<PAGE>
PROXY
ECHO BAY MINES LTD.
ANNUAL AND SPECIAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON THE 14TH DAY OF MAY 1997
The undersigned shareholder of ECHO BAY MINES LTD. appoints ROBERT LEIGH
LECLERC, Q.C. or failing him RICHARD CARL KRAUS, or instead of them or either
of them ________________________ as proxy of the undersigned with full power
of substitution, to attend, vote and otherwise act for and on behalf of the
undersigned in respect of all matters that may come before the Annual and
Special General Meeting of Shareholders to be held on the 14th day of May
1997, and at any adjournment of the meeting, with the same power the
undersigned would have if the undersigned were present at the meeting, or any
adjournment of the meeting, and without limiting the generality of the
foregoing, the proxy is directed to vote or refrain from voting as specified
below:
1. to vote FOR / / or WITHHOLD vote on / / the election of the following
persons as directors: John Norman Abell, Latham Cawthra Burns,
Pierre Choquette, John Gilray Christy, Peter Clarke, Richard Carl Kraus,
Robert Leigh Leclerc, Q.C., John Frederick McOuat, Monica Elizabeth Sloan
and Richard Geoffrey Pentland Styles;
2. to vote FOR / / or WITHHOLD vote on / / the appointment of Ernst & Young as
auditors;
3. to vote FOR / /, AGAINST / / or WITHHOLD vote on / / an amendment to the
employee share incentive plan of the Corporation; and
4. to vote FOR / /, AGAINST / / or WITHHOLD vote on / / establishment of a plan
providing for the grant of restricted shares to eligible employees of the
Corporation.
DATED , 1997
---------------- ------------------------------------
Signature of Shareholder
(1) If a shareholder specifies a choice with respect to any of the matters
indicated above, the shares represented by the proxy will be voted for,
against or withheld from voting in respect of the matter on any ballot
that may be called for. With respect to the election of directors, a
shareholder may withhold authority to vote for a particular nominee but
vote for the election of the other nominees by lining through or otherwise
striking out the name of any particular nominee and checking the "vote FOR"
box.
(2) If this proxy is not dated in the above space, it is deemed to bear the date
on which it is mailed by the person making the solicitation.
INSTRUCTIONS
If you are unable to attend the Annual and Special General Meeting of
Shareholders in person, please fill in and sign this form of proxy and return
it in the envelope provided for that purpose.
1. This proxy is solicited by the Board of Directors and the management of
the Corporation.
2. If a shareholder wishes to be represented
at the meeting by proxy, the proxy must
be dated and executed by the shareholder
or the shareholder's attorney authorized
in writing or, if the shareholder is a
corporation, under its corporate seal or
by an officer or attorney of the
corporation duly authorized.
3. Unless otherwise indicated, this proxy
will be voted for the election of
directors, for the appointment of
auditors, for the amendment to the
employee share incentive plan and for
the establishment of a plan providing
for the grant of restricted shares to
eligible employees of the Corporation.
This form of proxy confers discretionary
authority with respect to any amendments
to matters identified in the notice of
meeting or other matters that may
properly come before the meeting.
4. A shareholder has the right to appoint
a person other than the persons
designated in this form of proxy as his
proxy to attend and act for him and on
his behalf at the meeting. The person
need not be a shareholder. This right
may be exercised either by inserting in
the space provided the name of the person
or by completing another proper form of
proxy.
<PAGE>
ECHO BAY MINES LTD.
NOTICE OF ANNUAL AND SPECIAL
GENERAL MEETING OF SHAREHOLDERS
MAY 14, 1997
NOTICE IS HEREBY GIVEN that the Annual and Special General Meeting of the
shareholders of Echo Bay Mines Ltd. will be held at the St. Lawrence Great
Hall, 157 King Street East, Toronto, Ontario on Wednesday, the 14th day of
May 1997, at the hour of 11:30 in the morning, for the following purposes:
1. to receive and consider the annual report containing financial statements
for the year ended December 31, 1996 together with the report of the
auditors thereon;
2. to elect directors;
3. to appoint auditors;
4. to consider and approve an amendment to the employee share incentive plan
of the Corporation, the details of which are summarized in the accompanying
Management Proxy Circular;
5. to consider and approve establishment of a plan providing for the grant of
restricted shares to eligible employees of the Corporation, the details of
which are summarized in the accompanying Management Proxy Circular; and
6. to transact such other business as may properly come before the meeting or
any adjournment thereof.
Only shareholders of record at the close of business on March 25, 1997 will
be entitled to notice of the meeting.
DATED at Edmonton, Alberta, Canada this 31st day of March 1997.
By Order of the Board,
Lois-Ann L. Brodrick
Secretary
NOTE: If you are unable to attend in person, please fill in and sign the
enclosed form of proxy and return it to the Secretary of the Corporation
in the envelope provided.
<PAGE>
MANAGEMENT PROXY CIRCULAR
SOLICITATION OF PROXIES
This Management Proxy Circular is furnished in connection with the
solicitation by the management of ECHO BAY MINES LTD. (the "Corporation") of
proxies to be used at the Annual and Special General Meeting of the
shareholders of the Corporation to be held at the time and place and for the
purposes set forth in the foregoing notice. This material was first sent to
shareholders on or about March 31, 1997. The Corporation will bear all costs
in connection with the printing and mailing of the enclosed materials as well
as the cost of solicitation of proxies. D.F. King & Company, Inc. will
solicit proxies from nominee accounts for a fee of U.S. $20,000 plus
expenses. To the extent necessary to assure adequate representation at the
meeting, solicitation of proxies may be made by directors, officers and
regular employees of the Corporation directly as well as by mail and by
telephone.
APPOINTMENT AND REVOCATION OF PROXIES
The persons designated in the enclosed form of proxy are directors of the
Corporation. A shareholder has the right to appoint a person other than the
persons designated in the accompanying form of proxy to represent him at the
meeting. The person need not be a shareholder. This right may be exercised
either by inserting in the space provided the name of the other person a
shareholder wishes to appoint or by completing another proper form of proxy.
Shareholders who wish to be represented at the meeting by proxy must deposit
their form of proxy prior to 11:30 o'clock in the morning local time on May 13,
1997 either at the principal office of the Corporation, 1210 Manulife Place,
10180 - 101 Street, Edmonton, Alberta, Canada T5J 3S4 or at the office of
Montreal Trust Company of Canada, 151 Front Street West, Toronto, Ontario,
Canada M5J 2N1, or bring the proxy to the meeting and deliver it to the Chairman
or Secretary of the Corporation prior to the commencement of the meeting.
A shareholder who has given a proxy has the right to revoke it at any
time by an instrument in writing executed by the shareholder or his attorney
authorized in writing or, if the shareholder is a corporation, under its
corporate seal or by an officer or attorney thereof duly authorized, and
deposited either at the principal office of the Corporation, 1210 Manulife
Place, 10180 - 101 Street, Edmonton, Alberta, Canada T5J 3S4 or at the office
of Montreal Trust Company of Canada, 151 Front Street West, Toronto, Ontario,
Canada M5J 2N1 addressed to the Secretary of the Corporation, c/o Montreal
Trust Company of Canada, at any time up to and including the last business
day preceding the day of the meeting, or any adjournment thereof, at which
the proxy is to be used, or with the Chairman or Secretary of the Corporation
on the day of the meeting, or any adjournment thereof.
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
On March 14, 1997, there were outstanding 139,357,131 common shares of
the Corporation, each of which carries with it the right to one vote. A
quorum of shareholders will be established at the meeting if the holders of a
majority of the shares entitled to vote at the meeting are present in person
or represented by proxy. Abstentions will be counted for quorum but for no
other purpose. A majority of the votes cast at the meeting in person or by
proxy is required for the approval of each matter being submitted to a vote
of the shareholders at the meeting. Shares held by a person to whom common
<PAGE>
shares might be issued under the proposed restricted share grant plan (see
page 17) will not be voted on the resolution establishing such plan. As of
March 14, 1997, an aggregate of 130,852 common shares were held by such
individuals.
Shareholders of record at the close of business on March 25, 1997 will
be entitled to vote at the meeting except to the extent they have transferred
the ownership of any of their shares after the record date and the transferee
of those shares has produced properly endorsed share certificates or has
otherwise established that he owns the shares and, in either case, has
demanded not later than May 2, 1997 that his name be included in the list of
shareholders entitled to vote at the meeting.
As of March 14, 1997, based upon information available to the
Corporation, no one shareholder was the beneficial owner of more than five
percent of the common shares.
VOTING OF PROXIES
Common shares of the Corporation, represented by a valid proxy in favour
of the person or persons designated in the enclosed form of proxy, will be
voted on any ballot which may be called for in respect of matters referred to
in the accompanying notice of meeting and, where a choice with respect to any
matter to be acted upon has been specified in the proxy, the shares will be
voted in accordance with the specification so made. The common shares will be
voted in favour of any matter for which no specification has been made.
The enclosed form of proxy confers discretionary authority upon the
persons named therein with respect to amendments to the matters identified in
the notice of meeting and other matters that may properly come before the
meeting. Management is not aware of any amendments to matters identified in
the notice of meeting or of any other matters that are to be presented for
action to the meeting.
ELECTION OF DIRECTORS
Under the articles of the Corporation, the Board of Directors may
consist of a minimum of three and a maximum of 15 directors. At present, the
Board consists of 11 directors and the Board of Directors has fixed the
number of directors at 10 for the term of office commencing with this
election. Management proposes to nominate and the persons named in the
enclosed form of proxy intend to vote for the election of the 10 persons
named below, all of whom are already directors. Management does not
contemplate that any of the nominees will be unable to serve as a director.
Each director elected will hold office until the next annual general meeting
or until a successor is duly elected.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Name and municipality Age Director Principal occupation and Directorships of other
of residence since business experience within public corporations
the last five years
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JOHN NORMAN ABELL 65 1980 Corporate director Stelco Inc.; AT Plastics Inc.
(1)(3)(4)
Ramsbury, Wilts., England
LATHAM CAWTHRA BURNS 66 1980 Corporate director since
(1)(3)(4) June 1995; prior thereto
Toronto, Ontario Honorary Chairman,
Nesbitt Burns Inc.
(investment dealers)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------
Name and municipality Age Director Principal occupation and Directorships of other
of residence since business experience within public corporations
the last five years
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PIERRE CHOQUETTE 54 1996 President and Chief Executive Methanex Corporation;
(2)(5)(6) Officer, Methanex Corporation Gennum Corporation
Vancouver, British Columbia since 1994; President Novacorp
International from 1991 to 1994
JOHN GILRAY CHRISTY 64 1980 Chairman, Chestnut Capital First Union Bank Advisory
(2)(4)(5) Corporation (holding company) Board-New Jersey; First
Wyndmoor, Pennsylvania and corporate director Union Bank Advisory
Board-Philadelphia; The
Philadelphia
Contributionship; The 1838
Bond Debenture Trading
Fund Limited
PETER CLARKE 66 1993 Consultant - metals and
(3)(5)(6) mining industries since
Nanoose Bay, British Columbia December 1992; prior thereto
Senior Vice President of the
Corporation
RICHARD CARL KRAUS 50 1992 President and Chief Executive St. Mary Land and
Englewood, Colorado Officer of the Corporation since Exploration Company
June 1994; prior thereto
President and Chief Operating
Officer
ROBERT LEIGH LECLERC, Q.C. 52 1992 Chairman of the Corporation
Highlands Ranch, Colorado since May 1996; Chairman and
Chief Executive Officer of and
partner in Milner Fenerty
(barristers and solicitors) from
December 1993 to June 1996;
prior thereto partner in Milner
Fenerty
JOHN FREDERICK McOUAT 63 1989 President, Watts, Griffis and Cominco Ltd.; Euro Nevada
(3)(5)(6) McOuat Limited (consulting Mining Corporation Ltd.;
Toronto, Ontario geologists and engineers) Bakyrchik Gold PLC
MONICA ELIZABETH SLOAN 43 1994 President, Telus Advanced
(1)(2)(4) Communications
Calgary, Alberta (telecommunications company)
since August 1995; prior thereto
Assistant Vice President Strategy
Development, Telus Corporation
RICHARD GEOFFREY PENTLAND STYLES 66 1987 Corporate director Onex Corp.; Working
(1)(2)(4) Ventures Canadian Fund
Toronto, Ontario Inc.; Scott's Restaurants Inc.;
The Geon Company;
Prosource Inc.
</TABLE>
3
<PAGE>
(1) Member of the Audit Committee (4) Member of the Nominating and Corporate
(2) Member of the Compensation Governance Committee
Committee (5) Member of the Operations Committee
(3) Member of the Finance Committee (6) Member of the Safety and Environment
Committee
MEETINGS AND COMPENSATION OF THE BOARD OF DIRECTORS
In 1996, the Board of Directors held 9 meetings. Effective January 1,
1995, directors received an annual retainer fee of U.S.$10,000 and U.S.$500
for attendance at each meeting of the Board of Directors and of each
committee on which they served. The Chairman of the Operations Committee
received an additional annual fee of U.S.$15,000 and all other committee
chairmen an additional annual fee of U.S.$10,000. Effective July 1, 1996, the
annual retainer fee paid directors was increased by U.S.$2,500 and the annual
retainer fee paid committee chairmen was reduced by U.S.$2,500. Messrs.
Leclerc and Kraus receive meeting attendance fees but do not receive annual
retainer fees. The committee chairmen were: Audit - Mr. Burns; Compensation -
Mr. Christy; Finance - Mr. Abell; Nominating and Corporate Governance - Mr.
Styles; Operations - Mr. Clarke; and Safety and Environment - Mr. McOuat.
In 1994 the Corporation established a director equity plan which
provides for the grant of options to permit eligible directors to acquire
common shares of the Corporation. Eligible directors are neither officers nor
employees of the Corporation and options may be granted according to a
formula which calls for grants annually on the date of the Corporation's
annual meeting of shareholders. In no case may the number of shares covered
by the grant be less than 2,500 or more than 6,500. The first grants were
made June 9, 1994 and each eligible director received an option to acquire
4,600 common shares of the Corporation at a price of Can.$14.625. On June 8,
1995 each eligible director received an option to acquire 6,500 common shares
of the Corporation at a price of Can.$12.50. On May 10, 1996 each eligible
director received an option to acquire 5,000 common shares of the Corporation
at a price of Can.$18.25, the closing price reported by The Toronto Stock
Exchange on that date.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee reviews the annual financial statements and the
annual audit with the Corporation's independent auditors and also reviews
quarterly financial information which is published and disseminated to
shareholders. The Compensation Committee reviews the performance and
recommends the compensation of corporate officers and makes grants under the
employee share incentive plan. The Finance Committee reviews the financial
structure of the Corporation and makes recommendations as to financial
requirements, hedging policies and the use of financial derivatives. The
Nominating and Corporate Governance Committee reviews Board responsibilities,
structure and composition, and recommends candidates to serve as directors of
the Corporation. Committee policy on nominations permits consideration of
candidates put forward by shareholders. Any shareholder interested in
submitting such a recommendation is required to communicate full details to
the Secretary of the Corporation by the end of the calendar year prior to the
year in which the nomination will be considered. The Operations Committee
reviews and makes recommendations to the Board regarding operations of the
Corporation, reserves, life-of-mine plans, the annual operating plan and
budget, and the annual exploration program. The Safety and Environment
Committee reviews the Corporation's safety and environmental policies,
procedures and practices.
4
<PAGE>
During 1996 the Audit Committee met five times, the Compensation
Committee four times, the Finance Committee twice, the Nominating and
Corporate Governance Committee three times, the Operations Committee twice
and the Safety and Environment Committee twice. Mr. Ferrer, who is not
standing for re-election, attended fewer than 75 percent of the aggregate of
the total number of meetings of the Board of Directors and the total number
of meetings held by all committees of the Board on which he served.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Toronto Stock Exchange requires companies listed on that Exchange to
disclose their approach to corporate governance in their annual reports or
information circulars and make the disclosure with reference to published
guidelines (the "Guidelines"). The following discusses the Corporation's
adherence to the Guidelines.
MANDATE OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for managing the business and
affairs of the Corporation. This responsibility manifests itself in many ways
such as reviewing and approving strategic and operating plans. The Board must
identify the principal risks of the business and ensure they are effectively
monitored and controlled. The Board is responsible for corporate governance
generally and for specific tasks such as selecting a chief executive officer,
assessing that individual's performance and replacing that individual if
appropriate. It is also responsible for all key executive appointments and
for setting equitable compensation for these and other executives.
The Board must ensure there is a sound basis for making key business
decisions, facilitate realization of corporate goals and ensure compliance,
to the greatest extent possible, with sound safety and environmental
standards. It must also make certain that the Corporation has sufficient
financial resources to meet its commitments.
In all instances the Board must ensure that the interests of
shareholders, creditors, employees and the communities in which the
Corporation operates are properly served. The Board must be able and willing
to take action, separate from management, on issues which by law or practice
require independent thought and action. In all of this the Board has a duty
to be certain the Corporation acts in a lawful, ethical and responsible
manner.
COMPOSITION OF THE BOARD
The Guidelines require the Corporation to address the extent to which
the Board has a majority of unrelated directors and the basis for reaching
this conclusion. An "unrelated director" is defined as a director who is
independent of management and is free from any interest and any business or
other relationship which could, or could reasonably be perceived to,
materially interfere with the director's ability to act with a view to the
best interests of the Corporation. Of the present 11 directors, eight are
unrelated. Each of them has business and other interests entirely unrelated
to those of the Corporation other than interests arising from holding shares
of the Corporation. The shareholding issue is immaterial as no single
shareholder or shareholder group, to the knowledge of management, has more
than a five percent beneficial interest in the shares of the Corporation. Of
the three directors who do not meet the "unrelated" test, only two (Messrs.
Leclerc and Kraus) are employed by the Corporation. Mr. McOuat is a principal
in a firm which from time to time provides consulting services to the
Corporation.
5
<PAGE>
The amount of business done by that firm for the Corporation does not
represent a material percentage of its gross annual revenue.
INDEPENDENT FUNCTIONING OF THE BOARD
To ensure the independence of the Board from management, the positions
of chairman and chief executive officer are separate. The Board has a
Nominating and Corporate Governance Committee which makes recommendations to
the Board as to which directors are "unrelated", reviews compliance with the
Guidelines and other relevant corporate governance requirements, and
periodically develops Board succession plans. It also reviews the
effectiveness of the Board, its committees and individual members and
recommends to the Board position descriptions for the chairman, the president
and chief executive officer and the Board itself. All of this is in addition
to the committee's duty to search for and recruit new directors.
The Board allows each director to seek the advice of independent
experts, if deemed appropriate. The relevant procedure in this case calls for
a director obtaining the approval of an appropriate Board committee not
chaired by that director.
BOARD COMMITTEES
The Board committees and their mandates are described at page 4 of this
management proxy circular. All members of the Audit, the Compensation and the
Nominating and Corporate Governance Committees are unrelated, outside
directors. All but one member of the Finance, the Operations and the Safety
and Environment Committees are unrelated, outside directors.
DECISIONS REQUIRING PRIOR APPROVAL BY THE BOARD
Prior Board approval is required for all acquisitions of other
companies, sale of securities of the Corporation, incurring debt except under
approved credit arrangements with banks and financial institutions, and
employment and compensation arrangements for officers of the Corporation.
Board or Operations Committee approval is required for capital expenditures
in excess of U.S.$2,500,000.
SHAREHOLDER FEEDBACK
Shareholders are encouraged to convey their concerns to management. They
may do so by writing to the Corporation's Investor Relations Department.
THE BOARD'S EXPECTATIONS OF MANAGEMENT
The Board expects management to conduct the business of the Corporation in
keeping with the strategic and operating plans adopted by the Board. Management
is also expected to assess the potential of properties to become profitable
commercial producers of gold and other metals, and to develop plans, arrange
financing and hire and train capable staff in order to bring these properties
into production. At the same time, it is expected the major mines that today
provide essentially all of the Corporation's cash flow will be effectively
managed.
6
<PAGE>
The Board expects that the capable management of today's producing mines
and the successful execution of the plans management has been developing on
exploration and development properties can increase shareholder value. The
Board believes the elements necessary for success are in place.
SECURITY OWNERSHIP
The following table shows equity securities of the Corporation
beneficially owned as of March 14, 1997 by all directors of the Corporation,
the Chief Executive Officer and next four most highly compensated executive
officers of the Corporation, and directors and executive officers of the
Corporation as a group.
Options to acquire common
Amount and nature of shares of the Corporation
Beneficial Owner beneficial ownership as exercisable within 60 days
of March 14, 1997 of March 14, 1997
- --------------------------------------------------------------------------------
John N. Abell 10,000 5,175
Robert C. Armstrong 27,944 208,923
John L. Azlant 11,000 76,620
Latham C. Burns 2,000 5,175
Peter H. Cheesbrough 21,368 107,487
Pierre Choquette 1,500 --
John G. Christy 42,553 5,175
Peter Clarke 30,000 194,542
Carlos A. Ferrer 6,150 4,025
Richard C. Kraus 65,194 328,228
Robert L. Leclerc, Q.C. 10,000 136,000
John F. McOuat 2,791 3,550
Monica E. Sloan 1,500 5,175
R. Geoffrey P. Styles 2,000 5,175
Robert D. Wunder -- 15,750
Directors and executive 1,355,774(1)(2)(3)
officers as a group
(1) Represents 0.96 percent of the outstanding common shares of the
Corporation.
(2) Includes 1,120,774 common shares which directors and officers have the
right to acquire within 60 days of March 14, 1997.
(3) No individual director or officer owns common shares of the Corporation
representing 1.0 percent or more of the number of outstanding shares.
LIABILITY INSURANCE
The Corporation has purchased insurance and has, in addition, agreed to
indemnify directors and officers of the Corporation against all costs,
charges and expenses reasonably incurred by them in respect of certain
proceedings to which they may be made party by reason of their status as
directors or officers of the Corporation. The indemnification is extended to
directors and officers provided they have acted honestly and in good faith
with a view to the best interests of the Corporation and, in the
7
<PAGE>
case of a criminal or administrative action or proceeding that is enforced by
a monetary penalty, on the condition the director or officer had reasonable
grounds for believing his conduct was lawful. The amount of the premium paid
in respect of directors and officers as a group was U.S.$120,000; the policy
coverage is U.S.$35,000,000 per claim and in aggregate in any policy year.
The first U.S.$500,000 of expense for the Corporation per claim is not
covered by the policy.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below shows the compensation of the Chief Executive Officer
and the next four most highly compensated executive officers for each of the
Corporation's last three completed fiscal years.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
--------------------------- --------------
Share All Other
Salary Bonus Option Compensation
Name/Principal Position Year (U.S.$) (U.S.$) Awards (#) (U.S.$)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RICHARD C. KRAUS 1996 $423,582 $ -- 110,547 $ 46,099(1)
Director, President and 1995 372,274 186,137 143,328 219,958
Chief Executive Officer 1994 346,519 118,042 93,172 39,224
- -------------------------------------------------------------------------------------------------------------------
ROBERT C. ARMSTRONG 1996 $264,630 $ 20,997 83,790 $ 28,665(1)
Executive Vice-President 1995 260,592 130,296 79,332 158,945
1994 240,293 77,339 65,220 26,816
- -------------------------------------------------------------------------------------------------------------------
PETER H. CHEESBROUGH 1996 $199,462 $ 33,283 39,481 $ 10,928(1)
Senior Vice President, Finance 1995 172,000 68,800 64,272 73,614
and Chief Financial Officer 1994 160,000 43,528 30,936 9,000
- -------------------------------------------------------------------------------------------------------------------
ROBERT D. WUNDER 1996 $156,385 $ 64,340 100,507 $ 3,069(1)
Senior Vice President,
Project Development
- -------------------------------------------------------------------------------------------------------------------
JOHN L. AZLANT 1996 $189,515 $ 12,968 37,507 $ 10,309(1)
Senior Vice President, 1995 164,800 65,920 94,608 75,797
Corporate Development 1994 160,000 43,528 30,936 8,123
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the annual employer contributions to the Corporation's
retirement savings and defined contribution plans.
EXECUTIVE CASH INCENTIVE PLAN
The Corporation has an executive cash incentive plan (the "ECIP") under
which certain executive officers and key employees are eligible to receive,
in addition to their base salary, incentive compensation if performance
objectives related to the Corporation's annual operating plan have been met.
A participant in the ECIP received for 1996 a percentage of base salary if
the Corporation met certain performance standards considered applicable to
the participant. Awards earned and paid to
8
<PAGE>
executive officers and key employees under the ECIP for 1996 aggregated
U.S.$535,346. The amounts paid to the Chief Executive Officer and the next
four most highly compensated executive officers are shown in the Summary
Compensation Table at page 8 under "Bonus".
SHARE OPTIONS
The Corporation has adopted a share incentive plan which provides for
the grant of options to purchase common shares to directors, officers and
employees. The number of common shares currently authorized under the plan is
8,000,000. The exercise price of all options granted to date has been 100
percent of the market value of the common shares on the date of each grant.
Options may be granted for a term of not more than 10 years and must be
granted at no less than 100 percent of fair market value on the date of
grant. The exercise price must be paid in full at the time of exercise of an
option and may be paid either in cash or by the surrender or delivery to the
Corporation of common shares.
The Compensation Committee of the Board of Directors exercises its
judgment as to eligibility for participation in the plan and the amount of
any particular grant. It also determines the date on which each option shall
become exercisable and may provide that options shall be exercisable in
installments. The Committee may in its sole discretion accelerate the time at
which any option may be exercised in whole or in part. Such discretion may be
exercised in any circumstances deemed appropriate by the Committee including,
but without limitation, the threat (actual or perceived) of a take-over bid
for voting control of the Corporation.
At March 14, 1997 options to purchase a total of 4,287,410 common shares
were outstanding with an average exercise price per common share of
Can.$12.86.
The following table shows option grants in the last fiscal year to the
Chief Executive Officer and the next four most highly compensated executive
officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Individual Grants Grant Date Value
- -----------------------------------------------------------------------------------------------------------------------
Percent of
Total Options
Granted to
Employees Exercise or Grant Date
Options in Fiscal Base Price Present Value
Name Granted (#) Year (Can.$/Sh)(1) Expiration Date U.S.$(2)
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard C. Kraus 110,547 10.4 $10.70 Oct. 30, 2006 $394,653
- -----------------------------------------------------------------------------------------------------------------------
Robert C. Armstrong 15,200 1.4 $19.625 Feb. 14, 2006 97,432
68,590 6.4 $10.70 Oct. 30, 2006 244,866
- -----------------------------------------------------------------------------------------------------------------------
Peter H. Cheesbrough 39,481 3.7 $10.70 Oct. 30, 2006 140,947
- -----------------------------------------------------------------------------------------------------------------------
Robert D. Wunder 63,000 5.9 $18.875 Mar. 1, 2006 396,900
37,507 3.5 $10.70 Oct. 30, 2006 133,900
- -----------------------------------------------------------------------------------------------------------------------
John L. Azlant 37,507 3.5 $10.70 Oct. 30, 2006 133,900
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
(1) All grants under the share incentive plan were made for a ten year period
at the closing price for the shares as published by The Toronto Stock
Exchange on the date of grant. The Compensation Committee of the Board of
Directors determines the date on which each option shall become exercisable
and has decided that the options shall become exercisable as to 25 percent
on each of the first, second, third and fourth anniversaries of the date of
grant.
(2) The Black-Scholes option valuation model has been used to estimate the fair
value of options granted, assuming a weighted average option life of six
years, risk-free interest rates ranging from 5.40 to 6.64 percent, a
dividend yield ranging from 0.53 to 0.94 percent and a volatility factor of
40 percent.
The following table shows aggregated option exercises in the last fiscal
year and year-end option values for the Chief Executive Officer and the next
four most highly compensated executive officers of the Corporation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Value of Unexercised
Number of Unexercised In-The-Money Options
Shares Options at Fiscal Year-End at Fiscal Year-End (U.S.$)(2)
Acquired Value (#)
on Exercise Realized ----------------------------- --------------------------------
Name (#) (U.S.$) (1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Kraus -- -- 328,228 289,329 $ 14,739 $ --
- ------------------------------------------------------------------------------------------------------------------------------
Robert C. Armstrong 16,000 $107,132 200,123 194,389 110,757 8,580
- ------------------------------------------------------------------------------------------------------------------------------
Peter H. Cheesbrough -- -- 105,737 114,148 49,133 3,003
- ------------------------------------------------------------------------------------------------------------------------------
Robert D. Wunder -- -- -- 100,507 -- --
- ------------------------------------------------------------------------------------------------------------------------------
John L. Azlant -- -- 76,620 136,431 -- --
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the difference between the market value of the
Corporation's common shares on The Toronto Stock Exchange on
the date of exercise of the option and the exercise price
calculated in Can.$ and converted into U.S.$ using the exchange
rate in effect on the date of exercise.
(2) Represents the difference between the market value of the securities
underlying the options calculated in Can.$ using the closing price of
the Corporation's common shares on The Toronto Stock Exchange on
December 31, 1996 and the exercise price of the options converted to
U.S.$ using the year-end exchange rate of Can.$1.3695 = U.S.$1.00.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
AGREEMENTS
Mr. Kraus, the President and Chief Executive Officer of the Corporation,
and the Corporation have entered into a contract which provides for an annual
base salary currently set at U.S.$436,800. The contract, which is for an
indefinite term, provides for certain lump sum payments if the Corporation
terminates Mr. Kraus's employment on fewer than two years' written notice or
demotes him and he voluntarily resigns within 60 days thereof. In the event
that a change of control of the Corporation is
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<PAGE>
followed by a termination of Mr. Kraus's employment under specified
circumstances, Mr. Kraus shall be paid a cash payment equal to three times
the total of his annual base salary plus bonus at guideline under the
executive cash incentive plan. The specified circumstances include (i) the
Corporation's termination of Mr. Kraus's employment within two years of a
change of control or (ii) a voluntary resignation by Mr. Kraus for "good
reason" within one year of a change of control. The expression "good reason"
is defined to include any one of four acts of employer constructive
dismissal: the assignment of lower level status or responsibility, a
reduction in base salary, a requirement to relocate, or a change in employee
participation in or benefits under the Corporation's benefit plans.
Additionally, in the final 30 days of the one-year period referred to above,
Mr. Kraus may resign for any reason, or no reason at all, and be entitled
forthwith to the cash payment calculated as specified above.
Mr. Leclerc, Chairman of the Corporation, and the Corporation have
entered into a contract which provides for an annual base salary set until
the end of 1997 at U.S.$350,000. The contract, which is for an indefinite
term, provides for certain lump sum payments if the Corporation terminates
Mr. Leclerc's employment on fewer than two years' written notice or demotes
him and he voluntarily resigns within 60 days thereof. In the event that a
change of control of the Corporation is followed by a termination of Mr.
Leclerc's employment under specified circumstances, Mr. Leclerc shall be paid
a cash payment equal to three times the total of his annual base salary. The
specified circumstances are the same as those specified in Mr. Kraus's
contract and Mr. Leclerc also has the right to resign for any reason, or no
reason at all, in the 30 days before the first anniversary of the change of
control.
Messrs. Armstrong, Azlant, Cheesbrough and Wunder, all referred to in
the table on page 8, have entered into employment contracts with the
Corporation, each for an indefinite term. The contracts are structured on a
basis similar to that of Mr. Kraus including the provisions in the case of a
change of control.
All of the employment contracts referred to above also provide that, if
a payment is to be made in the context of a change of control followed by
termination of employment and the payment when made would constitute a
"parachute payment" as defined in the U.S. Internal Revenue Code, the payment
will be reduced to the largest amount that would result in no portion being
subject to the excise tax imposed by (or the disallowance of a deduction
under) certain provisions of the Code.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors was established in
1983 and has always been comprised of outside directors. Among other
activities, the Committee sets guidelines for executive compensation and
recommends compensation for executive officers of the Corporation. In the
case of share options, the Committee makes the final determination of
recipients and the amount of the awards. For other significant components of
executive compensation, the Committee recommends action to the full Board of
Directors. In all cases the directors have acted upon Compensation Committee
recommendations without modification in any material way.
The following report is submitted by the undersigned directors in their
capacity as the Compensation Committee of the Board. Neither this report nor
the Performance Graph following it shall be deemed incorporated by reference
by any general statement incorporating this proxy circular into any filing
under the Securities Act of 1933 or under the Securities Exchange Act of
1934, except to the extent that the Corporation specifically incorporates
this information by reference, nor otherwise deemed to be filed under such
Acts.
11
<PAGE>
COMPENSATION PHILOSOPHY
The Corporation's policy on compensation attempts to show consistent
application for all executive officers, with variations given to differences
in the level of responsibility for certain areas of corporate management, or
in the nature of the functions performed by particular individuals or groups.
The goals of the compensation program include creating a relationship between
business objectives and performance, which will encourage the creation of
value for shareholders. Pursuit of such goals requires the establishment of
compensation policies which will enable the Corporation to attract, retain
and reward executive officers who can effectively contribute to the long-term
success of the Corporation. No particular attempt is made to differentiate
the Chief Executive Officer for compensation purposes. The Committee views
the Chief Executive Officer as one member of the senior management team and
applies compensation criteria evenly among them.
Compensation for the Chairman of the Corporation, who acts in an
executive capacity, is set out in the employment agreement described at page
11. The Chairman does not participate in any cash incentive plan nor is he
included as a member of the senior management team for purposes of setting
base compensation or the award of share options.
The Committee recognizes that management of a precious metal producer
must take the initiative in identifying and developing properties which will
be of long-term benefit and create value for shareholders. At the same time,
properties which are in production must be judiciously managed, with metal
production carefully planned and delivered for sale at an efficient cost for
each ounce produced. Management has limited control over the prices at which
gold and silver are sold but does attempt to secure prices for a limited part
of future production using prudent hedging techniques.
Regardless of the stage of property activity, management must also be
mindful of the need to maintain a safe work environment. The failure to do
better than standard in this area should result in a deduction from
compensation otherwise payable. In addition, management must take steps to
ensure the development of ore reserves and to plan for mining these reserves
efficiently and with due regard for cost, safety and environmental concerns.
The compensation techniques are designed to give effect to this philosophy.
COMPENSATION COMPONENTS AND PERFORMANCE MEASURES
In evaluating executive compensation for 1996, the Committee adopted a
plan comprising a mix of base compensation (salary), cash bonus and share
options to give effect to the general philosophy outlined above. In
considering base compensation and the principle of paying according to
industry quartile standards, the Committee chose 10 North American precious
metal producers as a competitor group. Management and an independent
consultant obtained data for the prospective 1996 salary policies of this
group. The cash bonus and share option plan components were selected in
preference to and exclusion of other alternatives. The Committee considered
competitor practices and judged what would best further the interests of the
Corporation both short and long term, and also facilitate the objective of
attracting, retaining and rewarding quality executives.
For the salary component, the Committee decided to compensate the most
senior executives on a level that would be average (second quartile level) by
reference to competitor practices in the North American gold mining industry.
The same determination was made for vice presidents and general managers
having responsibility in the development or mine management areas. For vice
presidents in staff functions, the Committee recommended payment in the third
quartile level, meaning they would
12
<PAGE>
be paid on a basis whereby 25 percent of their industry counterparts would be
more highly compensated.
Regarding the cash bonus, the most senior executives in 1996 were to
have the opportunity to earn a bonus of 50 to 200 percent of a guideline
ranging between 40 and 50 percent of their base compensation, whereas for
executives in a development or mine management function the guideline was 35
percent and for staff executives 25 percent. All guidelines were set in March
1996 after the establishment (in November 1995) of the 1996 Operating Plan
for the Corporation, and involved ore reserve, production cost, production
volume, support services cost and operations spending criteria. Guidelines
could be met in whole or in part or surpassed and bonuses would reflect this.
The weighting of the criteria would vary in the executive ranks, depending on
the nature of an individual's job responsibility, and all executives would be
penalized should the Corporation fail to meet safety standards.
The share option component of the executive compensation plan was set as
a function of base salary and the price for the Corporation's common shares
measured at 100 percent of market on the date of grant.
FISCAL 1996 EXECUTIVE COMPENSATION
For the financial year ended December 31, 1996 the following summarizes
executive compensation recommended by the Committee and approved by the Board
of Directors. Share option grants were generally made in accordance with the
formula and for the reasons described above. The numbers of shares covered by
option grants to the named executive officers are set out in the Summary
Compensation Table and the Table of Option Grants shown at pages 8 and 9.
Salary - The Committee decided in general to increase executive salaries
by four percent. In the case of 12 of the 19 most senior executives increases
were set on this basis. Six executives received increases ranging from 7 to
16.3 percent, and one executive received no increase, in all cases
attributable to changes in job responsibility and an assessment of what
industry would pay on average for the particular job.
Cash Bonus - The Committee set guidelines for the ore reserve,
production cost, production volume, support services cost and operations
spending components of the 1996 bonus plan. The weighting of bonus components
varied according to the nature of the function or responsibility assigned to
an executive officer or other participant in the bonus plan. Within each
classification the target percentage was allocated among the five criteria.
For seven participants in the cash bonus plan, the actual payout of cash
bonus was either at guideline or above guideline. For the remaining
participants, the actual payout of cash bonus was less than guideline. As to
executive bonuses paid, the average payment represents 63 percent of
guideline, with success in achieving production rates while controlling costs
being the factors contributing to this result.
As to safety, the Committee continued its policy that lost time
accidents at each mine site must not exceed a predetermined target. At one of
the four mine sites lost time accident performance did not meet target and
the bonus for the mine manager was reduced. Corporation-wide there were 23
lost time accidents. The accident incident rate was 1.04 for each 200,000
employee-hours worked compared with the average rate of 2.75 reported by
organizations subject to the United States Mine Safety and Health Act.
13
<PAGE>
Additionally, if a fatality were to occur, safety deductions would be
applied as follows: (i) the general manager of the location at which the
fatality occurred 20 percent, (ii) the vice president in charge of operations
15 percent, (iii) senior executives 10 percent, and (iv) other executives 5
percent. In 1996 there was one fatality and safety deductions were applied
against bonuses.
Performance Compared to 1996 Operating Plan - The Committee believes
that planned operating results are critical to the establishment of bonus
levels. Accordingly, the 1996 bonus plan was established to reward executives
whose performance helped the Corporation meet targets contemplated by the
1996 Operating Plan. Production and cost performance were better than target
while support services cost exceeded target and bonus payments for these
components were calculated accordingly. Gold reserves declined at producing
mine sites and development sites with the Corporation's decision to write off
its investment in the Alaska-Juneau property having the greatest effect. As a
result of this write off, the Compensation Committee decided that all senior
officers but one, who only joined the Corporation during 1996, should be
penalized for the reserve reduction and the bonus payments were reduced
accordingly.
A total of U.S.$535,346 in bonus was paid to 20 executives in early 1997
for 1996 performance. The Committee recognizes the dedication and hard work
by all of these executives and believes that performance and shareholder
value mandate bonus payments at the formula level measured by the criteria
established in March 1996. The Committee has discretion to adjust bonus
payments for individual executives but, except for the Chief Executive
Officer, declined to exercise that discretion for 1996. In response to his
recommendation, the Compensation Committee decided that the Chief Executive
Officer should be paid no bonus for 1996.
LIMITATION ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation for each of the Chief Executive Officer and the four other
highest paid executive officers to $1,000,000 per year (subject to certain
exceptions). None of the Corporation's officers receive annual compensation
in excess of the maximum deductible amount. If, because of competitive
factors and individual performance, the Committee should determine that it is
appropriate to pay one or more executive officers in excess of the annual
maximum deductible amount it will consider establishing performance criteria
that will allow the Corporation to avail itself of all appropriate tax
deductions.
OTHER REMARKS
In summary, the Committee believes it is important to compensate
officers on a basis which reflects industry practice but which also considers
corporate objectives and performance. Base salaries are established by
reference to competitor practice, and the Corporation tends to pay its
executives at an average or, in the case of staff executives, slightly above
average rate, compared with other North American precious metal producers.
The cash bonus plan is aligned to short-term objectives and performance, with
reserve strategy and production and cost/spending performance being the
criteria selected for the 1996 financial year. The Corporation's share
incentive plan is used as a long-term compensation technique and aligns
management's objectives with those of the shareholders. While monitoring
reserves is an ongoing discipline, the Corporation relies on executives to
build reserves over time and facilitate future production and other long term
goals designed to create value for the shareholders.
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<PAGE>
The Committee is of the view that the compensation practices followed
for 1996 have achieved an equitable balance between rewarding executives and
managing the business of the Corporation for all shareholders.
John Gilray Christy, Chairman
Pierre Choquette, Carlos A. Ferrer, Monica E. Sloan, R. Geoffrey P. Styles
PERFORMANCE GRAPH
The graph below, expressed in U.S. dollars, compares over five years the
percentage change in the cumulative return to a holder of common shares in
the Corporation with the cumulative performance of the S & P 500 Index, The
Toronto Stock Exchange Gold Index and the price of gold. The graph assumes an
investment of U.S.$100 on December 31, 1991 and the reinvestment of dividends
paid during the five year period.
COMPARISON OF CUMULATIVE RETURNS
ECHO BAY S&P
YEAR COMMON GOLD TSE GOLD 500
1991 100.0 100.0 100.0 100.0
1992 66.7 94.3 99.0 107.6
1993 175.1 111.0 193.7 118.5
1994 145.5 108.5 164.9 120.0
1995 141.5 109.5 185.4 165.1
1996 92.3 104.5 141.8 203.1
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL
Robert L. Leclerc, Q.C., a director and Chairman of the Corporation,
was, until June 30, 1996, Chairman and Chief Executive Officer of and a
partner in Milner Fenerty, which provides legal services to the Corporation.
15
<PAGE>
John F. McOuat is a director, officer and shareholder of Watts, Griffis
and McOuat Limited ("WGM") which, from time to time, performs professional
consulting services for the Corporation and affiliates. In 1991 certain
affiliates of WGM sold their working interest in the Alaska-Juneau property
to the Corporation for cash and other consideration. Notwithstanding the
Corporation's decision to proceed no further with development of the
Alaska-Juneau property and write it off, the Corporation is obligated to make
three more annual payments of Can.$500,000 to the WGM affiliates. The
interest of Mr. McOuat and members of his immediate family in this
transaction, whether direct or indirect, is approximately 30 percent.
INDEBTEDNESS OF MANAGEMENT
The Corporation has made loans available to certain persons employed by
the Corporation or an affiliate to assist with employee relocation. The loans
are for five years with an interest rate of nine percent per annum but for
the first three years the interest is rebated to the employee. At the end of
three years, interest at the lower of nine percent or the applicable federal
rate for short-term loans determined pursuant to the U.S. Internal Revenue
Code will be payable monthly until maturity. At maturity the loans may be
renegotiated for a further five-year period.
The following table shows, in United States dollars, the particulars of
indebtedness by officers in excess of U.S.$60,000 for the period January 1,
1996 to March 14, 1997:
Balance
Nature Maximum outstanding
of balance at March Interest
Name Capacity loan in period 14, 1997 rate
- --------- ---------- ------ --------- --------- -----
R. L. Leclerc Chairman Housing $150,000 $150,000 9.00
APPOINTMENT OF AUDITORS
The persons named in the enclosed form of proxy intend to vote for the
appointment of Ernst & Young as the auditors of the Corporation to hold
office until the next annual meeting of shareholders. Ernst & Young have been
the auditors of the Corporation since 1985. One or more members of the
auditors will attend the meeting, have an opportunity to make a statement,
and be available to respond to appropriate questions.
1996 ANNUAL REPORT
The annual report for the year 1996, including financial statements and
other information with respect to the Corporation, has been mailed to each
shareholder. Additional copies of the annual report may be obtained by
writing to the Corporation.
PROPOSED AMENDMENT TO EMPLOYEE SHARE INCENTIVE PLAN
In May 1983 the Board of Directors of the Corporation created an
employee share incentive plan (the "Plan"), under the terms of which a
specified number of common shares of the Corporation were reserved for the
grant of options to directors, officers and employees of the Corporation. At
present 161 individuals participate in the Plan. From time to time the Plan
has been amended by the Board of Directors, with shareholder approval,
adjusting the number of common shares reserved for option grants. At present,
8,000,000 shares have been authorized under the Plan and there remain 337,992
16
<PAGE>
common shares available for additional share option grants. At its meeting on
February 13, 1997 the Board of Directors made a further amendment to the Plan
with respect to which the shareholders will be asked at the meeting to enact
a confirming resolution. This amendment provides for an increase in the
aggregate number of common shares of the Corporation which have been reserved
for the grant of options from 8,000,000 to 13,000,000.
CANADIAN FEDERAL INCOME TAX CONSEQUENCES
There are no Canadian Federal income tax consequences to the Corporation
or to a grantee upon the grant of an option under the Plan. If an option is
exercised, the excess, if any, of the fair market value of the common shares
at the time of acquisition over the option price for such shares will be a
taxable benefit of employment to the grantee in the year in which the shares
are acquired. In certain circumstances, only three-quarters of such benefit
will be taxable, provided that the exercise price for the shares is not less
than their fair market value at the time the option is granted. In
calculating its taxable income, the Corporation will not be entitled to
deduct any amount in respect of the taxable benefit received by a grantee who
exercises an option.
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
There are no United States Federal income tax consequences to the
Corporation or to a grantee upon the grant of an option under the Plan. All
option grants to date under the Plan have been non-qualified stock options.
Upon the exercise of such an option, the difference between the market value
of the common shares on the date of exercise and the option price is taxable
to the employee as ordinary income. There are tax consequences to a
corporation that is subject to United States income tax upon the exercise of
options by grantees but the Corporation is not subject to United States
income tax.
RECOMMENDATION
The Board of Directors believes that grants under the Plan are an
effective means of strengthening the ability of the Corporation to attract
and retain in its employ persons of sufficient training, experience and
ability upon whose judgment, initiative and efforts the successful conduct of
its business depends. After having re-assessed the Plan, the Board of
Directors has decided that the authorization of additional shares for grants
under the Plan is necessary at this time in order to make a sufficient number
of authorized shares available under the Plan.
The persons named in the enclosed form of proxy intend to vote for the
resolution confirming the amendments to the Plan.
PROPOSED RESTRICTED SHARE GRANT PLAN
At its meeting held February 13, 1997 the Board of Directors created a
plan which will provide for grants of restricted shares by the Compensation
Committee to eligible employees (the "RSG Plan") . An "eligible employee" is
a person who, at the time of a grant, is an officer of the Corporation or a
subsidiary of the Corporation.
An aggregate of 750,000 common shares of the Corporation has been set
aside and reserved for the making of grants under the RSG Plan. The
Compensation Committee may, from time to time, make grants of restricted
shares to eligible persons and decide that such a grant may entitle the
grantee to receive, not less than six months from the date of grant (the
"vesting period"), a certificate representing
17
<PAGE>
a portion of the shares contemplated by the grant. The grantee must have
performed substantial services for the Corporation or a subsidiary during the
vesting period to be entitled to take delivery of the shares contemplated by
the grant. The Compensation Committee would make subsequent determinations as
to delivery or entitlement of the grantee to receive the balance of the
shares contemplated by the grant. If the service of a grantee were terminated
for cause or resignation, the grantee would immediately forfeit any right to
receive common shares of the Corporation covered by a grant made pursuant to
the RSG Plan. If, before completion of the vesting period, the service of a
grantee were terminated for any reason other than cause or resignation, the
grantee or the grantee's estate would only be entitled to take delivery of
the common shares which are scheduled to vest, and then only at the end of
the vesting period, and would otherwise forfeit any right to receive common
shares of the Corporation covered by a grant made pursuant to the RSG Plan.
There is no assurance that any grants will be made in a given year, that
all or any part of the shares contemplated by a grant will be delivered, that
once a grant has been made another grant will be made in a subsequent year or
as to the identity of eligible employees who might at any time receive a
grant.
The Board of Directors believes that the RSG Plan benefits the
Corporation's shareholders by enabling executives to own common shares, thus
aligning executive pay with shareholder interests. In addition, the Board
considers it necessary to increase the retentive effect of the Corporation's
compensation practices through a plan which will provide an incentive for
executives to enhance shareholder value and remain in the Corporation's
employ.
The persons named in the enclosed form of proxy intend to vote for the
resolution establishing the RSG Plan.
1998 ANNUAL MEETING
Proposals of shareholders intended to be presented at the next annual
meeting must be received by the Corporation for inclusion in its Management
Proxy Circular on or before February 13, 1998.
The contents and the sending of this Management Proxy Circular have been
approved by the directors of the Corporation.
Dated at Edmonton, Alberta, Canada this 31st day of March 1997.
Lois-Ann L.Brodrick
Secretary
ECHO BAY MINES LTD.
1210 Manulife Place
10180 - 101 Street
Edmonton, Alberta, Canada
T5J 3S4
<PAGE>
ECHO BAY MINES LTD.
SHARE INCENTIVE PLAN
(INCLUDING AMENDMENTS TO NOVEMBER 9, 1995)
1. PURPOSE
The purpose of this Plan is to provide an incentive, in the form of
a proprietary interest in Echo Bay Mines Ltd. (the "Corporation") to
officers, directors and employees of the Corporation and its subsidiaries who
are in a position to contribute materially to the successful operation of the
business of the Corporation, to increase their interest in the Corporation's
welfare, and to provide a means through which the Corporation can attract and
retain employees of outstanding abilities.
2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors (the "Board") of the Corporation.
Each member of the Committee shall at all times be a "disinterested person"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934,
as amended from time to time.
Only "outside directors", as hereinafter defined, are eligible to
sit on the Committee and there must be at least two such directors on the
Committee. A director is an "outside director" if the director (i) is not a
current employee of the Corporation, (ii) is not a former employee of the
Corporation who received compensation for prior services during the taxable
year, (iii) has not been an officer of the Corporation, and (iv) does not
receive remuneration from the Corporation, either directly or indirectly, in
any capacity other than as a director. The determination of a person's
status as an employee or former officer and the definition of remuneration
are established under the Plan by reference to the Regulations under the
Internal Revenue Code (United States), as they may from time to time be
amended or replaced. The Committee may make grants, subject to the terms of
the Plan, to such eligible persons and with respect to such number of shares
in the common share capital of the Corporation as the Committee, in its sole
discretion, may determine.
Subject to the provisions of the Plan, the Committee shall be
authorized to interpret the Plan and the grants made under the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan,
to determine the terms and provisions of the agreements related to the grants
described in Section 6 hereof, and to make all other determinations necessary
or advisable for the administration of the Plan. The Committee may correct
any defect, supply any omission and reconcile any inconsistency in the Plan
or in any option or grant in the manner and to the extent it shall be deemed
desirable to carry it into effect. The determinations of the Committee in
the administration of the Plan, as described herein, shall be final and
conclusive.
<PAGE>
2
3. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 10, an aggregate of
8,000,000 common shares of the Corporation will be available for issuance
upon the exercise of options granted under the Plan. If any Plan option
shall terminate for any reason without having been exercised in full the
unpurchased shares subject thereto shall be available for future options.
For greater certainty, the aforesaid number of 8,000,000 common shares gives
effect to the six for five split of the common shares of the Corporation
determined by the Board on August 9, 1983, with a record date of August 24,
1983 as well as the two for one split determined on June 8, 1987, with a
record date of July 14, 1987 and includes
(a) 72,000 common shares, being the 60,000 common shares of the
Corporation reserved for issuance by the Board on May 6, 1983, as
adjusted pursuant to Section 10 hereof in recognition of the 1983
share split;
(b) an additional 428,000 common shares of the Corporation, reserved for
issuance by resolution of the Board made August 9, 1983;
(c) an additional 750,000 common shares of the Corporation, reserved for
issuance by resolution of the Board made November 12, 1985;
(d) an additional 750,000 common shares of the Corporation, reserved for
issuance by resolution of the Board made February 17, 1987;
(e) an additional 2,000,000 common shares of the Corporation, to adjust
the above-mentioned numbers in recognition of the 1987 share split;
(f) an additional 2,000,000 common shares of the Corporation, reserved for
issuance by resolution of the Board made February 13, 1992; and
(g) an additional 2,000,000 common shares of the Corporation, reserved for
issuance by resolution of the Board made February 17, 1994.
4. ELIGIBILITY
Officers, directors and employees of the Corporation and its
subsidiaries shall be eligible for grants under the Plan but no single
officer, director or employee of the Corporation and its subsidiaries shall
be eligible to receive options covering, in total, more than 5% of the issued
and outstanding common shares of the Corporation. The term "subsidiaries"
shall mean any corporation in which the Corporation owns 50% or more of the
total combined voting shares of all classes of share capital at the time a
grant of an option is made to a person eligible for grants
<PAGE>
3
under the Plan, or at any time when such person is by the terms of the Plan
eligible to exercise a grant. The term "affiliate", for the purposes of
Section 5(c) of the Plan, shall mean an affiliated body corporate as defined
in the CANADA BUSINESS CORPORATIONS ACT.
5. GRANTING OF OPTIONS
The Committee may, from time to time, grant share options to
eligible persons. Except as hereinafter provided, options granted pursuant
to the Plan shall be subject to the following terms and conditions:
(a) PRICE In respect of all grants of options, the purchase price per
share deliverable upon exercise of an option shall be not less than
100% of the fair market value of the Corporation's common shares at
the time the option is granted. The fair market value shall be the
closing price of the Corporation's common shares as determined by the
Committee on the date the option is granted, or if there is no sale on
such date, then the closing price on the last previous day on which a
sale is reported. References to sales shall in the first instance be
to those on The Toronto Stock Exchange, and if no sale has occurred on
the applicable date on such Exchange then to the Montreal Exchange.
Shares may be purchased only upon payment of the purchase price
therefor in full, either in cash (which may include settlement by
cheque or wire transfer of funds) or by the surrender or delivery to
the Corporation of common shares.
(b) TERMS OF OPTIONS The term during which each option may be exercised
shall be determined by the Committee, but in no event shall an option
be exercisable in whole or in part more than 10 years from the date it
is granted. All rights to purchase pursuant to an option shall,
unless sooner terminated, expire at the date designated by the
Committee. The Committee shall determine the date (which shall not be
earlier than six months after the date of grant) on which each option
shall become exercisable and may provide that an option shall become
exercisable in installments. The shares comprising each installment
may be purchased in whole or in part at any time after such
installment becomes purchasable. The Committee may, in its sole
discretion, accelerate the time at which any option may be exercised
in whole or in part. Such discretion may be exercised in any
circumstances deemed appropriate by the Committee including, but
without limitation, the threat (actual or perceived) of a take-over
bid for voting control of the Corporation.
(c) TERMINATION OF EMPLOYMENT The following provisions shall govern the
rights of a grantee (or the estate of a grantee) whose service has
terminated:
<PAGE>
4
(i) if the service of a grantee is terminated for cause, all options
which are exercisable must be exercised within 10 business days
of termination, failing which they shall automatically lapse, and
all options not exercisable at the time of termination shall
immediately be forfeited;
(ii) if the service of a grantee is terminated other than for cause,
all options which are exercisable must be exercised within one
year of termination, failing which they shall automatically
lapse, and all options not exercisable at the time of termination
shall immediately be forfeited;
(iii) if a grantee resigns from service, all options which are
exercisable must be exercised within 60 days of resignation,
failing which they shall automatically lapse, and all
options not exercisable at the time of resignation shall
immediately be forfeited;
(iv) if a grantee, having reached the full age of 62 years and
completed five years of service, retires from service, all
options which are exercisable must be exercised within three
years of retirement, failing which they shall automatically
lapse, and any options not exercisable at the time of retirement
shall continue to vest for three years from retirement and must
(once they have vested) be exercised during the three year period
measured from the date of retirement;
(v) if a grantee, having reached the full age of 62 years and
completed 15 years of service, retires from service, options not
then exercisable shall continue to vest and all options shall be
exercisable throughout their term;
(vi) if a grantee becomes disabled, the terms of all options shall
immediately become accelerated such that the options are fully
vested and immediately exercisable and all options shall be
exercisable throughout the term of the option grant; and
(vii) if a grantee dies while in the service of the Corporation or
a subsidiary or after retirement or becoming disabled, the
terms of all options shall immediately become accelerated
such that the options are fully vested and immediately
exercisable and all options shall be exercisable throughout
the term of the option grant.
For the purposes of this Section 5(c), "service" includes employment
or office with the Corporation or any other entity which was/is at the
relevant time a subsidiary or affiliate of the Corporation.
<PAGE>
5
Notwithstanding the foregoing provisions of this Section 5(c) the
Committee may, when appropriate and in the best interests of the
Corporation, vary the option rights of a grantee whose employment has
been terminated; provided, however, that the grantee's rights are in
result no less favourable to him than would be the case had the
Committee decided to take no action whatsoever.
(d) MAXIMUM AGGREGATE GRANT AND AMOUNT OF COMPENSATION No grantee may
during any consecutive three calendar year period receive an aggregate
grant of more than 400,000 options to acquire common shares. Under
the terms of any option, the amount of compensation a grantee is
entitled to receive is based solely on an increase in the value of the
corresponding common shares after the date of grant or award.
6. INCENTIVE STOCK OPTIONS
The Committee may, at the time it grants a share option, designate
such option as an "incentive stock option" ("ISO"). Any options so
designated shall be subject to the additional conditions and limitations set
forth in this paragraph and to any other conditions and limitations that the
Committee may deem advisable in order that such ISO may qualify as an
incentive stock option under Section 422A of the United States Internal
Revenue Code (the "Code"). Such ISO shall also be subject to the other
provisions of this Plan except to the extent modified herein.
(a) ISO's may be granted only to officers and employees of the Corporation
and its subsidiaries. Directors of the Corporation or its
subsidiaries are not eligible to receive ISO's unless they are also
employees or officers of the Corporation or one of its subsidiaries.
(b) The purchase price per share deliverable upon the exercise of each ISO
shall be not less than 100% of the fair market value of the
Corporation's common shares (determined in accordance with paragraph
5(a)) at the time the ISO is granted. If the grantee of an ISO owns
securities possessing more than 10% of the total combined voting power
of all classes of securities of the Corporation or any parent or
subsidiary corporation of the Corporation, the purchase price per
share deliverable upon exercise of the ISO shall be at least 110% of
the fair market value of the common shares subject to the ISO at the
time such ISO is granted, and such ISO shall not be exercisable after
five years following the date on which it was granted.
(c) With respect to ISO's granted before January 1, 1987, the aggregate
fair market value (determined as of the time the ISO is granted) of
the common shares for which any eligible person may be granted ISO's
in any calendar year under this
<PAGE>
6
Plan and under any other incentive stock option plan of the
Corporation or any parent or subsidiary corporation of the Corporation
shall not exceed U.S. $100,000 plus any unused limit carryover to such
year, as defined in Section 422A(c)(4) of the Code. With respect to
ISO's granted on or after January l, 1987, the aggregate fair market
value (determined as of the time the ISO is granted) of the common
shares as to which an ISO may first become exercisable in a particular
calendar year may not exceed U.S. $100,000.
(d) Upon the termination of a grantee's employment because of retirement,
the grantee's right to exercise an ISO shall be limited to three
months from the date of retirement, and upon the termination of a
grantee's employment because of disability, the grantee's right to
exercise an ISO shall be limited to twelve months from the date of
such disability.
(e) No ISO granted under this Plan prior to January 1, 1987 ("New ISO")
shall be exercisable while there is outstanding (within the meaning of
Section 422A(c)(7) of the Code) any ISO which was granted before the
granting of such New ISO to the grantee to purchase securities in the
Corporation or in a corporation which (at the time of granting of such
new ISO) is a parent or subsidiary corporation, as defined in Section
425 of the Code, of the Corporation or a predecessor corporation of
any such corporations.
7. CERTIFICATE OF GRANT
Each grantee who receives a grant of options under the Plan shall
receive a certificate of grant from the Corporation which shall contain such
provisions, consistent with the provisions of the Plan, as may be established
from time to time by the Committee.
8. TRANSFERABILITY OF GRANTS
No grant under the Plan shall be transferable by a grantee
otherwise than by will or the laws of descent and distribution or pursuant to
a qualified domestic relations order, and during the lifetime of the grantee
such grants may be exercised only by him or by his guardian or legal
representative.
9. LISTING AND REGISTRATION
Each grant shall be subject to the requirement that, if at any time
the Committee shall determine in its discretion that the listing,
registration or qualification of the shares subject
<PAGE>
7
to such grant upon any securities exchange or under any provincial or federal
law, or the consent or approval of any governmental regulatory body is
necessary or desirable as a condition of, or in connection with, such grant
or the issue or purchase of shares thereunder, no such grant may be exercised
in whole or in part unless such listing, registration, qualification, consent
or approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
10. ADJUSTMENT OF AND CHANGES IN COMMON SHARES OF THE CORPORATION
In the event of a reorganization, recapitalization, change of
shares, share split, spin-off, stock dividend, reclassification, subdivision
or combination of shares, merger, consolidation, rights offering, or any
other change in the corporate structure or shares of the Corporation, the
Committee shall make such adjustment as it deems appropriate in the number
and kind of shares authorized by the Plan, in the number and kind of shares
covered by grants made under the Plan and in the purchase prices of
outstanding options.
11. NO RIGHTS OF SHAREHOLDERS
Neither the grantee nor his personal representative shall be, or
have any of the rights and privileges of, a shareholder of the Corporation in
respect of any shares purchasable upon the exercise of any option in whole or
in part, unless and until certificates for such shares have been issued.
12. AMENDMENT AND TERMINATION
The Plan may be amended by the Board of Directors of the
Corporation as it shall deem advisable to conform to any change in the law or
regulation applicable thereto or in any other respect which the Board may
deem to be in the best interest of the Corporation; provided, however, that
the Board may not, without the authorization and approval of the shareholders
increase the total number of securities which may be issued under the Plan
except pursuant to paragraph 10.
The Board of Directors of the Corporation may, in its discretion,
terminate, or fix a date for the termination of the Plan. No such
termination shall affect any grants theretofore made which have neither
expired nor been terminated. Unless previously terminated, the Plan shall
terminate on December 31, 2002, and no grants shall be made under the Plan
after such date.
<PAGE>
8
13. EFFECTIVE DATE OF THE PLAN
The Plan was created by the Board effective May 6, 1983 and
confirmed by the holders of voting securities of the Corporation in general
meeting held June 21, 1983. The increase in the number of securities which
may be issued under the Plan, by 428,000 common shares as described in
Section 3(b) hereof, was authorized and approved by the holders of the voting
securities of the Corporation, as were
(a) the change in the administration of the Plan (from the Board of
Directors to the Committee); and
(b) the extension of the class of persons eligible to receive grants, to
include officers, directors and employees of the Corporation.
The matters described in items (a) and (b) above are the subject of
a directors' resolution adopted February 21, 1984.
The increase in the number of securities which may be issued under
the Plan, by 750,000 common shares as described in Section 3(c) hereof and
the amendment in Section 5(a) hereof, providing for the right of a grantee to
pay for common shares purchased under the Plan by the surrender or delivery
to the Corporation of common shares were approved by the Board on November
12, 1985 and by the holders of the voting securities of the Corporation on
June 9, 1986.
The increase in the number of securities which may be issued under
the Plan, by 750,000 common shares as described in Section 3(d) hereof, was
approved by the Board on February 17,1987 and by the holders of the voting
securities of the Corporation on June 9, 1987.
The increase in the number of securities which may be issued under
the Plan, by 2,000,000 common shares as described in Section 3(f) hereof, was
approved by the Board on February 13, 1992 and by the holders of the voting
securities of the Corporation on June 11, 1992.
The increase in the number of securities which may be issued under
the Plan, by 2,000,000 common shares as described in Section 3(g) hereof, was
approved by the Board on February 17, 1994 and by the holders of the voting
securities of the Corporation on June 9, 1994.
<PAGE>
ECHO BAY MINES LTD.
RESTRICTED SHARE GRANT PLAN
1. PURPOSE
The purpose of this Plan is to provide an incentive, in the form of a
proprietary interest in Echo Bay Mines Ltd. (the "Corporation"), to officers
of the Corporation and any subsidiary who are in a position to contribute
materially to the successful operation of the business and to provide a means
through which the Corporation can attract and retain employees of outstanding
abilities. The Plan is not intended to replace the share incentive plan of
the Corporation created in May 1983.
2. ADMINISTRATION
The Plan shall be administered by the Compensation Committee (the
"Committee") of the Board of Directors (the "Board") of the Corporation.
Each member of the Committee shall at all times be a "non-employee director"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934
and an "outside director" for the purposes of section 162(m) of the Internal
Revenue Code .
The Committee may make grants, subject to the terms of the Plan, to such
eligible persons and with respect to such number of shares in the common
share capital of the Corporation as the Committee, in its sole discretion,
may determine.
Subject to the provisions of the Plan, the Committee shall be authorized
to interpret the Plan and the grants made under the Plan, to establish, amend
and rescind any rules and regulations relating to the Plan, and to make all
other determinations necessary or advisable for the administration of the
Plan. The Committee may correct any defect, supply any omission and reconcile
any inconsistency in the Plan or in any grant in the manner and to the extent
it shall be deemed desirable to carry it into effect. The determinations of
the Committee in the administration of the Plan, as described herein, shall
be final and conclusive.
3. SHARES SUBJECT TO THE PLAN
Subject to adjustment as provided in Section 9, an aggregate of 750,000
common shares of the Corporation will be available and reserved for issuance
pursuant to grants made under the Plan. If any grant is made pursuant to the
Plan, but the entitlement of a grantee to receive the common shares covered
thereby shall terminate for any reason without acquisition of all such
shares, the shares subject thereto shall be available for future grants.
4. ELIGIBILITY
Officers of the Corporation and any subsidiary shall be eligible for
grants under the Plan. The term "subsidiary" shall mean any corporation in
which the Corporation owns 50 percent or more of the total combined voting
shares of all classes of share capital at the time a grant is made to a
<PAGE>
person eligible for grants under the Plan, or at any time when such person is
by the terms of the Plan eligible to receive the shares represented by a
grant.
5. GRANTING RESTRICTED SHARES
Grants pursuant to the Plan shall be subject to the following terms and
conditions:
(a) NATURE AND TERM OF GRANTS - The Committee may, from time to time, make
grants of restricted shares to eligible persons. Such a grant may entitle
the grantee to receive, not less than six months from the date of grant
(the "vesting period"), a certificate representing a portion of the shares
contemplated by the grant. For the grantee to be entitled to take
delivery of the shares contemplated by the grant, he or she must have
performed substantial services for the Corporation or a subsidiary at all
times during the vesting period. The Committee will make subsequent
determinations as to delivery or entitlement of the grantee to receive the
balance of the shares contemplated by the grant.
(b) TERMINATION OF EMPLOYMENT - The following provisions shall govern the
rights of a grantee (or the estate of a grantee) whose service has
terminated:
(i) if the service of a grantee is terminated for cause or resignation,
the grantee shall immediately forfeit any right to receive common
shares of the Corporation covered by a grant made pursuant to the
Plan;
(ii) if, before completion of the vesting period, the service of a grantee
is terminated for any reason other than cause or resignation, the
grantee or the estate of the grantee shall only be entitled to take
delivery of the common shares which are scheduled to vest, and then
only at the end of the vesting period; the grantee shall otherwise
forfeit any right to receive common shares of the Corporation covered
by a grant made pursuant to the Plan;
For the purposes of this Section 5(b), "cause" shall mean:
(aa) the failure, neglect or refusal by a grantee to perform his duties,
functions or responsibilities as an employee;
(bb) grantee's commission of acts of dishonesty, fraud, misrepresentation
or other acts of moral turpitude; or
(cc) any other reason which the Committee, in the exercise of reasonable
business judgment, considers to constitute cause.
Notwithstanding the foregoing provisions of this Section 5(b), the
Committee may accelerate the entitlement of a grantee to take delivery of
common shares represented by a grant under
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<PAGE>
the Plan should there be a threat (actual or perceived) of a take-over bid
for voting control of the Corporation.
Any decision by the Committee shall be final and binding on any grantee or
grantee's estate. The Committee shall not be bound by any prior decision
of the Committee.
6. CERTIFICATE OF GRANT
Each grantee who receives a grant under the Plan shall receive a
certificate of grant from the Corporation which shall contain such
provisions, consistent with the Plan, as may be established from time to time
by the Committee.
7. TRANSFERABILITY OF GRANTS
No grant under the Plan shall be transferable by a grantee.
8. LISTING AND REGISTRATION
Each grant shall be subject to the requirement that, if at any time the
Committee shall determine in its discretion that the listing, registration or
qualification of the shares subject to such grant upon any securities
exchange or under any provincial, state or federal law, or the consent or
approval of any governmental regulatory body is necessary or desirable as a
condition of, or in connection with, such grant or the issue of shares
pursuant thereto, no shares covered by any such grant may be dealt with in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained free of any conditions not
acceptable to the Committee.
9. ADJUSTMENT OF AND CHANGES IN COMMON SHARES OF THE CORPORATION
In the event of a reorganization, recapitalization, change of shares,
share split, spin-off, stock dividend, reclassification, subdivision or
combination of shares, merger, consolidation, rights offering, or any other
change in the corporate structure or shares of the Corporation, the Committee
shall make such adjustment as it deems appropriate in the number and kind of
shares authorized by the Plan and in the number and kind of shares covered by
grants made under the Plan.
10. NO RIGHTS OF SHAREHOLDERS
Neither the grantee nor his personal representative shall be, or have
any of the rights and privileges of, a shareholder of the Corporation in
respect of any shares which may be delivered pursuant to a grant, unless and
until certificates for such shares have been issued.
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<PAGE>
11. AMENDMENT AND TERMINATION
The Plan may be amended by the Board as it shall deem advisable to
conform to any change in the law or regulation applicable thereto or in any
other respect which the Board may deem to be in the best interest of the
Corporation; provided, however, that the Board may not, without the
authorization and approval of the shareholders, increase the total number of
securities which may be issued under the Plan except pursuant to Section 9.
The Board may, in its discretion, terminate, or fix a date for the
termination of the Plan. No such termination shall affect any grants
theretofore made which have neither expired nor been terminated. Unless
previously terminated, the Plan shall terminate on December 31, 2002, and no
grants shall be made under the Plan after such date.
12. EFFECTIVE DATE OF THE PLAN
The Plan was created by the Board, on the recommendation of the
Committee, effective February 13, 1997 and confirmed by the holders of voting
securities of the Corporation in general meeting held May 14, 1997.
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