were outstanding on
September 3, 1997, and an unlimited number of preferred shares, issuable in
series, none of which are currently outstanding. In addition, as of September 3,
1997, 5,530,000 Common Shares have been reserved for issuance upon the exercise
of outstanding options.
COMMON SHARES
The holders of Common Shares have one vote for each share held and are not
entitled to cumulative votes for the election of directors. Each Common Share is
entitled to participate equally in such dividends as may be declared by the
Board of Directors of the Company out of funds legally available therefor and is
entitled to share equally in any distribution to holders of Common Shares on
liquidation. The holders of Common Shares have no preemptive, conversion or
redemption rights. Each outstanding Common Share is fully paid and
nonassessable.
PREFERRED SHARES
The Board of Directors of the Company may issue preferred shares from time
to time in one or more series, subject to the provisions of the Articles of
Incorporation of the Company. When any preferred shares of the Company are
outstanding, no dividends may be paid or declared on outstanding Common Shares
unless all dividends on preferred shares of all series shall have been paid in
full with respect to past dividend periods, and the full dividends thereon for
the then current dividend period shall have been declared and a sum set apart
for payment thereof. Any sinking fund requirements with respect to preferred
shares of the Company must also be complied with before dividends on Common
Shares may be paid.
SHAREHOLDER RIGHTS PLAN
Under the Company's shareholder rights plan, if any person or group were to
announce an intention to acquire, or were to acquire, 20% or more of the
Company's Common Shares without complying with the conditions of a "permitted
bid," then the owners of each share of common stock (other than the acquiring
person or group) would become entitled to exercise a right to buy one additional
Common Share at 50% of the lowest share price on The Toronto Stock Exchange
during the prior 90 days. The plan expires in 2004, subject to reconfirmation by
shareholders in 1999.
A "permitted bid," which does not trigger the entitlement to acquire shares
under the plan, is one that complies with applicable securities law in all
jurisdictions where at least 5% of the Company's Common Shares are owned; is
made to all shareholders for all outstanding shares; is open for a minimum of 60
days; takes up no shares until at least 662/3% of the outstanding shares have
been tendered to the bid, including those owned by the acquiring person or
group; and meets certain other conditions.
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DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), as well as other types of Warrants. Warrants may
be issued independently or together with any Debt Securities and may be attached
to or separate from such Debt Securities. Each series of Warrants will be issued
under a separate warrant agreement (each a "Warrant Agreement") to be entered
into between the Company and a warrant agent ("Warrant Agent"). The Warrant
Agent will act solely as an agent of the Company in connection with the Warrants
of such series and will not assume any obligation or relationship of agency or
trust for or with any holders or beneficial owners of Warrants. The following
sets forth certain general terms and provisions of the Warrants offered hereby.
Further terms of the Warrants and the applicable Warrant Agreement will be set
forth in the applicable Prospectus Supplement.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the following terms of
the Debt Warrants in respect of which this Prospectus is being delivered: (1)
the title of such Debt Warrants; (2) the aggregate number of such Debt Warrants;
(3) the price or prices at which such Debt Warrants will be issued; (4) the
currency or currencies, including composite currencies, in which the price of
such Debt Warrants may be payable; (5) the designation, aggregate principal
amount and terms of the Debt Securities purchasable upon exercise of such Debt
Warrants; (6) if applicable, the designation and terms of the Debt Securities
with which such Debt Warrants are issued and the number of such Debt Warrants
issued with each such Debt Security; (7) the currency or currencies, including
composite currencies, in which the principal of or any premium or interest on
the Debt Securities purchasable upon exercise of such Debt Warrant will be
payable; (8) if applicable, the date on and after which such Debt Warrants and
the related Debt Securities will be separately transferable; (9) the price at
which and currency or currencies, including composite currencies, in which the
Debt Securities purchasable upon exercise of such Debt Warrants may be
purchased; (10) the date on which the right to exercise such Debt Warrants shall
commence and the date on which such right shall expire; (11) if applicable, the
minimum or maximum amount of such Debt Warrants which may be exercised at any
one time; (12) if applicable, any index or formula used to determine the amount
of payments of principal of and any premium and interest on Debt Securities
purchasable upon exercise of Debt Warrants; (13) information with respect to
book-entry procedures, if any; (14) if applicable, a discussion of certain
United States Federal income tax considerations; and (15) any other terms of
such Debt Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Debt Warrants.
OTHER WARRANTS
The Company may issue other Warrants. The applicable Prospectus Supplement
will describe the following terms of any such other Warrants in respect of which
this Prospectus is being delivered: (1) the title of such Warrants; (2) the
designation and number of securities (which may include Preferred Stock or
Common Stock) and/or amount of cash consideration for which such Warrants are
exercisable; (3) the price or prices at which such Warrants will be issued; (4)
the currency or currencies, including composite currencies, in which the price
of such Warrants may be payable; (5) if applicable, the designation and terms of
the Debt Securities or Preferred Stock with which such Warrants are issued and
the number of such Warrants issued with each such Debt Security or share of
Preferred Stock or Common Stock; (6) if applicable, the date on and after which
such Warrants and the related Debt Securities, Preferred Stock or Common Stock
will be separately transferable; (7) if applicable, any index or formula used to
determine the price or prices at which such other securities and/or cash
consideration will be issued; (8) if applicable, a discussion of certain United
States Federal income tax considerations; and (9) any other terms of such
Warrants, including terms, procedures and limitations relating to the exchange
and exercise of such Warrants.
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PLAN OF DISTRIBUTION
The Company may offer and sell the Debt Securities, Common Shares and
Warrants to or through underwriters or dealers, and also may offer and sell Debt
Securities, Common Shares and Warrants directly to other purchasers or through
agents. EBR may sell the Debt Securities and Preferred Stock, together with
Guarantees issued by the Company, to or through underwriters, and may also sell
Debt Securities and Preferred Stock, together with Guarantees issued by the
Company, directly to other purchasers through agents.
Each Prospectus Supplement will set forth the terms of the offering of the
particular series of Securities to which the Prospectus Supplement relates,
including the name or names of any underwriters, dealers or agents, the purchase
price or prices of the Securities, the proceeds to the Company or EBR from the
sale of such series of Securities, the use of such proceeds, any initial public
offering price or purchase price of such series of Securities, any underwriting
discount or commission, any discounts, concessions or commissions allowed or
reallowed or paid by any underwriters to other dealers, any commissions paid to
any agents and the securities exchanges, if any, on which such Securities will
be listed. Any initial public offering price or purchase price and any
discounts, concessions or commissions allowed or reallowed or paid by any
underwriter to other dealers may be changed from time to time.
Sales of Common Shares offered pursuant to any Prospectus Supplement may be
effected from time to time in one or more transactions on the American Stock
Exchange or, in appropriate circumstances, The Toronto Stock Exchange, or in
negotiated transactions or any combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at other negotiated prices.
In connection with distributions of Common Shares or otherwise, the Company
may enter into hedging transactions with broker-dealers in connection with which
such broker-dealers may sell Common Shares registered hereunder in the course of
hedging through short sales the positions they assumed with the Company.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or EBR or from purchasers of Securities
for whom they may act as agents in the form of discounts, concessions or
commissions, Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company or EBR and any profit
on the resale of Securities by them may be deemed to be underwriting discounts
and commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company or EBR will be
described, in the applicable Prospectus Supplement.
Under agreements which may be entered into by the Company or EBR,
underwriters and agents who participate in the distribution of Securities may be
entitled to indemnification by the Company or EBR against certain liabilities,
including liabilities under Canadian and US securities legislation.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agent to solicit
offers by certain institutions to purchase Debt Securities, Preferred Stock or
Warrants to purchase Debt Securities or Preferred Stock from the Company or EBR
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the offered Debt Securities or Preferred Stock shall not at the time of delivery
be prohibited under the laws of the jurisdiction to which such purchaser is
subject. The underwriters and such other agents will not have any responsibility
in respect of the validity or performance of such contracts.
-30-
<PAGE>
The Company and EBR may grant underwriters who participate in the
distribution of Securities an option to purchase additional Securities to cover
over-allotments, if any.
The place and date of delivery for the Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Securities in respect of which this Prospectus is being delivered (other than
Common Shares) will be a new issue of securities, will not have an established
trading market when issued and will not be listed on any securities exchange.
Any underwriters or agents to or through whom such Securities are sold by the
Company or EBR for public offering and sale may make a market in such
Securities, but such underwriters or agents will not be obligated to do so and
may discontinue any market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for any such Securities.
Certain of the underwriters and their affiliates may from time to time
perform various commercial banking and investment banking services for the
Company, for which customary compensation is received.
EXPERTS
The consolidated financial statements of the Company included in its Annual
Report on Form 10-K for the year ended December 31, 1996 have been audited by
Ernst & Young, independent chartered accountants, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are, and audited financial statements to be included in
subsequently filed documents will be, incorporated herein by reference in
reliance upon the reports of Ernst & Young pertaining to such financial
statements (to the extent covered by consents filed with the Securities and
Exchange Commission) given upon the authority of such firm as experts in
accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the validity of the securities, other
than the validity of the Common Shares, will be passed upon for the Company by
Davis, Graham & Stubbs LLP, Denver, Colorado. Certain legal matters relating to
the validity of the Common Shares, and certain other matters with respect to
Canadian law in connection with the Securities, will be passed upon for the
Company by Milner Fenerty, Edmonton, Alberta. Certain legal matters will be
passed upon for the underwriters, if any, by the counsel named in the applicable
Prospectus Supplement.
-31-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14 - OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following sets forth expenses, other than underwriting fees and
commissions, expected to be borne by the Registrants in connection with the
distribution of the securities being registered:
Securities and Exchange Commission registration fee... US $30,304
Blue Sky fees and expenses............................ 25,000
Rating Agency fees ................................... 165,000
Trustee fees and expenses............................. 30,000
Legal fees and expenses............................... 165,000
Printing and engraving expenses....................... 85,000
Accounting fees and expenses.......................... 35,000
Miscellaneous(1)...................................... 64,696
-------------
TOTAL........................................ US $600,000
=============
(1) Includes estimates of stock exchange listing fees and NASD filing fees.
All amounts listed above, except for the registration fee are estimates.
ITEM 15 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under the Canada Business Corporations Act, Echo Bay Mines Ltd. (the
"Company" or "Echo Bay") may indemnify a present or former director or officer
of Echo Bay or of another corporation of which Echo Bay is a stockholder or
creditor against amounts paid to settle civil, criminal or administrative
actions or judgments and expenses in connection therewith, where the director or
officer was made a party by reason of his position with Echo Bay or such other
corporation and provided that the director or officer acted honestly and in good
faith with a view to the best interests of Echo Bay and, in the case of a
criminal or administrative action or proceeding that is enforced by a monetary
penalty, had reasonable grounds for believing that his conduct was lawful. Such
indemnification may be made in connection with a derivative action only with
court approval. A director or officer is entitled to indemnification from Echo
Bay as a matter of right if he was substantially successful on the merits and
fulfilled the conditions set forth above.
The Bylaws and Certificate of Incorporation of Echo Bay Resources Inc.
("EBR") provide that EBR shall, to the full extent permitted by the General
Corporation Law of the State of Delaware, as amended from time to time,
indemnify all directors and officers of EBR. Section 145 of the Delaware General
Corporation Law provides in part that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (other than
an action by or in the right of the corporation) by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interest of the corporation, and with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful. Similar indemnity is authorized for such persons against
expenses (including attorneys' fees) actually and reasonably incurred in defense
or settlement of any threatened, pending or completed action or suit by or in
the right of the corporation, if such person acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interest of the
corporation, and provided further that (unless a court of competent
II-1
<PAGE>
jurisdiction otherwise provides) such person shall not have been adjudged liable
to the corporation. Any such indemnification may be made only as authorized in
each specific case upon a determination by the stockholders or disinterested
directors that indemnification is proper because the indemnitee has met the
applicable standard of conduct.
Additionally, the Certificate of Incorporation eliminates in certain
circumstances the monetary liability of directors of EBR for a breach of their
fiduciary duty as directors. This provision does not eliminate the liability of
a director (i) for a breach of the director's duty of loyalty to EBR or its
stockholders; (ii) for acts or omissions by the director not in good faith or
which involve intentional misconduct or a knowing violation of law; (iii) for
liability arising under Section 174 of the Delaware General Corporation Law
(relating to the declaration of dividends and purchase of redemption of shares
in violation of the Delaware General Corporation Law); or (iv) for any
transaction from which the director derived an improper personal benefit.
A policy of directors' and officers' liability insurance is maintained by
Echo Bay, which policy insures directors and officers for losses as a result of
claims based upon their acts or omissions as directors and officers of the
Registrants, including liabilities arising under the Securities Act of 1933, and
also reimburses Echo Bay for payments made pursuant to the indemnity provisions
under the Canada Business Corporations Act.
ITEM 16 - EXHIBITS
1.1 Form of Underwriting Agreements (Incorporated by reference to Exhibit
1.1 to the Company's and EBR's Amendment No. 1 to Registration
Statement on Form S-3, No. 33-77738, filed July 8, 1994)
3.1 Certificate of Incorporation of EBR (Incorporated by reference to
Exhibit 3.1 to the Company's and EBR's Registration Statement on Form
S-3, No. 33-77738, filed April 14, 1994)
3.2 By-laws of EBR (Incorporated by reference to Exhibit 3.2 to the
Company's and EBR's Registration Statement on Form S-3, No. 33-77738,
filed April 14, 1994)
3.3 Certificate of Amendment of Certificate of Incorporation of EBR**
4.1 Form of Indenture for Debt Securities (Incorporated by reference to
Exhibit 4.1 to the Company's and EBR's Registration Statement on Form
S-3, No. 33-77738, filed April 14, 1994)
4.2 Form of Debt Security (included in Exhibit 4.1) (Incorporated by
reference to Exhibit 4.2 to the Company's and EBR's Registration
Statement on Form S-3, No. 33-77738, filed April 14, 1994)
4.3 Form of Indenture for Guaranteed Debt Securities (Incorporated by
reference to Exhibit 4.3 to the Company's and EBR's Registration
Statement on Form S-3, No. 33-77738, filed April 14, 1994)
4.4 Form of Guaranteed Debt Security (included in Exhibit 4.3)
(Incorporated by reference to Exhibit 4.4 to the Company's and EBR's
Registration Statement on Form S-3, No. 33-77738, filed April 14,
1994)
4.5 Form of Preferred Stock Certificate*
4.6 Form of Common Stock Warrant Agreement (including form of Common Stock
Warrant Certificate)*
4.7 Form of Preferred Stock Warrant Agreement (including form of Preferred
Stock Warrant Certificate)*
4.8 Form of Debt Warrant Agreement (including form of Debt Warrant
Certificate)*
II-2
<PAGE>
4.9 Form of Certificate of Designations of Preferred Stock*
5.1 Opinion and Consent of Milner Fenerty**
5.2 Opinion and Consent of Davis, Graham & Stubbs LLP**
12.1 Statement re Computation of Ratios**
23.1 Consent of Ernst & Young**
23.2 Consent of Milner Fenerty - contained in Exhibit 5.1**
23.3 Consent of Davis, Graham & Stubbs LLP - contained in Exhibit 5.2**
24.1 Echo Bay Mines Ltd. Power of Attorney**
24.2 Echo Bay Resources Inc. Power of Attorney**
25 Statement of Eligibility of Trustee on Form T-1*
28.1 Canadian short form prospectus of the Company
relating to Common Shares**
28.2 Canadian short form prospectus of the Company
relating to Debt Securities**
* To be filed by amendment or incorporated by reference herein.
** Filed herewith.
ITEM 17 - UNDERTAKINGS
Echo Bay hereby undertakes that, for the purposes of determining any
liability under the Securities Act of 1933, each filing of the Registrant's
annual report pursuant to section 13(a) or section 15(d) of the Securities
Exchange Act of 1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities Exchange Act of
1934) that is incorporated by reference in this Registration Statement shall be
deemed to be a new Registration Statement relating to the securities offered
herein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
The undersigned Registrants hereby undertake:
(a) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or
in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and
II-3
<PAGE>
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement,
PROVIDED, HOWEVER, that paragraphs (a)(i) and (a)(ii) do not apply if
the information required to be included in a post-effective amendment
by those paragraphs is contained in periodic reports filed by Echo Bay
pursuant to Section 13 or Section 15(d) of the Securities Exchange Act
of 1934, that are incorporated by reference in the Registration
Statement;
(b) That for purposes of determining any liability under the Securities
Act of 1933, the information omitted from the form of prospectus filed
as part of a Registration Statement in reliance upon Rule 430A and
contained in the form of prospectus filed by the Registrant pursuant
to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933
shall be deemed to be part of this Registration Statement as of the
time it was declared effective.
(c) That for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new Registration Statement relating
to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering
thereof.
(d) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the
termination of the offering.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the foregoing provisions or otherwise, the Registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
of 1933 and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrants of expenses incurred or paid by a director, officer or controlling
person of the Registrants in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrants will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act of 1933 and will be governed by the final adjudication of such issue.
Echo Bay hereby undertakes to deliver or cause to be delivered with the
prospectus, to each person to whom the prospectus is sent or given, the latest
annual report to security holders that is incorporated by reference in the
prospectus and furnished pursuant to and meeting the requirements of Rule 14a-3
or 14c-3 under the Securities Exchange Act of 1934; and, where the interim
financial information required to be presented by Article 3 of Regulation S-X
are not set forth in the prospectus, to deliver or cause to be delivered to each
person to whom the prospectus is sent or given, the latest quarterly report that
is specifically incorporated by reference in the prospectus to provide such
interim financial information.
The undersigned Registrants hereby undertake to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act ("the Act") in accordance with the
rules and regulations prescribed by the Commission under section 305(b)(2) of
the Act.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Englewood, County of Arapahoe, State of Colorado, on
the 17th day of September, 1997.
ECHO BAY MINES LTD.
By: /s/ Robert L. Leclerc*
-----------------------------------------
Robert L. Leclerc, Q.C., Chairman, Chief
Executive Officer and US Authorized
Representative
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Robert L. Leclerc* Chairman, Chief Executive Officer September 17, 1997
- ------------------------------------- and Director (Principal Executive
Robert L. Leclerc, Q.C. Officer)
/s/ Peter H. Cheesbrough* Senior Vice-President, Finance and September 17, 1997
- ------------------------------------- Chief Financial Officer (Principal
Peter H. Cheesbrough Financial Officer)
/s/ Tom S. Q. Yip Controller (Principal Accounting September 17, 1997
- ------------------------------------- Officer)
Tom S. Q. Yip
/s/ John N. Abell* Director September 17, 1997
- -------------------------------------
John N. Abell
/s/ Latham C. Burns* Director September 17, 1997
- -------------------------------------
Latham C. Burns
Director
- -------------------------------------
Pierre Choquette
/s/ John Gilray Christy* Director September 17, 1997
- -------------------------------------
John Gilray Christy
II-5
<PAGE>
SIGNATURE TITLE DATE
/s/ Peter Clarke* Director September 17, 1997
- -------------------------------------
Peter Clarke
/s/ John F. McOuat* Director September 17, 1997
- -------------------------------------
John F. McOuat
/s/ Monica E. Sloan* Director September 17, 1997
- -------------------------------------
Monica E. Sloan
/s/ R. Geoffrey P. Styles* Director September 17, 1997
- -------------------------------------
R. Geoffrey P. Styles
*By: /s/Tom S. Q. Yip
---------------------------------
Attorney-in-Fact
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Englewood, County of Arapahoe, State of Colorado, on
the 17th day of September, 1997.
ECHO BAY RESOURCES INC.
By: /s/ Robert L. Leclerc*
-------------------------------------------
Robert L. Leclerc, Q.C., Chairman, Chief
Executive Officer and US Authorized
Representative
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Robert L. Leclerc* Chairman, Chief Executive Officer September 17, 1997
- ---------------------------------- and Director (Principal Executive
Robert L. Leclerc, Q.C. Officer)
/s/ Peter H. Cheesbrough* Senior Vice-President, Finance and September 17, 1997
- ---------------------------------- Chief Financial Officer (Principal
Peter H. Cheesbrough Financial Officer)
/s/ Tom S. Q. Yip Controller (Principal Accounting September 17, 1997
- ---------------------------------- Officer)
Tom S. Q. Yip
</TABLE>
*By: /s/Tom S. Q. Yip
------------------------------
Attorney-in-Fact
II-7
<PAGE>
EXHIBIT INDEX
3.3 Certificate of Amendment to Certificate of Incorporation of EBR
5.1 Opinion and Consent of Milner Fenerty
5.2 Opinion and Consent of Davis, Graham & Stubbs LLP
12.1 Statement re Computation of Ratios
23.1 Consent of Ernst & Young
23.2 Consent of Milner Fenerty - contained in Exhibit 5.1
23.3 Consent of Davis, Graham & Stubbs LLP - contained in Exhibit 5.2
24.1 Echo Bay Mines Ltd. Power of Attorney
24.2 Echo Bay Resources Inc. Power of Attorney
28.1 Canadian short form prospectus of the Company
relating to Common Shares
28.2 Canadian short form prospectus of the Company
relating to Debt Securities
II-8
Exhibit 3.3
CERTIFICATE OF AMENDMENT OF
CERTIFICATE OF INCORPORATION OF
ECHO BAY RESOURCES, INC.
ADOPTED IN ACCORDANCE WITH THE PROVISIONS OF
SECTION 242 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE
ECHO BAY RESOURCES, INC., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware (the
"Corporation"), DOES HEREBY CERTIFY:
FIRST: The Board of Directors of the Corporation, by written consent in lieu of
a meeting effective September 15, 1997, has adopted the following resolution
proposing and declaring advisable an amendment to the Certificate of
Incorporation of the Corporation:
RESOLVED, that ARTICLE I of the Certificate of Incorporation of Echo Bay
Resources, Inc. shall be amended by deleting said ARTICLE I in its entirety, and
substituting the following therefor:
"ARTICLE I
The name of the corporation is Echo Bay Resources Inc. (hereinafter
referred to as the "Corporation")."; and
FURTHER RESOLVED, that ARTICLE IV of the Certificate of Incorporation of
Echo Bay Resources, Inc. shall be amended by deleting said ARTICLE IV in its
entirety, and substituting the following therefor:
"ARTICLE IV
Section 1. AUTHORIZED SHARES. The Corporation is authorized to issue two
classes of shares of capital stock, which shall be referred to as "Common Stock"
and "Preferred Stock." The total number of shares of Common Stock authorized to
be issued is one thousand (1,000) shares with a par value of one cent ($0.01)
per share. The total number of shares of Preferred Stock authorized to be issued
is five million (5,000,000) shares with a par value of one cent ($0.01) per
share.
Section 2. DESIGNATIONS, POWERS AND PREFERENCES. The designations and the
powers, preferences and rights, and the qualifications, limitations or
restrictions of the shares of Common Stock and Preferred Stock are as follows:
A. COMMON STOCK. Each holder of Common Stock shall be entitled to one
vote for each share of Common Stock held on all matters as to which holders
of Common Stock shall be entitled to vote. Except for and subject to those
preferences, rights, and privileges expressly granted to the holders of all
classes of stock at the time outstanding having prior rights, and series of
Preferred Stock which may from time to time come into existence, and except
as may be provided by the laws of the State of Delaware, the holders of
Common Stock shall have exclusively all other rights of stockholders of the
Corporation, including, but not limited to, the following:
(i) the right to vote for the election of directors and on all
other matters requiring stockholder action, each share being entitled
to one vote;
<PAGE>
(ii) the right to receive dividends when, as and if declared by
the board of directors out of assets lawfully available therefor; and
(iii) in the event of any distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, the right to receive ratably and equally, in accordance
with their respective rights and interests, all of the net assets of
the Corporation remaining after the payment to the holders of
Preferred Stock of the specific amounts, if any, which they are
entitled to receive as may be provided herein or pursuant hereto.
B. PREFERRED STOCK. The Preferred Stock authorized by this Certificate
of Incorporation may be issued from time to time in one or more series as
the board of directors may determine. The board of directors of the
Corporation is authorized, subject to limitations prescribed by law, to
provide by resolution or resolutions for the issuance of the shares of
Preferred Stock as a class or in series, and, by filing a certificate of
designation, pursuant to the General Corporation Law of the State of
Delaware, setting forth a copy of such resolution or resolutions. The board
of directors is authorized to determine and alter the designation, powers,
rights, preferences and privileges of, and the qualifications, limitations
and restrictions granted to or imposed upon any wholly unissued series of
such shares and to increase or decrease (but not below the number of shares
of such series then outstanding) the number of shares of that series. If
the number of shares of any series of stock shall be so decreased, the
shares constituting such decrease shall resume the status that they had
prior to the adoption of the resolution originally fixing the number of
shares of such series. The authority of the board of directors with respect
to the class or each series shall include, but not be limited to,
determination of the following:
(i) The number of shares constituting any series and the
distinctive designation of that series;
(ii) The dividend rate on the shares of the class or of any
series, whether dividends shall be cumulative, and, if so, from which
date or dates, and the relative rights of priority, if any, of payment
of dividends on shares of the class or of that series;
(iii) Whether the class or any series shall have voting rights,
in addition to the voting rights provided by law, and, if so, the
terms of such voting rights;
(iv) Whether the class or any series shall have conversion
privileges, and, if so, the terms and conditions of such conversion,
including provision for adjustment of the conversion rate in such
events as the board of directors shall determine;
(v) Whether or not the shares of the class or of any series shall
be redeemable, and, if so, the terms and conditions of such
redemption, including the date or dates upon or after which they shall
be redeemable and the amount per share payable in case of redemption,
which amount may vary under different conditions and at different
redemption dates;
(vi) Whether the class or any series shall have a sinking fund
for the redemption or purchase of shares of the class or of that
series, and, if so, the terms and amount of such sinking fund;
(vii) The rights of the shares of the class or of any series in
the event of voluntary or involuntary dissolution or winding up of the
corporation, and the relative rights of priority, if any, of payment
of shares of the class or of that series;
(viii) Any other powers, preferences, rights, qualifications,
limitations, and restrictions of the class or of any series.
-2-
<PAGE>
C. PREEMPTIVE RIGHTS. No holder of any stock of the Corporation of any
class shall have the preemptive right to subscribe for or purchase any part
of any new or additional issue of stock of any class whatsoever of the
Corporation, or of securities convertible into or exchangeable for stock of
any class whatsoever, whether now or hereafter authorized, or whether
issued for cash or other consideration or by way of dividend."
SECOND: The foregoing Amendments were duly adopted by the Corporation's sole
stockholder in accordance with the provisions of Sections 228 and 242 of the
General Corporation Law of the State of Delaware.
THIRD: This Certificate of Amendment of the Certificate of Incorporation of Echo
Bay Resources, Inc. has been executed and acknowledged and shall be filed and
recorded in accordance with Section 103 of the General Corporation Law of the
State of Delaware.
* * * * *
-3-
<PAGE>
IN WITNESS WHEREOF the Corporation has caused this Certificate to be signed
by Robert L. Leclerc, Q.C., its Chairman and Chief Executive Officer, and
attested to by Lois-Ann L. Brodrick, its Secretary, this 15th day of September,
1997.
ECHO BAY RESOURCES, INC.
/s/Robert L. Leclerc
--------------------------------------
Robert L. Leclerc, Q.C.
Chairman and Chief Executive Officer
Attest:
/s/Lois-Ann L. Brodrick
- ----------------------------------
Lois-Ann L. Brodrick
Secretary
-4-
Exhibit 5.1
September 17, 1997
Echo Bay Mines Ltd.
Echo Bay Resources Inc.
1210 Manulife Place
10180 -- 101 Street
Edmonton, Alberta T5J 3S4
CANADA
Dear Sirs:
Re: Echo Bay Mines Ltd. and Echo Pay Resources Inc.
Registration of Common Shares, Debt Securities,
Preferred Stock, Warrants and Guarantees Described
in Registration Statement on Form S-3
We have acted as Canadian counsel on behalf of Echo Bay Mines Ltd. (the
"Corporation") in respect of the registration of an aggregate of $200,000,000
principal amount of (i) debt securities (the "Debt Securities") which may be
issued by the Corporation or Echo Bay Resources Inc. ("Resources"); (ii) shares
of preferred stock (the "Preferred Stock") which may be issued by Resources;
(iii) guarantees which may be issued by the Corporation (the "Guarantees") of
the Resources Debt Securities and Preferred Stock; (iv) common shares (the
"Common Shares") which may be issued by the Corporation; (v) and warrants (the
"Warrants") which may be issued by the Corporation (together, the "Securities")
described in a registration statement (the "Registration Statement") on Form S-3
of the Corporation, and in a prospectus forming a part thereof (the
"Prospectus"), filed on the date hereof with the Securities and Exchange
Commission, and in such capacity are familiar with all proceedings taken or to
be taken by the Corporation in respect of the authorization, registration and
issuance of the Securities.
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the Securities Act of 1933 (the "1933 Act").
We have examined the forms of the indentures for debt securities and
guaranteed debt securities (the "Indentures") incorporated by reference as
exhibits to the Registration Statement. In addition, we have examined and relied
on originals or
<PAGE>
Page 2
September 17, 1997
copies, certified or otherwise identified to our satisfaction, of such
documents, corporate records and other instruments, have made such inquiries as
to questions of fact of officers and representatives of the Corporation and have
made such examinations of law as we have deemed necessary or appropriate for
purposes of giving the opinion expressed below. In such examination, we have
assumed the genuineness of all signatures, the authenticity of all documents
submitted to us as originals, the legal capacity of natural persons, the
conformity with the originals of all documents submitted to us as facsimiles and
copies and the veracity of all information contained in such documents.
This opinion is limited to the laws of the Province of Alberta and the
federal laws of Canada applicable therein. We neither express nor imply any
opinion as to the laws of any other jurisdiction.
Based and relying upon, and subject to the foregoing, we are of the opinion
that:
1. The issuance and sale by the Corporation and Resources of up to
$200,000,000 of Securities, as contemplated in the Registration Statement, have
been duly and validly authorized by all necessary corporate action of the
Corporation.
2. The Common Shares, when issued and sold in accordance with the
Registration Statement, will be duly authorized, legally issued, fully paid and
nonassessable.
3. The Warrants, when issued and sold in accordance with the Registration
Statement, the Prospectus, an applicable prospectus supplement and the
provisions of an applicable Warrant Agreement will be valid and legally binding
obligations of the Corporation.
4. The Guarantees, when issued and sold in accordance with the Registration
Statement, the Prospectus, an applicable prospectus supplement and the
provisions of an applicable Guaranty Agreement will be valid and legally binding
obligations of the Corporation.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement which will be filed with the Securities and Exchange
Commission in respect of the Securities and to the reference to our name in such
prospectus under the headings "Enforcement of Certain Civil Liabilities,"
"Description of Debt Securities and Guarantees--Enforceability of Judgments" and
"Legal Matters." In
<PAGE>
Page 3
September 17, 1997
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the 1993 Act or the rules
of the Securities and Exchange Commission thereunder.
Yours truly,
/s/Milner Fenerty
Exhibit 5.2
September 17, 1997
Echo Bay Mines Ltd.
Echo Bay Resources Inc.
6400 South Fiddlers Green Circle
Suite 1000
Englewood, Colorado 80111-4957
Re: Registration Statement on Form S-3
Relating to $200,000,000 Aggregate
Principal Amount of Debt and Equity Securities
Gentlemen:
We have acted as special United States counsel to Echo Bay Mines Ltd., a
Canadian corporation (the "Company"), and Echo Bay Resources Inc., a Delaware
corporation ("Resources"), in connection with the preparation of a Registration
Statement on Form S-3 (as amended, the "Registration Statement"), filed by the
Company and Resources with the Securities and Exchange Commission. The
Registration Statement relates to the registration under the Securities Act of
1933 (the "1933 Act") of an aggregate of $200,000,000 principal amount of (i)
debt securities which may be issued by the Company or Resources (the "Debt
Securities"); (ii) shares of preferred stock (the "Preferred Stock") which may
be issued by Resources; (iii) full, unconditional and irrevocable guarantees of
the Resources Debt Securities and Preferred Stock (the "Guarantees"), which may
be issued by the Company; (iv) Common Shares which may be issued by the Company
(the "Common Shares"); and (v) warrants which may be issued by the Company (the
"Warrants"). Together, the Debt Securities, the Preferred Stock, the Guarantees,
the Common Shares and the Warrants are referred to as the "Securities."
This opinion is delivered in accordance with the requirements of Item
601(b)(5) of Regulation S-K under the 1933 Act.
We have examined the forms of the Indentures filed by the Company and
Resources as exhibits to the Registration Statement (the "Indentures"). In
addition, we have examined and relied on originals or copies, certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments, have made such inquiries as to questions of fact of
officers and representatives of the Company and Resources and have made such
examinations of law as we have deemed necessary or appropriate for purposes of
giving the opinion expressed below. In such examination, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to us
as originals and the conformity with the originals of all documents submitted to
us as copies.
We have assumed for purposes of this opinion (i) the corporate power,
authority and legal right of the trustee or trustees (the "trustees") under the
Indentures to execute, deliver and perform their obligations under the
Indentures, that the performance of such obligations by the trustees will not
violate their charter or bylaws and that the trustees have the legal ability to
exercise their trust powers in the State of Colorado, and (ii) that the
Indentures will have been duly authorized, executed and delivered by the
applicable trustee at the time of issuance of Debt Securities.
<PAGE>
Echo Bay Mines Ltd.
Echo Bay Resources Inc.
September 17, 1997
Page 2
In giving the opinion set forth below, we have relied on the opinion of
Milner Fenerty, Canadian counsel to the Company, as to certain matters covered
by Canadian law.
We are members of the bar of the State of Colorado, and the following
opinions are limited solely to the applicable federal law of the United States
of America, the law of the State of Colorado and the General Corporation Law of
the State of Delaware. While we are not licensed to practice in the State of
Delaware, we have reviewed applicable provisions of the General Corporation Law
of Delaware as we have deemed appropriate in connection with the provisions
expressed herein. Except as described, we have neither examined nor do we
express any opinion with respect to Delaware law.
Based upon and subject to the foregoing, we are of the opinion that:
1. The issuance and sale by the Company and Resources of up to $200,000,000
of Securities, as provided in the Registration Statement, have been duly and
validly authorized by all necessary corporate action of the Company and
Resources.
2. When (i) the Registration Statement has become effective under the 1933
Act, (ii) the applicable Indenture has been qualified under the Trust Indenture
Act of 1939 and has been duly executed and delivered by the parties thereto,
(iii) the definitive terms of any Debt Securities and of their issue and sale
have been duly established in conformity with the resolutions of the board of
directors of the Company and, if applicable, Resources, and the applicable
Indentures so as not to violate any applicable law or agreement or instrument
then binding on the Company and, if applicable, Resources, (iv) such Debt
Securities have been duly executed and authenticated in accordance with the
Indentures, and (v) such Debt Securities have been issued and sold as
contemplated in the Registration Statement, the prospectus contained therein
(the "Prospectus") and in the applicable supplement to the Prospectus, such Debt
Securities will constitute valid and legally binding obligations of the Company
and, if applicable, Resources, entitled to the benefits provided by the
applicable Indentures, except (A) the enforceability thereof may be limited by
bankruptcy, insolvency, reorganization, fraudulent transfer, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (B) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to certain equitable defenses and to the
discretion of the court before which any proceeding therefor may be brought.
3. The Preferred Stock of Resources, when issued and sold in conformity
with the resolutions of the board of directors of Resources, and as contemplated
in the Registration Statement, the Prospectus and in the applicable supplement
to the Prospectus, will be validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as Exhibit 5.2 to the Registration Statement. We also
consent to the reference to this firm under the heading "Legal Matters" in the
Prospectus included in the Registration Statement as the counsel who will pass
upon the validity of the Debt Securities. In giving this consent, we do not
thereby admit that we are in the category of persons whose consent is required
under Section 7 of the 1933 Act or the rules of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Davis, Graham & Stubbs LLP
DAVIS, GRAHAM & STUBBS LLP
Exhibit 12.1
ECHO BAY MINES LTD.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
REG. 229.503
ITEM 503
REFERENCE EARNINGS 6/30/97 1996 1995 1994 1993 1992
---------------------------- ------------ ------------ ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Pre-tax income - Canadian
(d)(3) GAAP $ (36.2) $(176.1) $(44.7) $13.0 $ 9.7 $(29.4)
Add fixed charges pursuant
(d)(3)(i) to (d)(4) 7.8 9.3 6.1 7.1 7.5 8.3
(d)(3)(i)(A) Less adjustments:
(d)(3)(i)(B) Interest capitalized (0.5) - - - - (1.7)
------------ ------------ ----------- ----------- ------------ ------------
Total earnings $ (28.9) $(166.8) $(38.6) $20.1 $17.2 $(22.8)
============ ============ =========== =========== ============ ============
FIXED CHARGES 6/30/97 1996 1995 1994 1993 1992
------------------------------ ------------ ------------ ------------ ------------- ----------- ------------
(d)(4)(i)(A) Interest
Expensed $ 6.3 $ 8.2 $ 5.0 $ 6.1 $ 6.8 $ 5.5
Capitalized 0.5 - - - - 1.7
(d)(4)(i)(B) Amortization of rent
expense, discounts and
premiums of related debt * * * * * *
(d)(4)(i)(C) Portion of rental expense
attributable to interest 1.0 1.1 1.1 1.0 0.7 1.1
------------ ------------ ------------ ------------- ----------- ------------
Total fixed charges $ 7.8 $ 9.3 $ 6.1 $ 7.1 $ 7.5 $ 8.3
============ ============ ============ ============= =========== ============
Calculated sufficiency
(deficiency) $ (36.7) $(176.1) $(44.7) $ 13.0 $ 9.7 (31.1)
============ ============ ============ ============= =========== ============
Ratio of earnings to fixed
charges ** ** ** 2.83 2.9 **
============ ============ ============ ============= =========== ============
Adjustment to US GAAP (6.5) 2.2 3.6 (0.7) 4.9 -
------------ ------------ ------------ ------------- ----------- ------------
Calculated sufficiency
(deficiency) - US GAAP $ (43.2) (173.9) (41.1) 12.3 14.6 (31.1)
============ ============ ============ ============= =========== ============
Ratio of earnings to fixed ** ** ** 2.73 2.95 **
charges - US GAAP
============ ============ ============ ============= =========== ============
* Included in interest expense line item.
** Earnings are insufficient to cover fixed charges.
<PAGE>
ECHO BAY MINES LTD.
RATIO OF EARNINGS TO FIXED CHARGES
REG. 229.503
ITEM 503
REFERENCE EARNINGS 6/30/97 1996 1995 1994 1993 1992
------------------------------ ------------ ----------- ----------- ----------- ------------ ------------
(d)(3) Pre-tax income - Canadian
GAAP $ (36.2) $(176.1) $(44.7) $ 13.0 $ 9.7 $(29.4)
(d)(3)(i) Add fixed charges pursuant
to (d)(4) 7.8 9.3 21.1 23.4 18.8 15.7
(d)(3)(i)(A) Less adjustments:
(d)(3)(i)(B) Interest capitalized (0.5) - - - - (1.7)
Actual amount of
preferred stock dividend
requirements included
in fixed charges NOT
deducted in
determination of pre-tax
income - - (15.0) (16.3) (11.3) (7.3)
------------ ----------- ----------- ----------- ------------ ------------
Total earnings $ (28.9) $(166.8) $(38.6) $ 20.1 $ 17.2 $(22.7)
============ =========== =========== =========== ============ ============
FIXED CHARGES 6/30/97 1996 1995 1994 1993 1992
------------------------------ ------------ ----------- ----------- ----------- ------------ ------------
(d)(4)(i)(A) Interest
Expensed $ 6.3 $ 8.2 $ 5.0 $ 6.1 $ 6.8 $ 5.5
Capitalized 0.5 - - - - 1.7
(d)(4)(i)(B) Amortization of rent expense,
discounts and premiums of
related debt * * * * * *
(d)(4)(i)(C) Portion of rental expense
attributable to interest 1.0 1.1 1.1 1.0 0.7 1.1
(d)(4)(i)(D) Preferred stock dividends - - 15.0 16.3 11.3 7.4
------------ ----------- ----------- ----------- ------------ ------------
Total fixed charges $ 7.8 $ 9.3 $ 21.1 $ 23.4 $ 18.8 $ 15.7
============ =========== =========== =========== ============ ============
Calculated deficiency $(36.7) $(176.1) $(59.7) $ (3.3) $ (1.6) $(38.4)
============ =========== =========== =========== ============ ============
Ratio of earnings to fixed
charges ** ** ** ** ** **
============ =========== =========== =========== ============ ============
Adjustment to US GAAP (6.5) 2.2 3.6 (0.7) 4.9 -
------------ ----------- ----------- ----------- ------------ ------------
Calculated sufficiency
(deficiency) - US GAAP $(43.2) $(173.9) $(56.1) $ (4.0) $ 3.3 $(38.4)
============ =========== =========== =========== ============ ============
Ratio of earnings to fixed ** ** ** ** 1.18 **
charges - US GAAP ============ =========== =========== =========== ============ ============
* Included in interest expense line item.
** Earnings are insufficient to cover fixed charges.
Preferred share dividends $ - $ - $ 8,524 $ 9,298 $ 6,693 $ 4,332
Tax rate - 0.432 0.432 0.429 0.410 0.411
----------- ----------- ----------- ----------- ------------ -----------
Tax effected $ - $ - $15,007 $16,284 $11,344 $ 7,355
=========== =========== =========== =========== ============ ===========
</TABLE>
-2-
Exhibit 23.1
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related prospectus of Echo Bay Mines Ltd.
(the "Company") and Echo Bay Resources Inc. ("EBR"), dated September 17, 1997
for the shelf registration of up to US $200 million securities of the Company
and EBR and to the incorporation by reference therein of our report dated
January 27, 1997, with respect to the consolidated financial statements of the
Company included in its Annual Report on Form 10-K for the year ended December
31, 1996, filed with the Securities and Exchange Commission.
Edmonton, Canada
September 17, 1997
/s/Ernst & Young
Ernst & Young
Chartered Accountants
Exhibit 24.1
ECHO BAY MINES LTD.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors or
officers of Echo Bay Mines Ltd. (the "Company" or the "Registrant"), hereby
constitutes and appoints Peter H. Cheesbrough, Tom S. Q. Yip and Ronald R.
Levine, II and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, to sign the Registration
Statement on Form S-3 to be filed by the Company and any and all amendments
(including without limitation post-effective amendments and any amendments
pursuant to Rule 462 under the Securities Act) to such Registration Statement,
and to file the same with the Securities and Exchange Commission, together with
any exhibits thereto and other documents therewith, granting unto said
attorneys-in-fact and agents and each of them, full power and authority to do
and perform each and every act and thing requisite or necessary and advisable to
enable the Registrant to comply with the Securities Act and any rules,
regulations and requirements of the Securities and Exchange Commission in
respect thereof to be done in and about the premises, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that said attorney-in-fact and agents, or any of them, or their, or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have affixed their signatures hereto.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Robert L. Leclerc Chairman, Chief Executive Officer September 17, 1997
- ------------------------------- and Director (Principal Executive
Robert L. Leclerc, Q.C. Officer)
/s/ Peter H. Cheesbrough Senior Vice-President, Finance and September 17, 1997
- ------------------------------- Chief Financial Officer (Principal
Peter H. Cheesbrough Financial Officer)
/s/ Tom S. Q. Yip Controller (Principal Accounting September 17, 1997
- ------------------------------- Officer)
Tom S. Q. Yip
/s/ John N. Abell Director September 17, 1997
- -------------------------------
John N. Abell
/s/ Latham C. Burns Director September 17, 1997
- -------------------------------
Latham C. Burns
Director
- -------------------------------------
Pierre Choquette
/s/ John Gilray Christy Director September 17, 1997
- -------------------------------
John Gilray Christy
<PAGE>
SIGNATURE TITLE DATE
/s/ Peter Clarke Director September 17, 1997
- -------------------------------
Peter Clarke
/s/ John F. McOuat Director September 17, 1997
- -------------------------------
John F. McOuat
/s/ Monica E. Sloan Director September 17, 1997
- -------------------------------
Monica E. Sloan
/s/ R. Geoffrey P. Styles Director September 17, 1997
- -------------------------------
R. Geoffrey P. Styles
</TABLE>
-2-
Exhibit 24.2
ECHO BAY RESOURCES INC.
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned directors or
officers of Echo Bay Resources Inc. ("EBR" or the "Registrant"), hereby
constitutes and appoints Peter H. Cheesbrough, Tom S. Q. Yip and Ronald R.
Levine, II and each of them, his true and lawful attorneys-in-fact and agents,
with full power of substitution and resubstitution, to sign the Registration
Statement on Form S-3 to be filed by EBR and any and all amendments (including
without limitation post-effective amendments and any amendments pursuant to Rule
462 under the Securities Act) to such Registration Statement, and to file the
same with the Securities and Exchange Commission, together with any exhibits
thereto and other documents therewith, granting unto said attorneys-in-fact and
agents and each of them, full power and authority to do and perform each and
every act and thing requisite or necessary and advisable to enable the
Registrant to comply with the Securities Act and any rules, regulations and
requirements of the Securities and Exchange Commission in respect thereof to be
done in and about the premises, as fully to all intents and purposes as he might
or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agents, or any of them, or their, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned have affixed their signatures hereto.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Robert L. Leclerc Chairman, Chief Executive Officer September 17, 1997
- ------------------------------- and Director (Principal Executive
Robert L. Leclerc, Q.C. Officer)
/s/ Peter H. Cheesbrough Senior Vice-President, Finance and September 17, 1997
- ------------------------------- Chief Financial Officer (Principal
Peter H. Cheesbrough Financial Officer)
/s/ Tom S. Q. Yip Controller (Principal Accounting September 17, 1997
- ------------------------------- Officer)
Tom S. Q. Yip
</TABLE>
Exhibit 28.1
This short form prospectus has been filed under procedures in each of the
provinces of Canada which permit certain information with respect to these
securities to be determined after the short form prospectus has become final and
permit the omission from this short form prospectus of such information. Such
procedures require the delivery to purchasers of a prospectus or a prospectus
supplement containing this omitted information within a specified period of time
after agreeing to purchase any of these securities.
This short form prospectus constitutes a public offering of these securities
only in those jurisdictions where they may be lawfully offered for sale and
therein only by persons permitted to sell such securities. No securities
commission or similar authority in Canada has in any way passed upon the merits
of the securities offered hereunder and any representation to the contrary is an
offence. Information has been incorporated by reference in this short form
prospectus from documents filed with securities commissions or similar
authorities in Canada (the permanent information record in the Province of
Quebec). Copies of the documents incorporated herein by reference may be
obtained on request without charge from the Secretary, Echo Bay Mines Ltd., 1210
ManuLife Place, 10180 - 101 Street, Edmonton, Alberta, T5J 3S4 (telephone (403)
496-9002).
ECHO BAY MINES LTD.
10,000,000 COMMON SHARES
Echo Bay Mines Ltd. ("Echo Bay" or the "Company") may from time to time, during
the two-year period that this short form prospectus, including any amendments
thereto, is valid, offer for sale in Canada up to 10,000,000 Common Shares. The
Common Shares will be offered at prices and on terms to be determined at the
time of sale.
The Common Shares of the Company are listed in Canada on the Toronto and
Montreal stock exchanges, in the United States on the American Stock Exchange
and in Europe on the Paris, Brussels, Zurich, Geneva, Basel, Frankfurt, Berlin
and Dusseldorf stock exchanges.
In the opinion of counsel, the Common Shares are not precluded as investments
under the statutes referred to under "Eligibility for Investment."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE COMMON SHARES.
The Company has filed a shelf prospectus with Canadian securities regulatory
authorities relating to the potential offering of debt securities in Canada at
an aggregate initial offering price of up to U.S. $125,000,000 and has filed a
shelf registration statement with the Securities and Exchange Commission in the
United States relating to the potential offering of debt securities (including
debt securities of Echo Bay Resources, Inc. ("EBR"), a wholly-owned subsidiary
of the Company) and Common Shares in the United States (including the 10,000,000
Common Shares qualified hereunder and the U.S. $125,000,000 of debt securities
referred to above) at an aggregate initial offering price of up to U.S.
$200,000,000.
The Company may offer and sell the Common Shares to or through underwriters or
dealers, and may offer and sell the Common Shares directly to other purchasers
or through agents. Such underwriters may include Nesbitt Burns Inc. and, in the
United States, Goldman Sachs & Co. See "Plan of Distribution." This short form
prospectus will be supplemented by one or more accompanying prospectus
supplements (a "Prospectus Supplement"), which will set forth the terms of the
offering thereof. The Prospectus Supplement will set forth the names of any
underwriters, dealers or agents involved in the sale of the Common Shares, the
number of Common Shares, if any, to be purchased by underwriters or dealers and
the compensation of any such underwriters, dealers or agents. Any offering will
be subject to approval of certain legal matters on behalf of Echo Bay by Milner
Fenerty and on behalf of any underwriters, dealers or agents by Fraser & Beatty.
The date of this prospectus is July 10, 1996.
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE PAGE
<S> <C> <C> <C>
Documents Incorporated by Reference.............. 2 Description of Share Capital..................... 7
Eligibility for Investment....................... 3 Plan of Distribution............................. 7
Currency ........................................ 3 Legal Matters.................................... 8
The Company ..................................... 3 Statutory Rights of Withdrawal and Rescission.... 8
Risk Factors..................................... 5 Certificate of the Company....................... 9
Use of Proceeds.................................. 7
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, filed with the provincial securities commissions
or similar authorities in Canada, are incorporated by reference into this short
form prospectus:
(a) the Company's Annual Information Form (being the Company's Annual
Report on Form 10-K for the year ended December 31, 1995 as filed with
the Securities and Exchange Commission), including the comparative
consolidated financial statements of the Company at December 31, 1995
and the report of the auditors thereon;
(b) the Company's comparative unaudited consolidated financial statements
for the first quarter ended March 31, 1996;
(c) the Company's notice of meeting and management proxy circular dated
March 28, 1996 with respect to the Company's annual general meeting of
shareholders held on May 10, 1996; and
(d) the Company's material change report dated April 15, 1996 with respect
to the entering into by the Company of an agreement dated April 9,
1996 whereby the Company will increase its ownership from 7% to 50% of
the outstanding shares of Santa Elina Gold Corporation through a
series of transactions.
Any amendment to the Company's Annual Report on Form 10-K, material change
reports (excluding confidential reports), comparative interim financial
statements, comparative financial statements for the Company's most recently
completed financial year together with the report of the auditors thereon and
information circulars filed by the Company with securities commissions or
similar authorities in Canada after the date of this short form prospectus and
prior to the termination of this offering shall be deemed to be incorporated by
reference into this short form prospectus.
ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN OR CONTAINED HEREIN SHALL BE DEEMED TO BE
MODIFIED OR SUPERSEDED, FOR PURPOSES OF THIS SHORT FORM PROSPECTUS, TO THE
EXTENT THAT A STATEMENT CONTAINED HEREIN OR IN ANY OTHER SUBSEQUENTLY FILED
DOCUMENT WHICH ALSO IS OR IS DEEMED TO BE INCORPORATED BY REFERENCE HEREIN
MODIFIES OR SUPERSEDES SUCH STATEMENT. THE MODIFYING OR SUPERSEDING STATEMENT
NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR INCLUDE
ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT WHICH IT MODIFIES OR SUPERSEDES.
THE MAKING OF SUCH A MODIFYING OR SUPERSEDING STATEMENT SHALL NOT BE DEEMED AN
ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR SUPERSEDED STATEMENT, WHEN MADE,
CONSTITUTED A MISREPRESENTATION, AN UNTRUE STATEMENT OF A MATERIAL FACT OR AN
OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR THAT IS
NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES IN
WHICH IT WAS MADE. ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED
IN ITS UNMODIFIED OR SUPERSEDED FORM TO CONSTITUTE PART OF THIS SHORT FORM
PROSPECTUS.
-2-
<PAGE>
A Prospectus Supplement containing the specific terms of any offering of
Common Shares hereunder will be delivered to prospective purchasers of such
Common Shares, together with this short form prospectus, and will be deemed to
be incorporated into this short form prospectus as of the date of such
Prospectus Supplement only for the purpose of the offering of such Common
Shares.
Upon a new Annual Report on Form 10-K and the related annual financial
statements being filed by the Company during the currency of this short form
prospectus with, and, where required, accepted by, the applicable securities
regulatory authorities, the previous Annual Report on Form 10-K, the previous
annual financial statements and all quarterly financial statements, material
change reports and information circulars filed prior to the commencement of the
Company's financial year in which the new Annual Report on Form 10-K is filed
shall be deemed no longer to be incorporated into this short form prospectus for
purposes of future offers and sales of securities hereunder.
ELIGIBILITY FOR INVESTMENT
In the opinion of Milner Fenerty, counsel to Echo Bay, and Fraser & Beatty,
counsel to the underwriters, dealers or agent, at the date hereof, the Common
Shares, if issued on such date, subject to compliance with the prudent
investment standards and general investment provisions of the statutes referred
to below (and, where applicable, the regulations thereunder) and, in certain
cases, subject to the satisfaction of additional requirements relating to
investment or lending policies or goals, are not precluded as investments under
the following statutes:
Insurance Companies Act (Canada)
An Act respecting insurance (Quebec) (for an issuer, as defined therein,
incorporated under the laws of the Province of Quebec other than a guarantee
fund corporation, mutual association or a professional corporation)
Trust and Loans Companies Act (Canada)
Loan and Trust Corporations Act (Ontario)
Loan and Trust Corporations Act (Alberta)
An Act respecting trust companies and savings companies (Quebec)
Financial Institutions Act (British Columbia)
Pension Benefits Act (Ontario)
Supplemental Pension Plans Act (Quebec)
In the further opinion of such counsel, the Common Shares of the Company at
the date hereof are qualified investments for trusts governed by registered
retirement savings plans, registered retirement income funds and deferred profit
sharing plans under the Income Tax Act (Canada).
CURRENCY
The Company reports all financial results in United States dollars. Unless
otherwise indicated, references herein to dollar amounts are to United States
dollars. References to Canadian dollars are designated by "Cdn. $."
THE COMPANY
Echo Bay mines, processes and explores for gold and silver. Revenues are
derived principally from the sale of gold and silver. Its interest in operating
properties is set out below (all are operated by Echo Bay):
-3-
<PAGE>
PERCENTAGE
MINE LOCATION OWNERSHIP INTEREST
- ---- -------- ------------------
McCoy/Cove................... Nevada, U.S.A. 100%
Round Mountain............... Nevada, U.S.A. 50%
Lupin........................ Northwest Territories, Canada 100%
Kettle River................. Washington, U.S.A. 100%
In 1995 and the first quarter of 1996, Echo Bay produced a total of 754,762
and 161,246 ounces of gold, respectively, at average cash operating costs of
$229 and $261 per ounce, respectively. Effective January 1, 1996, the Company
adopted the "Gold Institute Production Cost Standard" for reporting production
costs on a per ounce basis. This standard defines cash operating costs as those
costs directly associated with the mining and milling of gold and silver,
adjusted for such items as inventories and mining costs relating to future
production. 1995 costs have been restated to conform with the new standard. The
Company's silver production in 1995 and the first quarter of 1996 was 11,905,806
and 1,175,057 ounces, respectively.
In 1995, Echo Bay reported a net loss of $50.1 million. Operating earnings
in 1995 were $33.5 million on revenues of $360.7 million. These results reflect
increased operating costs per ounce (principally due to mining lower grade
ores), significantly increased exploration and development property expenses,
and increased environmental expenses related to reclamation at the former
Sunnyside mine in Colorado. Exploration and development properties expenses
increased to $69.8 million in 1995 reflecting Echo Bay's expanded international
search for new gold reserves and production. In the first quarter of 1996, Echo
Bay reported a net loss of $16.2 million. The operating loss for the quarter was
$2.6 million on revenues of $67.8 million. The results reflect lower precious
metal sales and higher cash operating costs per ounce. Exploration and
development properties expenses were $14.0 million for the first quarter of
1996.
Over the past several years, Echo Bay has significantly expanded its search
for new gold reserves and production, particularly outside Canada and the United
States. Echo Bay's international growth strategy emphasizes strategic alliances
with exploration companies holding land positions on some of the world's major
gold belts. Echo Bay added five development properties during 1995: Paredones
Amarillos, Mexico (60% interest), Chapada, Brazil (holds an option to acquire a
50% interest), Kingking, Philippines (an indirect 75% interest in a Philippine
corporation that holds the right to acquire a 100% interest), and Aquarius (100%
interest) and Ulu (100% interest) in Canada. Echo Bay also continued work at the
Alaska-Juneau development project, Alaska (100% interest). At December 31, 1995,
Echo Bay's proven and probable ore reserves totalled 10,983,000 ounces of gold
and 62,913,000 ounces of silver. In addition, Echo Bay reported other
mineralization of 343.1 million tons at an average grade of 0.027 ounces of gold
per ton, 6.8 million tons at an average grade of 0.65 ounces of silver per ton,
and 225.5 million tons at an average grade of 0.46% copper.
Echo Bay is incorporated under the laws of Canada. No shareholder is known
to own more than 5% of the Echo Bay Common Shares. The principal executive
offices of Echo Bay are located at Suite 1000, 6400 South Fiddlers Green Circle,
Englewood, Colorado, 80111-4957.
RECENT DEVELOPMENTS
There are no material recent developments since Echo Bay's Annual Report on
Form 10-K was filed on March 21, 1996, except as described below.
There is pending, in Nevada state court, a suit commenced by Summa
Corporation against the Company and the predecessor owner of the McCoy/Cove and
Manhattan mines, claiming improper deductions in calculation of royalties
payable over several years from production at McCoy/Cove and the former
Manhattan mine. Summa
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<PAGE>
Corporation filed a motion for summary judgment which seeks $10.3 million of
allegedly underpaid royalties plus interest. The court denied Summa's motion.
The Company does not agree with the amount sought by Summa and will vigorously
defend its position. The Company proposed a settlement of $1.2 million that
Summa rejected. The Company made an offer of judgment to the court of $1.5
million and Summa made an offer of judgment to the court of $7.5 million. Both
of these offers of judgment have expired and are now null and void. The May 1996
court date has been continued to February 3, 1997. The Company has accrued $1.2
million related to the Summa litigation, including $1.0 million during the first
quarter of 1996.
On March 20, 1996, a favourable Record of Decision was received from the
Bureau of Land Management concerning the Environmental Impact Statement for the
Round Mountain mine. This has enabled construction to proceed for a $60 million
(Echo Bay's share is 50%), 8,000 ton per day mill to treat the higher-grade
unoxidized ore.
On April 9, 1996 the Company entered into an agreement with Santa Elina
Gold Corporation ("Santa Elina"), Sercor, Ltd. ("Sercor") and Paulo C. de Brito
("de Brito"), the controlling shareholder of Sercor, pursuant to which Echo Bay
has agreed to increase its ownership from 7% to 50% of the outstanding shares of
Santa Elina through a series of transactions. Shareholders of Santa Elina other
than Echo Bay and Sercor would receive one Echo Bay common share for each 6.67
common shares of Santa Elina owned by them. Santa Elina is a British Virgin
Islands corporation which owns a 83% interest in the Chapada copper and gold
deposit in Brazil as well as a number of other exploration and development
prospects in Brazil. Sercor currently owns approximately 67% of Santa Elina's
common shares, and is controlled by de Brito, Chairman of Santa Elina. The
transaction is subject to the approval of Santa Elina shareholders and such
approval is expected to be obtained in July, 1996.
RISK FACTORS
Purchasers of the Common Shares being offered hereby should carefully read
this entire Prospectus and the documents incorporated by reference herein.
Purchasers should consider, among other things, the risk factors set forth
below.
GOLD AND SILVER PRICES
The profitability of Echo Bay's operations is significantly affected by
changes in the market price of gold and, to a lesser extent, changes in the
market price of silver. Gold prices fluctuate widely and are affected by
numerous factors beyond the Company's control, including expectations with
respect to the rate of inflation, the strength of the U.S. dollar and of other
currencies, interest rates, global and regional political and economic crises,
major discoveries and production costs in major gold-producing regions. The
demand for and supply of gold also affect prices but not necessarily in the same
manner as such factors affect the prices of other commodities. Gold price
declines may render projects with comparatively high production costs per ounce
temporarily or permanently uneconomic, unless forward sales or other hedging
techniques make realized prices sufficiently higher than the then achievable
spot market prices. Hedging activities protect the Company against falling
prices but may result in the Company being required to sell production at lower
than market prices and may reduce the benefits of price increases.
RESERVE ESTIMATES
While Echo Bay's ore reserves are believed to be well established, ore
reserve estimates are necessarily imprecise and involve subjective judgments
regarding the presence and grade of mineralization. Should the Company encounter
mineralization or geological or mining conditions at any of its mines or
projects different from those predicted by historical drilling, sampling and
similar examinations, mining plans may have to be altered in a way that might
adversely affect Company operations and reduce its ore reserves.
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<PAGE>
The price used in estimating the Company's ore reserves at December 31,
1995 was $375 per ounce of gold and $5.00 per ounce of silver. The market prices
for gold and silver have been volatile and if market prices for gold and silver
decline significantly below their current levels and the Company determines that
its reserves should be calculated at significantly lower prices than used at
December 31, 1995, there would likely be a material reduction in the amount of
reserves. Should such reductions occur, material write-downs of the Company's
investment in mining properties and/or increased amortization charges may be
required.
EXPLORATION AND DEVELOPMENT RISKS
Echo Bay's long-term success will be affected by the results of its
development and exploration programs. Although Echo Bay has been able to
successfully replace a substantial portion of reserves produced from its
principal mines, continued replacement of reserves will depend on discovery of
extensions to existing ore reserves and discovery or acquisition of new ore
deposits. Furthermore, the development and operation of new mines requires the
obtaining of permits from relevant government authorities which may not in all
cases be issued, or which may be challenged by citizens' groups on environmental
or other grounds, leading to delays in project start-up.
MINING RISKS AND INSURANCE
The business of gold mining is subject to many risks and hazards, including
environmental hazards, industrial accidents, unusual or unexpected geological or
mining conditions, pressures, gasses, flooding and gold bullion theft. The
Company maintains general liability insurance of a total of $50 million for
occurrences in any year, which insurance is available for all operations. The
Company may become subject to liability for pollution, accidents or other
hazards against which it is uninsured or not adequately insured.
GOVERNMENT REGULATION
Echo Bay's mining operations and exploration activities are subject to
extensive U.S. and Canadian federal, state, provincial, territorial and local
laws and regulations governing prospecting, development, transportation,
production, exports, taxes, labor standards, mine safety and occupational
health. The Company's operations are also subject to laws and regulations
concerning protection of the environment, waste disposal, remediation or
releases of hazardous substances and reclamation of land. These laws and
regulations change periodically and are generally becoming more restrictive,
which may have the effect of increasing future costs. The Company believes that
it is in substantial compliance with all applicable laws and regulations.
In the United States, proposed legislation is being introduced in both
houses of the current Congress to modernize the general mining laws applicable
to operations on federal lands, including a comprehensive bi-partisan bill
actively supported by the mining industry. These proposals include royalty
provisions, environmental controls and requirements for reclamation.
The most material direct economic impact of U.S. mining law revision could
be from royalties on production at the McCoy/Cove mine in Nevada, which is on
federal land, and (to a lesser degree) at the 50%-owned Round Mountain mine in
Nevada, 24% of whose reserves are on federal land. However, the Company has
completed all of the steps currently required under U.S. law to convert the
McCoy/Cove and Round Mountain land to patented status (and thus to be exempt
from any proposed royalty), and has filed applications for patents. During 1994,
the Company filed lawsuits against the U.S. Department of the Interior to
require the government to cease its delay and to issue certificates and patents
to which the mines are currently entitled. The government has formally notified
the court that the key certificates, which were the objective of the suits, were
issued to the Company on March 1, 1995. The U.S. Department of the Interior is
expected to complete its administrative review and issue the patents in
accordance with the regulations.
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<PAGE>
USE OF PROCEEDS
Unless a Prospectus Supplement indicates otherwise, the net proceeds to be
received by the Company from the issue and sale from time to time of the Common
Shares will be added to the general funds of the Company to be used to finance
the Company's operations and for other general corporate purposes. Pending such
application, such net proceeds may be invested in short-term marketable
securities. Each Prospectus Supplement will contain specific information
concerning the use of proceeds from each sale of Common Shares to which it
relates.
DESCRIPTION OF SHARE CAPITAL
GENERAL
The authorized share capital of the Company consists of an unlimited number
of Common Shares, without par value, of which 130,497,801 were outstanding on
March 31, 1996, and an unlimited number of preferred shares, issuable in series,
none of which are currently outstanding. In addition, as of March 31, 1996,
3,749,349 Common Shares have been reserved for issuance upon the exercise of
outstanding options.
COMMON SHARES
The holders of Common Shares have one vote for each share held and are not
entitled to cumulative votes for the election of directors. Each Common Share is
entitled to participate equally in such dividends as may be declared by the
Board of Directors of the Company out of funds legally available therefor and is
entitled to share equally in any distribution to holders of Common Shares on
liquidation. The holders of Common Shares have no preemptive, conversion or
redemption rights. Each outstanding Common Share is fully paid and
nonassessable.
PREFERRED SHARES
The Board of Directors of the Company may issue preferred shares from time
to time in one or more series, subject to the provisions of the Articles of
Incorporation of the Company. When any preferred shares of the Company are
outstanding, no dividends may be paid or declared on outstanding Common Shares
unless all dividends on preferred shares of all series shall have been paid in
full with respect to past dividend periods, and the full dividends thereon for
the then current dividend period shall have been declared and a sum set apart
for payment thereof. Any sinking fund requirements with respect to preferred
shares of the Company must also be complied with before dividends on Common
Shares may be paid.
PLAN OF DISTRIBUTION
The Company may offer and sell the Common Shares to or through underwriters
or dealers, and also may offer and sell Common Shares, directly to other
purchasers or through agents. Such underwriters may include Nesbitt Burns Inc.
and, in the United States, Goldman, Sachs & Co.
Each Prospectus Supplement will set forth the terms of the particular
offering of Common Shares to which the Prospectus Supplement relates, including
the name or names of any underwriters, dealers or agents, the purchase price or
prices of the Common Shares, the proceeds to the Company from the sale of the
Common Shares, the use of such proceeds, any initial public offering price, any
underwriting discount or commission, any discounts, concessions or commissions
allowed or reallowed or paid by any underwriters to other dealers, any
commissions paid to any agents and the securities exchanges on which such Common
Shares will be listed. Any initial public offering price and any discounts,
concessions or commissions allowed or reallowed or paid by any underwriter to
other dealers may be changed from time to time.
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<PAGE>
Sales of Common Shares offered pursuant to any Prospectus Supplement may be
effected from time to time in one or more transactions on the American Stock
Exchange or, in appropriate circumstances, the Toronto or Montreal stock
exchanges, or in negotiated transactions or any combination of such methods of
sale, at market prices prevailing at the time of sale, at prices related to such
prevailing market prices, or at other negotiated prices.
Pursuant to policy statements of the Ontario Securities Commission and the
Commission des valeurs mobilieres du Quebec, the Underwriters may not, through
the period of distribution, bid for or purchase the Common Shares. The foregoing
restriction is subject to exceptions, on the condition that the bid or purchase
not be engaged in for the purpose of creating actual or apparent active trading
in, or raising the price of, the Common Shares. These exceptions include a bid
or purchase permitted under the by-laws and rules of The Toronto Stock Exchange
and Montreal Exchange relating to market stabilization and passive market-making
activities and a bid or purchase made for and on behalf of a customer where the
order was not solicited during the period of distribution. Pursuant to the
first-mentioned exception, in connection with this offering, the Underwriters
may over-allot or effect transactions which stabilize or maintain the market
price of the Common Shares at levels other than those which might otherwise
prevail on the open market. Such transactions, if commenced may be discontinued
at any time.
Underwriters, dealers and agents who participate in the distribution of the
Common Shares, may be entitled under agreements to be entered into with the
Company to indemnification by the Company against certain liabilities, including
liabilities under securities legislation, or to contribution with respect to
payments which such underwriters, dealers or agents may be required to make in
respect thereof. Such underwriters, dealers and agents may be customers of,
engage in transactions with, or perform services for, the Company in the
ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the offering of Common Shares will be
passed upon on behalf of the Company by Milner Fenerty and on behalf of any
underwriters, dealers or agents by Fraser & Beatty.
STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION
Securities legislation in certain of the provinces of Canada provides
purchasers with the right to withdraw from an agreement to purchase securities
within two business days after receipt or deemed receipt of a prospectus, the
accompanying prospectus supplement relating to the securities purchased and any
amendment. In several of the provinces, securities legislation further provides
a purchaser with remedies for rescission or, in some jurisdictions, damages
where the prospectus, the accompanying prospectus supplement relating to the
securities purchased and any amendment contains a misrepresentation or is not
delivered to the purchaser, but such remedies must be exercised by the purchaser
within the time limit prescribed by the securities legislation of the
purchaser's province. A purchaser should refer to any applicable provisions of
the securities legislation of the purchaser's province for the particulars of
these rights or consult with a legal advisor.
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<PAGE>
CERTIFICATE OF THE COMPANY
Dated: July 10, 1996
The foregoing, together with the documents incorporated herein by
reference, as of the date of each supplement hereto, will constitute full, true
and plain disclosure of all material facts relating to the securities offered by
this short form prospectus and such supplement as required by the securities
laws of all provinces of Canada and will not contain any misrepresentation
likely to affect the value or the market price of the securities to be
distributed.
(Signed) Richard C. Kraus (Signed) Peter H. Cheesbrough
Chief Executive Officer Chief Financial Officer
On Behalf of the Board of Directors:
(Signed) Robert L. Leclerc (Signed) Monica E. Sloan
Director Director
-9-
Exhibit 28.2
This short form prospectus has been filed under procedures in each of the
provinces of Canada which permit certain information with respect to these
securities to be determined after the short form prospectus has become final and
permit the omission from this short form prospectus of such information. Such
procedures require the delivery to purchasers of a prospectus or a prospectus
supplement containing this omitted information within a specified period of time
after agreeing to purchase any of these securities.
This short form prospectus constitutes a public offering of these securities
only in those jurisdictions where they may be lawfully offered for sale and
therein only by persons permitted to sell such securities. No securities
commission or similar authority in Canada has in any way passed upon the merits
of the securities offered hereunder and any representation to the contrary is an
offence. Information has been incorporated by reference in this short form
prospectus from documents filed with securities commissions or similar
authorities in Canada (the permanent information record in the Province of
Quebec). Copies of the documents incorporated herein by reference may be
obtained on request without charge from the Secretary, Echo Bay Mines Ltd., 1210
ManuLife Place, 10180 - 101 Street, Edmonton, Alberta, T5J 3S4 (telephone (403)
496-9002).
ECHO BAY MINES LTD.
U.S. $125,000,000
DEBT SECURITIES
Echo Bay Mines Ltd. ("Echo Bay" or the "Company") may from time to time, during
the two-year period that this short form prospectus, including any amendments
thereto, is valid, offer for sale in Canada debt securities consisting of
debentures, notes, bonds or other similar evidences of indebtedness (the "Debt
Securities") up to an aggregate initial public offering price of U.S.
$125,000,000 or the equivalent thereof in one or more other currencies or
currency units, including the European Currency Unit. Debt Securities may be
offered in separate series at prices and on terms to be determined at the time
of sale.
This Prospectus will be supplemented by one or more accompanying Prospectus
Supplements, which will set forth with regard to the particular series of Debt
Securities in respect of which this Prospectus is being delivered the title,
aggregate principal amount, currency of denomination, maturity, interest rate,
if any (which may be fixed or variable), or method of calculation thereof, time
of payment of any interest, any terms for redemption at the option of the
Company or the Holder, any terms for sinking fund payments, rank, any conversion
or exchange rights, any listing on a securities exchange, the initial public
offering price and any other terms in connection with the offering and sale of
such Debt Securities. The Prospectus Supplement will also contain information,
as applicable, about certain United States and Canadian Federal income tax
considerations relating to the Debt Securities in respect of which this
Prospectus is being delivered.
In the opinion of counsel, the Debt Securities are not precluded as investments
under the statutes referred to under "Eligibility for Investment."
SEE "RISK FACTORS" BEGINNING ON PAGE 5 FOR CERTAIN CONSIDERATIONS RELEVANT TO AN
INVESTMENT IN THE DEBT SECURITIES.
The Company has filed a shelf prospectus with Canadian securities regulatory
authorities relating to the potential offering of up to 10,000,000 common shares
in Canada and has filed a shelf registration statement with the Securities and
Exchange Commission in the United States relating to the potential offering of
Debt Securities (including the Debt Securities qualified hereunder and debt
securities of Echo Bay Resources, Inc. ("EBR"), a wholly-owned subsidiary of the
Company) and common shares in the United States (including the 10,000,000 common
shares referred to above) for an aggregate initial offering price of up to U.S.
$200,000,000.
The Company may offer and sell the Debt Securities to or through underwriters or
dealers, and also may offer and sell the Debt Securities directly to other
purchasers or through agents. Such underwriters may include Nesbitt Burns Inc.
and, in the United States, Goldman, Sachs & Co. See "Plan of Distribution." A
Prospectus Supplement will set forth the names of any underwriters, dealers or
agents involved in the sale of the Debt Securities, the principal amounts, if
any, to be purchased by underwriters or dealers and the compensation of any such
underwriters, dealers or agents. Any offering will be subject to approval of
certain legal matters on behalf of Echo Bay by Milner Fenerty and on behalf of
any underwriters, dealers or agents by Fraser & Beatty.
The date of this prospectus is July 10, 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
<S> <C> <C> <C>
Documents Incorporated by Reference.............. 2 Interest and Asset Coverages..................... 7
Eligibility for Investment....................... 3 Description of Debt Securities................... 7
Currency ........................................ 3 Plan of Distribution............................. 15
The Company ..................................... 3 Legal Matters.................................... 16
Risk Factors .................................... 5 Statutory Rights of Withdrawal and Rescission.... 16
Use of Proceeds.................................. 7 Certificate of the Company....................... 17
</TABLE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, filed with the provincial securities commissions
or similar authorities in Canada, are incorporated by reference into this short
form prospectus:
the Company's Annual Information Form (being the Company's Annual Report on
Form 10-K for the year ended December 31, 1995 as filed with the Securities
and Exchange Commission), including the comparative consolidated financial
statements of the Company at December 31, 1995 and the report of the
auditors thereon;
the Company's comparative unaudited consolidated financial statements for
the first quarter ended March 31, 1996;
the Company's notice of meeting and management proxy circular dated March
28, 1996 with respect to the Company's annual general meeting of
shareholders held on May 10, 1996; and
the Company's material change report dated April 15, 1996 with respect to
the entering into by the Company of an agreement dated April 9, 1996
whereby the Company will increase its ownership from 7% to 50% of the
outstanding shares of Santa Elina Gold Corporation through a series of
transactions.
Any amendment to the Company's Annual Report on Form 10-K, material change
reports (excluding confidential reports), comparative interim financial
statements, comparative financial statements for the Company's most recently
completed financial year together with the report of the auditors thereon and
information circulars filed by the Company with securities commissions or
similar authorities in Canada after the date of this short form prospectus and
prior to the termination of this offering shall be deemed to be incorporated by
reference into this short form prospectus.
ANY STATEMENT CONTAINED IN A DOCUMENT INCORPORATED OR DEEMED TO BE
INCORPORATED BY REFERENCE HEREIN OR CONTAINED HEREIN SHALL BE DEEMED TO BE
MODIFIED OR SUPERSEDED, FOR PURPOSES OF THIS SHORT FORM PROSPECTUS, TO THE
EXTENT THAT A STATEMENT CONTAINED HEREIN OR IN ANY OTHER SUBSEQUENTLY FILED
DOCUMENT WHICH ALSO IS OR IS DEEMED TO BE INCORPORATED BY REFERENCE HEREIN
MODIFIES OR SUPERSEDES SUCH STATEMENT. THE MODIFYING OR SUPERSEDING STATEMENT
NEED NOT STATE THAT IT HAS MODIFIED OR SUPERSEDED A PRIOR STATEMENT OR INCLUDE
ANY OTHER INFORMATION SET FORTH IN THE DOCUMENT WHICH IT MODIFIES OR SUPERSEDES.
THE MAKING OF SUCH A MODIFYING OR SUPERSEDING STATEMENT SHALL NOT BE DEEMED AN
ADMISSION FOR ANY PURPOSES THAT THE MODIFIED OR SUPERSEDED STATEMENT, WHEN MADE,
CONSTITUTED A MISREPRESENTATION, AN UNTRUE STATEMENT OF A MATERIAL FACT OR AN
OMISSION TO STATE A MATERIAL FACT THAT IS REQUIRED TO BE STATED OR THAT IS
NECESSARY TO MAKE A STATEMENT NOT MISLEADING IN LIGHT OF THE CIRCUMSTANCES IN
WHICH IT WAS MADE. ANY STATEMENT SO MODIFIED OR SUPERSEDED SHALL NOT BE DEEMED
IN ITS UNMODIFIED OR SUPERSEDED FORM TO CONSTITUTE PART OF THIS SHORT FORM
PROSPECTUS.
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A Prospectus Supplement containing the specific terms of any particular
series of Debt Securities, updated disclosure of interest and asset coverages,
if applicable, and other information relating to such Debt Securities, will be
delivered to prospective purchasers of such Debt Securities, together with this
short form prospectus, and will be deemed to be incorporated into this short
form prospectus as of the date of such Prospectus Supplement only for the
purpose of the offering of such Debt Securities.
Upon a new Annual Report on Form 10-K and the related annual financial
statements being filed by the Company during the currency of this short form
prospectus with, and, where required, accepted by, the applicable securities
regulatory authorities, the previous Annual Report on Form 10-K, the previous
annual financial statements and all quarterly financial statements, material
change reports and information circulars filed prior to the commencement of the
Company's financial year in which the new Annual Report on Form 10-K is filed
shall be deemed no longer to be incorporated into this short form prospectus for
purposes of future offers and sales of securities hereunder.
ELIGIBILITY FOR INVESTMENT
In the opinion of Milner Fenerty, counsel to Echo Bay, and Fraser & Beatty,
counsel to the underwriters, dealers or agent, at the date hereof, the Debt
Securities, if issued on such date, subject to compliance with the prudent
investment standards and general investment provisions of the statutes referred
to below (and where applicable, the regulations thereunder) and, in certain
cases, subject to the satisfaction of additional requirements relating to
investment or lending policies or goals, are not precluded as investments under
the following statutes:
Insurance Companies Act (Canada)
An Act respecting insurance (Quebec) (for an issuer, as defined therein,
incorporated under the laws of the Province of Quebec, other than a guarantee
fund corporation, mutual association or a professional corporation)
Trust and Loans Companies Act (Canada)
Loan and Trust Corporations Act (Ontario)
Loan and Trust Corporations Act (Alberta)
An Act respecting trust companies and savings companies (Quebec)
Financial Institutions Act (British Columbia)
Pension Benefits Act (Ontario)
Supplemental Pension Plans Act (Quebec)
CURRENCY
The Company reports all financial results in United States dollars. Unless
otherwise indicated, references herein to dollar amounts are to United states
dollars. References to Canadian dollars are designated by "Cdn. $."
THE COMPANY
Echo Bay mines, processes and explores for gold and silver. Revenues are
derived principally from the sale of gold and silver. Its interest in operating
properties is set out below (all are operated by Echo Bay):
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PERCENTAGE
MINE LOCATION OWNERSHIP INTEREST
- ---- -------- ------------------
McCoy/Cove................. Nevada, U.S.A. 100%
Round Mountain............. Nevada, U.S.A. 50%
Lupin...................... Northwest Territories, Canada 100%
Kettle River............... Washington, U.S.A. 100%
In 1995 and the first quarter of 1996, Echo Bay produced a total of 754,762
and 161,246 ounces of gold, respectively, at average cash operating costs of
$229 and $261 per ounce, respectively. Effective January 1, 1996, the Company
adopted the "Gold Institute Production Cost Standard" for reporting production
costs on a per ounce basis. This standard defines cash operating costs as those
costs directly associated with the mining and milling of gold and silver,
adjusted for such items as inventories and mining costs relating to future
production. 1995 costs have been restated to conform with the new standard. The
Company's silver production in 1995 and the first quarter of 1996 was 11,905,806
and 1,175,057 ounces, respectively.
In 1995, Echo Bay reported a net loss of $50.1 million. Operating earnings
in 1995 were $33.5 million on revenues of $360.7 million. These results reflect
increased operating costs per ounce (principally due to mining lower grade
ores), significantly increased exploration and development property expenses,
and increased environmental expenses related to reclamation at the former
Sunnyside mine in Colorado. Exploration and development properties expenses
increased to $69.8 million in 1995 reflecting Echo Bay's expanded international
search for new gold reserves and production. In the first quarter of 1996, Echo
Bay reported a net loss of $16.2 million. The operating loss for the quarter was
$2.6 million on revenues of $67.8 million. The results reflect lower precious
metal sales and higher cash operating costs per ounce. Exploration and
development properties expenses were $14.0 million for the first quarter of
1996.
Over the past several years, Echo Bay has significantly expanded its search
for new gold reserves and production, particularly outside Canada and the United
States. Echo Bay's international growth strategy emphasizes strategic alliances
with exploration companies holding land positions on some of the world's major
gold belts. Echo Bay added five development properties during 1995: Paredones
Amarillos, Mexico (60% interest), Chapada, Brazil (holds an option to acquire a
50% interest), Kingking, Philippines (an indirect 75% interest in a Philippine
corporation that holds the right to acquire a 100% interest), and Aquarius (100%
interest) and Ulu (100% interest) in Canada. Echo Bay also continued work at the
Alaska-Juneau development project, Alaska (100% interest). At December 31, 1995,
Echo Bay's proven and probable ore reserves totalled 10,983,000 ounces of gold
and 62,913,000 ounces of silver. In addition, Echo Bay reported other
mineralization of 343.1 million tons at an average grade of 0.027 ounces of gold
per ton, 6.8 million tons at an average grade of 0.65 ounces of silver per ton,
and 225.5 million tons at an average grade of 0.46% copper.
Echo Bay is incorporated under the laws of Canada. No shareholder is known
to own more than 5% of the Echo Bay Common Shares. The principal executive
offices of Echo Bay are located at Suite 1000, 6400 South Fiddlers Green Circle,
Englewood, Colorado, 80111-4957.
RECENT DEVELOPMENTS
There are no material recent developments since Echo Bay's Annual Report on
Form 10-K was filed on March 21, 1996, except as described below.
There is pending, in Nevada state court, a suit commenced by Summa
Corporation against the Company and the predecessor owner of the McCoy/Cove and
Manhattan mines, claiming improper deductions in calculation of royalties
payable over several years from production at McCoy/Cove and the former
Manhattan mine. Summa
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<PAGE>
Corporation filed a motion for summary judgment which seeks $10.3 million of
allegedly underpaid royalties plus interest. The court denied Summa's motion.
The Company does not agree with the amount sought by Summa and will vigorously
defend its position. The Company proposed a settlement of $1.2 million that
Summa rejected. The Company made an offer of judgment to the court of $1.5
million and Summa made an offer of judgment to the court of $7.5 million. Both
of these offers of judgment have expired and are now null and void. The May 1996
court date has been continued to February 3, 1997. The Company has accrued $1.2
million related to the Summa litigation, including $1.0 million during the first
quarter of 1996.
On March 20, 1996, a favourable Record of Decision was received from the
Bureau of Land Management concerning the Environmental Impact Statement for the
Round Mountain mine. This has enabled construction to proceed for a $60 million
(Echo Bay's share is 50%), 8,000 ton per day mill to treat the higher-grade
unoxidized ore.
On April 9, 1996 the Company entered into an agreement with Santa Elina
Gold Corporation ("Santa Elina"), Sercor, Ltd. ("Sercor") and Paulo C. de Brito
("de Brito"), the controlling shareholder of Sercor, pursuant to which Echo Bay
has agreed to increase its ownership from 7% to 50% of the outstanding shares of
Santa Elina through a series of transactions. Shareholders of Santa Elina other
than Echo Bay and Sercor would receive one Echo Bay common share for each 6.67
common shares of Santa Elina owned by them. Santa Elina is a British Virgin
Islands corporation which owns a 83% interest in the Chapada copper and gold
deposit in Brazil as well as a number of other exploration and development
prospects in Brazil. Sercor currently owns approximately 67% of Santa Elina's
common shares, and is controlled by de Brito, Chairman of Santa Elina. The
transaction is subject to the approval of Santa Elina shareholders and such
approval is expected to be obtained in July, 1996.
RISK FACTORS
Purchasers of the Debt Securities being offered hereby should carefully
read this entire Prospectus and the documents incorporated by reference herein.
Purchasers should consider, among other things, the risk factors set forth
below.
GOLD AND SILVER PRICES
The profitability of Echo Bay's operations is significantly affected by
changes in the market price of gold and, to a lesser extent, changes in the
market price of silver. Gold prices fluctuate widely and are affected by
numerous factors beyond the Company's control, including expectations with
respect to the rate of inflation, the strength of the U.S. dollar and of other
currencies, interest rates, global and regional political and economic crises,
major discoveries and production costs in major gold-producing regions. The
demand for and supply of gold also affect prices but not necessarily in the same
manner as such factors affect the prices of other commodities. Gold price
declines may render projects with comparatively high production costs per ounce
temporarily or permanently uneconomic, unless forward sales or other hedging
techniques make realized prices sufficiently higher than the then achievable
spot market prices. Hedging activities protect the Company against falling
prices but may result in the Company being required to sell production at lower
than market prices and may reduce the benefits of price increases.
RESERVE ESTIMATES
While Echo Bay's ore reserves are believed to be well established, ore
reserve estimates are necessarily imprecise and involve subjective judgments
regarding the presence and grade of mineralization. Should the Company encounter
mineralization or geological or mining conditions at any of its mines or
projects different from those predicted by historical drilling, sampling and
similar examinations, mining plans may have to be altered in a way that might
adversely affect Company operations and reduce its ore reserves.
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The price used in estimating the Company's ore reserves at December 31,
1995 was $375 per ounce of gold and $5.00 per ounce of silver. The market prices
for gold and silver have been volatile and if market prices for gold and silver
decline significantly below their current levels and the Company determines that
its reserves should be calculated at significantly lower prices than used at
December 31, 1995, there would likely be a material reduction in the amount of
reserves. Should such reductions occur, material write-downs of the Company's
investment in mining properties and/or increased amortization charges may be
required.
EXPLORATION AND DEVELOPMENT RISKS
Echo Bay's long-term success will be affected by the results of its
development and exploration programs. Although Echo Bay has been able to
successfully replace a substantial portion of reserves produced from its
principal mines, continued replacement of reserves will depend on discovery of
extensions to existing ore reserves and discovery or acquisition of new ore
deposits. Furthermore, the development and operation of new mines requires the
obtaining of permits from relevant government authorities which may not in all
cases be issued, or which may be challenged by citizens' groups on environmental
or other grounds, leading to delays in project start-up.
MINING RISKS AND INSURANCE
The business of gold mining is subject to many risks and hazards, including
environmental hazards, industrial accidents, unusual or unexpected geological or
mining conditions, pressures, gasses, flooding and gold bullion theft. The
Company maintains general liability insurance of a total of $50 million for
occurrences in any year, which insurance is available for all operations. The
Company may become subject to liability for pollution, accidents or other
hazards against which it is uninsured or not adequately insured.
GOVERNMENT REGULATION
Echo Bay's mining operations and exploration activities are subject to
extensive U.S. and Canadian federal, state, provincial, territorial and local
laws and regulations governing prospecting, development, transportation,
production, exports, taxes, labor standards, mine safety and occupational
health. The Company's operations are also subject to laws and regulations
concerning protection of the environment, waste disposal, remediation or
releases of hazardous substances and reclamation of land. These laws and
regulations change periodically and are generally becoming more restrictive,
which may have the effect of increasing future costs. The Company believes that
it is in substantial compliance with all applicable laws and regulations.
In the United States, proposed legislation is being introduced in both
houses of the current Congress to modernize the general mining laws applicable
to operations on federal lands, including a comprehensive bi-partisan bill
actively supported by the mining industry. These proposals include royalty
provisions, environmental controls and requirements for reclamation.
The most material direct economic impact of U.S. mining law revision could
be from royalties on production at the McCoy/Cove mine in Nevada, which is on
federal land, and (to a lesser degree) at the 50%-owned Round Mountain mine in
Nevada, 24% of whose reserves are on federal land. However, the Company has
completed all of the steps currently required under U.S. law to convert the
McCoy/Cove and Round Mountain land to patented status (and thus to be exempt
from any proposed royalty), and has filed applications for patents. During 1994,
the Company filed lawsuits against the U.S. Department of the Interior to
require the government to cease its delay and to issue certificates and patents
to which the mines are currently entitled. The government has formally notified
the court that the key certificates, which were the objective of the suits, were
issued to the Company on March 1, 1995. The U.S. Department of the Interior is
expected to complete its administrative review and issue the patents in
accordance with the regulations.
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SUBORDINATED NATURE OF CERTAIN DEBT SECURITIES
Certain Debt Securities may be subordinated in right of payment to all
Senior Indebtedness of the Company, whether now outstanding or hereafter
created, incurred, assumed or guaranteed by the Company. The Indentures under
which any Debt Securities will be issued may not limit the amount of Senior
Indebtedness or other indebtedness that the Company may incur. In addition, the
Debt Securities may be effectively subordinated to all liabilities of the
Company's other consolidated subsidiaries. See "The Company" and "Description of
Debt Securities."
USE OF PROCEEDS
Unless a Prospectus Supplement indicates otherwise, the net proceeds to be
received by the Company from the issue and sale from time to time of the Debt
Securities will be added to the general funds of the Company to be used to
finance the Company's operations and for other general corporate purposes.
Pending such application, such net proceeds may be invested in short-term
marketable securities. Each Prospectus Supplement will contain specific
information concerning the use of proceeds from each sale of Debt Securities to
which it relates.
INTEREST AND ASSET COVERAGES
The asset and earnings coverages set out below have been prepared and
included in this short form prospectus in accordance with Canadian disclosure
requirements.
These coverages do not give pro forma effect to any offering of Debt
Securities. The following coverages were calculated on a consolidated basis as
at, and for the 12 month periods ended December 31, 1995 and March 31, 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1995 MARCH 31, 1996
<S> <C> <C> <C>
Interest and preferred stock dividend coverage on long-term debt
and preferred stock of a subsidiary (1)............................ - -
Net tangible asset coverage of long-term debt (2)................... 5.1 times 5.1 times
</TABLE>
NOTES:
(1) The Company reported a net loss in excess of interest and preferred stock
dividends for the 12 month periods ended December 31, 1995 and March 31,
1996.
(2) Based on total tangible assets less current liabilities (excluding current
portion of long-term debt) and deferred income taxes.
DESCRIPTION OF DEBT SECURITIES
Debt Securities may be issued from time to time in one or more series. The
Debt Securities will constitute either indebtedness designated as Senior
Indebtedness ("Senior Debt Securities"), indebtedness designated as Senior
Subordinated Indebtedness ("Senior Subordinated Debt Securities") or
indebtedness designated as Subordinated Indebtedness ("Subordinated Debt
Securities"). The particular terms of each series of Debt Securities offered by
a particular Prospectus Supplement will be described therein. Senior Debt
Securities, Senior Subordinated Debt Securities and Subordinated Debt Securities
will each be issued under a separate indenture (individually an "Indenture" and
collectively the "Indentures") to be entered into prior to the issuance of such
Debt Securities. The Indentures will be substantially identical, except for
provisions relating to subordination. See "Subordination of Senior Subordinated
Debt Securities and Subordinated Debt Securities." Copies of the forms of the
Indentures may be obtained on request without charge from the Secretary, Echo
Bay Mines Ltd., Suite 1210 ManuLife Place, 10180 - 101 Street, Edmonton,
Alberta, T5J 3S4, telephone (403) 496-9002. There will be a separate Trustee
(individually
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a "Trustee" and collectively the "Trustees") under each Indenture.
Information regarding the Trustee under an Indenture will be included in any
Prospectus Supplement relating to the Debt Securities issued thereunder.
The following discussion includes a summary description of the material
terms of the Indentures, other than terms which are specific to a particular
series of Debt Securities and which will be described in the Prospectus
Supplement relating to such series. The following summaries do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indentures, including the definitions therein
of certain terms capitalized in this Prospectus. Wherever particular Sections,
Articles or defined terms of the Indentures are referred to herein or in a
Prospectus Supplement, such Sections, Articles or defined terms are incorporated
herein or therein by reference.
GENERAL
The Debt Securities will be general unsecured obligations of the Company.
The Indentures do not limit the aggregate amount of Debt Securities which may be
issued thereunder, and Debt Securities may be issued thereunder from time to
time in separate series up to the aggregate amount from time to time authorized
for each series.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Debt Securities in respect of
which this Prospectus is being delivered: (1) the title of such Debt Securities;
(2) any limit on the aggregate principal amount of such Debt Securities; (3)
whether any of such Debt Securities are to be issuable in permanent global form
("Global Security") and, if so, the terms and conditions, if any, upon which
interests in such Debt Securities in global form may be exchanged, in whole or
in part, for the individual Debt Securities represented thereby; (4) the person
to whom any interest on any Debt Security of the series shall be payable, if
other than the person in whose name the Debt Security is registered on the
Regular Record Date; (5) the date or dates on which such Debt Securities will
mature; (6) the rate or rates of interest, if any, or the method of calculation
thereof, which such Debt Securities will bear, and the basis upon which interest
will be calculated if other than that of a 360-day year of twelve 30-day months;
(7) the date or dates from which any such interest will accrue, the Interest
Payment Dates on which any such interest on such Debt Securities will be payable
and the Regular Record Date for any interest payable on any Interest Payment
Date; (8) the place or places where the principal of, premium, if any, and
interest on such Debt Securities will be payable; (9) the period or periods
within which, the events upon the occurrence of which, and the price or prices
at which, such Debt Securities may, pursuant to any optional or mandatory
provisions, be redeemed or purchased, in whole or in part, by the Company and
any terms and conditions relevant thereto; (10) the obligations of the Company,
if any, to redeem or repurchase such Debt Securities pursuant to any sinking
fund or analogous provisions or at the option of the Holders thereof; (11) the
denominations in which any such Debt Securities will be issuable, if other than
denominations of U.S. $1,000 and any integral multiple thereof; (12) the
currency, currencies or currency unit or units of payment of principal of,
premium, if any, and interest on such Debt Securities if other than U.S.
dollars; (13) any index or formula to be used to determine the amount of
payments of principal, premium, if any, and interest on such Debt Securities,
and any commodities, currencies, currency units or indices, or value, rate or
price, relevant to such determination; (14) if the principal of, premium, if
any, or interest on such Debt Securities is to be payable, at the election of
the Company or a Holder thereof, in one or more currencies or currency units
other than that or those in which such Debt Securities are stated to be payable,
the currencies or currency units in which payment of the principal of, premium,
if any, and interest on such Debt Securities as to which election is made shall
be payable, and the periods within which and the terms and conditions upon which
such election is to be made; (15) if other than the principal amount thereof,
the portion of the principal amount of such Debt Securities of the series which
will be payable upon acceleration of the Maturity thereof; (16) whether such
Debt Securities are subordinate in right of payment to any Senior Indebtedness
of the Company and, if so, the terms and conditions of such subordination and
the aggregate principal amount of such Senior Indebtedness outstanding as of a
recent date; (17) any covenants to which the Company may be subject with respect
to such Debt Securities; (18) the applicability of the provisions described
under "Defeasance" below; (19) the terms and conditions, if any, pursuant to
which such Debt Securities are convertible into or exchangeable for Common
Shares or other securities; (20) United States and Canadian Federal income tax
consequences, if any; (21) the provisions for the payment of
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additional amounts with respect to any Canadian withholding taxes in certain
cases; and (22) any other terms of such Debt Securities.
Debt Securities may be issued at a discount or a premium from their
principal amount. Canadian Federal income tax considerations and other special
considerations applicable to any such Securities will be described in the
applicable Prospectus Supplement.
If the purchase price of any series of Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of, premium, if any, and interest on any series of Debt Securities are
payable in a foreign currency or currencies or a foreign currency unit or units,
the restrictions, elections, general tax considerations, specific terms and
other information with respect to such series of Debt Securities will be set
forth in the applicable Prospectus Supplement.
Debt Securities may be issued from time to time with payment terms which
are calculated by reference to the value, rate or price of one or more
commodities, currencies, currency units or indices. Holders of such Debt
Securities may receive a principal amount (including premium, if any) on any
principal payment date, or a payment of interest on any interest payment date,
that is greater than or less than the amount of principal (including premium, if
any) or interest otherwise payable on such dates, depending upon the value, rate
or price on the applicable dates of the applicable currency, currency unit,
commodity or index. Information as to the methods for determining the amount of
principal, premium, if any, or interest payable on any date, the currencies,
currency units, commodities or indices to which the amount payable on such date
is linked and any additional tax considerations will be set forth in the
applicable Prospectus Supplement.
Except as may be set forth in the applicable Prospectus Supplement, Holders
of Debt Securities will not have the benefit of any specific covenants or
provisions in the applicable Indenture for such Debt Securities that would
protect them in the event that the Company engages in or becomes the subject of
a highly leveraged transaction, other than the limitations on mergers,
consolidations and transfers of substantially all of the Company's properties
and assets as an entirety to any person as described below under "Consolidation,
Merger and Sale of Assets."
SENIOR DEBT SECURITIES
The Senior Debt Securities will rank pari passu with all other unsecured
and unsubordinated debt of the Company and senior to the Senior Subordinated
Debt Securities and Subordinated Debt Securities.
SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES AND SUBORDINATED
DEBT SECURITIES
The payment of the principal of, premium, if any, and interest on the
Senior Subordinated Debt Securities and the Subordinated Debt Securities will,
to the extent set forth in the respective Indentures governing such Senior
Subordinated Debt Securities and Subordinated Debt Securities, be subordinated
in right of payment to the prior payment in full of all Senior Indebtedness.
Upon any payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Company, the holders of all Senior Indebtedness will be
entitled to receive payment in full of all amounts due or to become due thereon
before the Holders of the Senior Subordinated Debt Securities or the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, premium, if any, or interest on such Senior Subordinated
Debt Securities or Subordinated Debt Securities, as the case may be. In the
event of the acceleration of the maturity of any Senior Subordinated Debt
Securities or Subordinated Debt Securities, the holders of all Senior
Indebtedness will be entitled to receive payment in full of all amounts due or
to become due thereon before the Holders of the Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be, will be entitled
to receive any payment upon the principal of, premium, if any, or interest on
such Senior Subordinated Debt Securities or Subordinated Debt Securities, as the
case may be. No payments on account of principal, premium, if any, or interest
in respect of the Senior Subordinated Debt Securities or Subordinated Debt
Securities may be made if there shall have occurred and be
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<PAGE>
continuing in a default in the payment of principal of (or premium, if any) or
interest on any Senior Indebtedness beyond any applicable grace period, or a
default with respect to any Senior Indebtedness permitting the holders thereof
to accelerate the maturity thereof, or if any judicial proceedings shall be
pending with respect to any such default. For purposes of the subordination
provisions, the payment, issuance or delivery of cash, property or securities
(other than stock, and certain subordinated securities, of the Company) upon
conversion or exchange or a Senior Subordinated Debt Security or Subordinated
Debt Security will be deemed to constitute payment on account of the principal
of such Senior Subordinated Debt Security or Subordinated Debt Security, as the
case may be.
By reason of such provisions, in the event of insolvency, holders of Senior
Subordinated Debt Securities and Subordinated Debt Securities may recover less,
ratably, than holders of Senior Indebtedness with respect thereto.
The term "Senior Indebtedness," when used with respect to any series of
Senior Subordinated Debt Securities or Subordinated Debt Securities, is defined
to include all amounts due on and obligations in connection with any of the
following, whether outstanding at the date of execution of the Indenture or
thereafter incurred, assumed, guaranteed or otherwise created, (including,
without limitation, interest accruing on or after a bankruptcy or other similar
event, whether or not an allowed claim therein):
(a) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Company for money borrowed or evidenced by bonds,
debentures, notes or similar instruments;
(b) reimbursement obligations and other liabilities (contingent or
otherwise) of the Company with respect to letters of credit or
bankers' acceptances issued for the account of the Company and
interest rate protection agreements and currency exchange or purchase
agreements;
(c) obligations and liabilities (contingent or otherwise) of the Company
related to capitalized lease obligations;
(d) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Company related to agreements or arrangements
designed to protect the Company against fluctuations in commodity
prices, including without limitation, commodity futures contracts or
similar hedging instruments;
(e) indebtedness of others of the kinds described in the preceding clauses
(a) through (d) that the Company has assumed, guaranteed or otherwise
assumed the payment of, directly or indirectly;
(f) indebtedness of another Person of the type described in the preceding
clauses (a) through (e) secured by any mortgage, pledge, lien or other
encumbrance on property owned or held by the Company; and
(g) deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or
liability described in the preceding clauses (a) through (f) whether
or not there is any notice to or consent of the Holders of such series
of Senior Subordinated Debt Securities or Subordinated Debt
Securities, as the case may be;
except that, with respect to the Senior Subordinated Debt Securities, any
particular indebtedness, obligation, liability, guaranty, assumption, deferral,
renewal, extension or refunding shall not constitute "Senior Indebtedness" if it
is expressly stated in the governing terms, or in the assumption or guarantee,
thereof that the indebtedness involved is not senior in right of payment to the
Senior Subordinated Debt Securities or that such indebtedness is pari passu with
or junior to the Senior Subordinated Debt Securities and, with respect to
Subordinated Debt Securities, any particular indebtedness, obligation,
liability, guaranty, assumption, deferral, renewal, extension or refunding shall
not constitute "Senior Indebtedness" if it is expressly stated in the governing
terms, or in the assumption or guarantee, thereof that the indebtedness involved
is not senior in right of payment to the Subordinated Debt Securities or that
such indebtedness is pari passu with or junior to the Subordinated Debt
Securities.
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<PAGE>
In certain circumstances, such as the bankruptcy or insolvency of the
Company, Canadian or U.S. bankruptcy or insolvency legislation may be applicable
and the application of such legislation may lead to different results with
respect to, for example, payments to be made to Holders of Debt Securities, or
priorities between Holders of the Debt Securities and holders of Senior
Indebtedness, than those provided for in the applicable Indenture.
If this Prospectus is being delivered in connection with a series of Senior
Subordinated Debt Securities or Subordinated Debt Securities, the accompanying
Prospectus Supplement or the information incorporated herein by reference will
set forth the approximate amount of Senior Indebtedness outstanding as of the
end of the Company's most recent fiscal quarter.
CONVERSION OR EXCHANGE OF DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, such series will be convertible or
exchangeable into Common Shares of the Company or other securities (including
rights to receive payments in cash or securities based on the value, rate or
price of one or more specified commodities, currencies, currency units or
indices) on the terms and conditions set forth therein.
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities will be issued only in fully registered form in denominations of
U.S. $1,000 or integral multiples thereof. Unless otherwise indicated in the
applicable Prospectus Supplement, payment of principal, premium, if any, and
interest on the Debt Securities will be payable, and the exchange, conversion
and transfer of Debt Securities will be registerable, at the office or agency of
the Company maintained for such purposes. No service charge will be made for any
registration of transfer or exchange of the Debt Securities, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge imposed in connection therewith.
All monies paid by the Company to a Paying Agent for the payment of
principal of, premium, if any, or interest on any Debt Security which remain
unclaimed for two years after such principal, premium or interest has become due
and payable may be repaid to the Company and thereafter the holder of such Debt
Security may look only to the Company for payment thereof.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary ("Depositary") or its nominee identified in the applicable
Prospectus Supplement. In such a case, one or more Global Securities will be
issued in a denomination or aggregate denomination equal to the portion of the
aggregate principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered form, a Global
Security may not be registered for transfer or exchange except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any nominee to a successor Depositary or a
nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Company expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and
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the deposit of such Global Security with or on behalf of the Depositary for such
Global Security, the Depositary will credit, on its book-entry registration and
transfer system, the respective principal amounts of the Debt Securities
represented by such Global Security to the accounts of institutions that have
accounts with such Depositary or its nominee ("participants"). The accounts to
be credited will be designated by the underwriters or agents of such Debt
Securities or by the Company, if such Debt Securities are offered and sold
directly by the Company. Ownership of beneficial interest in such Global
Security will be limited to participants or Persons that may hold interests
through participants. Ownership of beneficial interests by participants in such
Global Security will be shown on, and the transfer of that ownership interest
will be effected only through, records maintained by the Depositary or its
nominee for such Global Security. Ownership of beneficial interests in such
Global Security by Persons that hold through participants will be shown on, and
the transfer of that ownership interest within such participant will be effected
only through, records maintained by such participant. The laws of some
jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations and
such laws may impair the ability to transfer beneficial interests in such Global
Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Unless otherwise specified in the applicable Prospectus
Supplement, owners of beneficial interests in such Global Security will not be
entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form and
will not be considered the Holders thereof for any purposes under the applicable
Indenture. Accordingly, each Person owning a beneficial interest in such Global
Security must rely on the procedures of the Depositary for such Global Security
and, if such Person is not a participant, on the procedures of the participant
through which such Person owns its interest, to exercise any rights of a Holder
under the applicable Indenture. The Company understands that under existing
industry practices, if the Company requests any action of Holders or an owner of
a beneficial interest in such Global Security desires to give notice or take any
action a Holder is entitled to give or take under an Indenture, the Depositary
for such Global Security would authorize the participants to give such notice or
take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal of, premium, if any, and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any series of Debt Securities represented by a Global Security is
at any time unwilling or unable to continue as Depositary or ceases to be a
clearing agency registered or in good standing under applicable legislation and
a successor Depositary is not appointed by the Company within 90 days after the
Company receives notice or becomes aware of such condition, the Company will
issue such Debt Securities in definitive certificated form in exchange for such
Global Security. In addition, the Company may at any time and in its sole
discretion determine not to have any of the Debt Securities of a series
represented by one or more Global Securities and, in such event, will issue Debt
Securities of such series in definitive certificated form in exchange for all of
the Global Security or Securities representing such Debt Securities.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
Debt Securities of any series: (a) failure to pay principal (or premium, if any)
on any Debt Security of that series when due, whether or not such failure is a
result of the subordination provisions of the Indenture with respect to such
series; (b) failure to pay any interest on any Debt Security of that series when
due, continued for 30 days, whether or not such failure is a result of the
subordination provisions of the Indenture with respect to such series; (c)
failure to make any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) failure to perform any other covenant of the
Company in the applicable Indenture or any other covenant to which the Company
may be subject with respect
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to Debt Securities of that series (other than a covenant solely for the benefit
of a series of Debt Securities other than that series), continued for 90 days
after written notice as provided in the applicable Indenture; (e) failure to pay
when due on final maturity (after the expiration of any applicable grace
period), or upon acceleration, any indebtedness for money borrowed by the
Company in excess of U.S. $10 million; (f) certain events of bankruptcy,
insolvency or reorganization; and (g) any other Event of Default provided with
respect to Debt Securities of that series.
If an Event of Default with respect to Outstanding Debt Securities of any
series shall occur and be continuing, either the Trustee or the Holders of at
least 25% in principal amount of the Outstanding Debt Securities of that series,
by notice as provided in the applicable Indenture, may declare the principal
amount (or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all Debt Securities of that series to be due and
payable immediately, except that upon the occurrence of an Event of Default
specified in (f) above, the principal amount (or in the case of Original Issue
Discount Securities, such portion) of all Debt Securities shall be immediately
due and payable without notice. However, at any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before judgment or decree based on such acceleration has been obtained, the
Holders of a majority in principal amount of the Outstanding Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration. For information as to waiver of defaults, see "Modification and
Waiver" below.
The Indentures will provide that, subject to the duty of the respective
Trustees thereunder during an Event of Default to act with the required standard
of care, each such Trustee will be under no obligation to exercise any of its
rights or powers under the respective Indentures at the request or direction of
any of the Holders, unless such Holders shall have offered to such Trustee
reasonable security or indemnity. Subject to certain provisions, including those
requiring security or indemnification of the applicable Trustee, the Holders of
a majority in principal amount of the Outstanding Debt Securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to such Trustee, or exercising any trust or
power conferred on such Trustee, with respect to the Debt Securities of that
series.
No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the applicable Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the applicable
Trustee written notice of a continuing Event of Default and unless also the
Holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of the same series shall have written requests, and offered
reasonable indemnity, to such Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of the same series
a direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. However, such limitations do not apply to a suit
instituted by a Holder of a Debt Security for enforcement of payment of the
principal of and interest on such Debt Security on or after the respective due
dates expressed in such Debt Security.
The Company will be required to furnish to the Trustees annually a
statement as to the performance by the Company of its obligations under the
respective Indentures and as to any default in such performance.
MODIFICATION AND WAIVER
Without the consent of any Holder of Outstanding Debt Securities, the
Company and the Trustees may amend or supplement the Indentures or the Debt
Securities to cure any ambiguity, defect or inconsistency, or to make any change
that does not adversely affect the rights of any Holder of Debt Securities.
Other modifications and amendments of the respective Indentures may be made by
the Company and the applicable Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the Outstanding Debt
Securities of each series affected thereby; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby: (a) change the Stated Maturity of
the principal of, or any instalment of principal of, or premium, if any, or
interest on any Debt Security; (b) reduce the principal amount of, the rate of
interest on, or the premium, if any, payable upon the redemption of, any Debt
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Security; (c) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the Maturity thereof; (d) change the place
or currency of payment of principal of, premium, if any, or interest on any Debt
Security; (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security on or after the Stated Maturity
or Redemption Date thereof; (f) modify the conversion or exchange provisions
applicable to convertible or exchangeable Debt Securities in a manner adverse to
the holders thereof; (g) modify the subordination provisions applicable to
Senior Subordinated Debt Securities or Subordinated Debt Securities in a manner
adverse to the Holders thereof; (h) reduce the percentage in principal amount of
Outstanding Debt Securities of any series, the consent of the Holders of which
is required for modification or amendment of the applicable Indenture or for
waiver of compliance with certain provisions of the applicable Indenture or for
waiver of certain defaults or (i) modify any of the provisions of certain
sections as specified in the Indenture including the provisions summarized in
this paragraph, except to increase any such percentage or to designate
additional provisions of the Indenture which, with respect to such series,
cannot be modified or waived without the consent of the Holder of each
Outstanding Debt Security affected thereby.
The Holders of at least a majority in principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned, compliance
by the Company with certain covenants of the applicable Indenture. The Holders
of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may, on behalf of the Holders of all Debt Securities of
that series, waive any past default under the applicable Indenture with respect
to that series, except a default in the payment of the principal of, premium, if
any, or interest on, any Debt Security of that series or in respect of a
provision which under the applicable Indenture cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security of that
series affected.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Company, without the consent of any Holders of any series of
outstanding Debt Securities, may consolidate with or merge into, or transfer or
lease its assets substantially as an entirety (treating the Company and each of
its Subsidiaries as a single consolidated entity) to, any corporation, and any
other corporation may consolidate with or merge into, or transfer or lease its
assets substantially as an entirety to, the Company, provided that the
corporation (if other than the Company) formed by such consolidation or into
which the Company is merged or which acquires or leases the assets of the
Company substantially as an entirety is organized and existing under the laws of
the United States of America or Canada or any political subdivision of either,
and assumes the Company's obligations under each series of Outstanding Debt
Securities and the Indentures applicable thereto and that the Trustee is
satisfied that the transaction will not result in the successor being required
to make any deduction or withholding on account of certain Canadian taxes from
any payments in respect of the Securities, and that, after giving effect to such
transaction, no Event of Default, and no event which, after notice or lapse of
time or both, would become an Event of Default, shall have occurred and be
continuing, and that the Trustee is delivered an officer's certificate and an
opinion of counsel with respect to compliance with the foregoing requirements.
DEFEASANCE
If so indicated in the applicable Prospectus Supplement with respect to the
Debt Securities of a series, the Company at its option (i) will be discharged
from any and all obligations in respect of the Debt Securities of such series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, to replace destroyed, stolen, lost or mutilated Debt
Securities of such series, and to maintain an office or agency in respect of the
Debt Securities and hold moneys for payment in trust) or (ii) will be released
from its obligations to comply with certain covenants specified in the
applicable Prospectus Supplement with respect to the Debt Securities of such
series, and the occurrence of an event described in clause (d) under "Events of
Default" above with respect to any defeased covenants, and clauses (e) and (g)
under "Events of Default" above shall no longer be an Event of Default, if in
either case the Company irrevocably deposits with the applicable Trustee, in
trust, money, Government Obligations of the government issuing the currency in
which the Debt Securities of the relevant series are denominated or a
combination thereof that through the payment of interest thereon and principal
thereof in accordance with the terms will provide money in an amount sufficient
to pay all the principal of and premium, if
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any, and interest on the Securities of such series on the dates such payments
are due (up to the Stated Maturity Date, or the Redemption Date, as the case may
be) in accordance with the terms of such Debt Securities. Such a trust may only
be established if, among other things, no Event of Default described under
"Events of Default" above or event that, after notice or lapse of time, or both,
would become an Event of Default under the applicable Indenture, shall have
occurred and be continuing on the date of such deposit, or, with regard to an
Event of Default described under clause (f) under "Events of Default" above or
an event that, after notice or lapse of time, or both, would become an Event of
Default described under such clause (f), shall have occurred and be continuing
at any time during the period ending on the 123rd day following such date of
deposit. In the event the Company omits to comply with its remaining obligations
under the applicable Indenture after a defeasance of such Indenture with respect
to the Debt Securities of any series as described under clause (ii) above and
the Debt Securities of such series are declared due and payable because of the
occurrence of any undefeased Event of Default, the amount of money and
Government Obligations on deposit with the applicable Trustee may be
insufficient to pay amounts due on the Debt Securities of such series at the
time of the acceleration resulting from such Event of Default. However, the
Company will remain liable in respect to such payments.
Notwithstanding the description set forth under "Subordination of Senior
Subordinated Debt Securities and Subordinated Debt Securities" above, in the
event that the Company deposits money or Government Obligations in compliance
with the Indenture that governs any Senior Subordinated Debt Securities or
Subordinated Debt Securities, as the case may be, in order to defease all or
certain of its obligations with respect to the applicable series of Debt
Securities, the money or Government Obligations so deposited will not be subject
to the subordination provisions of the applicable Indenture and the indebtedness
evidenced by such series of Debt Securities will not be subordinated in right of
payment to the holders of applicable Senior Indebtedness to the extent of the
money or Government Obligations so deposited.
GOVERNING LAW
The Indentures and the Debt Securities will be governed by, and construed
in accordance with, the laws of the State of New York.
REGARDING THE TRUSTEES
The Indentures contain certain limitations on the right of each Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. Each Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Debt Securities issued
under the applicable Indenture, it must eliminate such conflict or resign.
PLAN OF DISTRIBUTION
The Company may offer and sell the Debt Securities to or through
underwriters or dealers, and also may offer and sell Debt Securities directly to
other purchasers or through agents. Such underwriters may include Nesbitt Burns
Inc. and, in the United States, Goldman, Sachs & Co.
Each Prospectus Supplement will set forth the terms of the offering,
including the name or names of any underwriters, dealers or agents, the purchase
price or prices of the Debt Securities, the proceeds to the Company from the
sale of the Debt Securities, the use of such proceeds, any initial public
offering price, any underwriting discount or commission and may set forth any
discounts, concessions or commissions allowed or re-allowed or paid by any
underwriter to other dealers. Any initial public offering price and any
discounts, concessions or commissions allowed or re-allowed or paid by any
underwriter to other dealers may be changed from time to time.
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The Debt Securities may be sold from time to time in one or more
transactions at a fixed price or prices which may be changed or at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices, or at negotiated prices.
Underwriters, dealers and agents who participate in the distribution of the
Debt Securities, may be entitled under agreements to be entered into with the
Company to indemnification by the Company against certain liabilities, including
liabilities under securities legislation, or to contribution with respect to
payments which such underwriters, dealers or agents may be required to make in
respect thereof. Such underwriters, dealers and agents may be customers of,
engage in transactions with, or perform services for, the Company in the
ordinary course of business.
LEGAL MATTERS
Certain legal matters relating to the offering of Debt Securities will be
passed upon on behalf of the Company by Milner Fenerty and on behalf of any
underwriters, dealers or agents by Fraser & Beatty.
STATUTORY RIGHTS OF WITHDRAWAL AND RESCISSION
Securities legislation in certain of the provinces of Canada provides
purchasers with the right to withdraw from an agreement to purchase securities
within two business days after receipt or deemed receipt of a prospectus, the
accompanying prospectus supplement relating to the securities purchased and any
amendment. In several of the provinces, securities legislation further provides
a purchaser with remedies for rescission or, in some jurisdictions, damages
where the prospectus, the accompanying prospectus supplement relating to the
securities purchased and any amendment contains a misrepresentation or is not
delivered to the purchaser, but such remedies must be exercised by the purchaser
within the time limit prescribed by the securities legislation of the
purchaser's province. A purchaser should refer to any applicable provisions of
the securities legislation of the purchaser's province for the particulars of
these rights or consult with a legal advisor.
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CERTIFICATE OF THE COMPANY
Dated: July 10, 1996
The foregoing, together with the documents incorporated herein by
reference, as of the date of each supplement hereto, will constitute full, true
and plain disclosure of all material facts relating to the securities offered by
this short form prospectus and such supplement as required by the securities
laws of all provinces of Canada and will not contain any misrepresentation
likely to affect the value or the market price of the securities to be
distributed.
(signed) Richard C. Kraus (signed) Peter H. Cheesbrough
Chief Executive Officer Chief Financial Officer
On Behalf of the Board of Directors:
(signed) Robert L. Leclerc (signed) Monica E. Sloan
Director Director
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