<PAGE>
ECHO BAY MINES LTD.
NOTICE OF ANNUAL GENERAL MEETING
OF SHAREHOLDERS
JUNE 11, 1998
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the shareholders of
Echo Bay Mines Ltd. will be held at News Theatre, 98 The Esplanade, Toronto,
Ontario on Thursday, the 11th day of June 1998, at 9:30 in the morning, for
the following purposes:
1. to receive and consider the annual report containing financial
statements for the year ended December 31, 1997 together with the report
of the auditors thereon;
2. to elect directors;
3. to appoint auditors; and
4. 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 April 23, 1998 will be
entitled to notice of the meeting.
DATED at Edmonton, Alberta, Canada this 30th day of April 1998.
(SIGNED)
By Order of the Board,
Lois-Ann L. Brodrick
Vice President and 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 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 April 30, 1998. 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 officers 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 5:00 o'clock in the afternoon local time on June
10, 1998 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 April 15, 1998, there were outstanding 139,370,031 common shares of
the Corporation, each of which carries 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.
<PAGE>
Shareholders of record at the close of business on April 23, 1998 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 June 1, 1998 that his name be included in the list of
shareholders entitled to vote at the meeting.
As of April 15, 1998, 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 nine directors and the Board of Directors has fixed the
number of directors at nine 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 nine 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 (1) 66 1980 Corporate director Stelco Inc.; AT Plastics Inc.
Ramsbury, Wilts., England
LATHAM CAWTHRA BURNS (1) 67 1980 Corporate director since June
Toronto, Ontario 1995; prior thereto Honorary
Chairman, Nesbitt Burns Inc.
(investment dealers)
PIERRE CHOQUETTE (2) 55 1996 President and Chief Executive Methanex Corporation;
Vancouver, British Columbia Officer, Methanex Corporation Gennum Corporation;
since 1994; President Novacorp BC Telecom Inc.
International from 1991 to 1994
</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>
JOHN GILRAY CHRISTY (2) 65 1980 Chairman, Chestnut Capital First Union Bank Advisory
Wyndmoor, Pennsylvania Corporation (holding company) Board-New Jersey; First
and corporate director Union Bank Advisory
Board-Philadelphia; The
Philadelphia
Contributionship; the 1838
Bond Debenture Trading
Fund Limited
PETER CLARKE 67 1993 Consultant - metals and
Nanoose Bay, British Columbia mining industries
ROBERT LEIGH LECLERC, Q.C. 53 1992 Chairman and Chief Executive Minefinders Corporation Ltd.
Highlands Ranch, Colorado Officer of the Corporation since
April 1997, Chairman of the
Corporation from May 1996 to
April 1997; 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 64 1989 Chairman, Watts, Griffis and Bakyrchik Gold Plc.;
Toronto, Ontario McOuat Limited (consulting Cominco Ltd.; Diamond
geologists and engineers) Fields International Ltd.;
since January 1998; prior Euro Nevada Mining
thereto President, Watts, Corporation Ltd.
Griffis and McOuat Limited
MONICA ELIZABETH SLOAN (1)(2) 44 1994 President, Kelman Technologies
Calgary, Alberta Inc. (oil and gas servicing
company) since January 1998;
management consultant from
July 1997 to December 1997;
President, Telus Advanced
Communications from August
1995 to June 1997; prior thereto
Assistant Vice President Strategy
Development, Telus Corporation
RICHARD GEOFFREY 67 1987 Corporate director Onex Corp.; Working
PENTLAND STYLES (1)(2) Ventures Canadian Fund
Toronto, Ontario Inc.; The Geon Company;
Prosource Inc.
</TABLE>
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
3
<PAGE>
MEETINGS AND COMPENSATION OF THE BOARD OF DIRECTORS
In 1997, the Board of Directors held nine meetings. All directors,
except Mr. Leclerc, received an annual retainer fee of U.S.$12,500 and
U.S.$500 for attendance at each meeting of the Board of Directors and of each
committee on which they served. Committee chairmen received an additional
annual fee of U.S.$7,500. Mr. Leclerc receives meeting attendance fees but
does not receive an annual retainer fee. The committee chairmen were: Audit -
Mr. Burns, and Compensation - Mr. Christy.
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. The number of shares covered by the grant
shall be not less than 2,500 nor more than 6,500. On May 14, 1997 each
eligible director received an option to acquire 6,500 common shares of the
Corporation at a price of Can.$8.00, 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. During 1997 each committee met four times.
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Toronto and Montreal stock exchanges require companies listed on
those exchanges 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 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.
4
<PAGE>
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 nine 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 only related director is Mr. Leclerc, who is employed
by the Corporation. Although Mr. McOuat is a principal in a firm which from
time to time provides consulting services to the Corporation, the amount of
business done for the Corporation does not represent a material percentage of
that firm's gross annual revenue and Mr. McOuat is considered unrelated.
INDEPENDENT FUNCTIONING OF THE BOARD
The positions of chairman and chief executive officer were separated
until the president and chief executive officer resigned in April 1997.
Following his resignation, the Board determined that the interests of the
Corporation would be best served by designating the chairman as the chief
executive officer for the short term. Believing the Corporation is well
served and the independence of the Board from management is not compromised
by the combined role, the Board, in November 1997, confirmed the chairman as
the Corporation's chief executive officer. The Board has only nine members,
one of which is the chairman, and at its meetings often considers matters
with the chairman being the only member of management present. If required to
effectively deal with a situation, the Board will excuse the chairman during
discussions. The Corporation's by-laws provide that any two directors may
call a meeting of the Board at any time for any purpose.
The Board allows each director to seek the advice of independent
experts, if deemed appropriate.
BOARD COMMITTEES
The Board has an Audit and a Compensation Committee and their mandates
are described at page 4 of this management proxy circular. All members of
each committee are unrelated, outside directors. Considering the Board has
only nine members it was decided no other committees were required. The
decision was made because the Board believes the challenges facing the
Corporation should receive the attention of the full Board. Functioning as a
full Board, rather than several committees, allows management to have the
advantage of the collective wisdom of all members of the Board. As well,
management is encouraged to informally consult Board members on matters not
requiring a formal Board meeting and on which a specific Board member has
expertise.
Realizing the responsibility for selection of Board nominees remains
that of the Board, a nominating committee is considered unnecessary. The
Board searches for and recruits new directors. From time to time the Board
reviews its compliance with the guidelines and other relevant corporate
governance requirements and evaluates its own effectiveness.
DECISIONS REQUIRING PRIOR APPROVAL BY THE BOARD
Prior Board approval is required for all acquisitions of other
companies, sales 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 approval is also required for capital expenditures in excess of
U.S.$2,500,000.
5
<PAGE>
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.
SECURITY OWNERSHIP
The following table shows equity securities of the Corporation
beneficially owned as of April 15, 1998 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.
<TABLE>
<CAPTION>
Amount and nature of Options to acquire common shares
beneficial ownership as of the Corporation exercisable
Beneficial Owner of April 15, 1998 within 60 days of April 15, 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
John N. Abell 10,000 13,600
Latham C. Burns 2,000 13,600
Peter H. Cheesbrough 26,868 199,123
Pierre Choquette 2,500 1,625
John G. Christy 42,553 13,600
Peter Clarke 30,000 202,967
Donald C. Ewigleben 400 55,464
Robert L. Leclerc 10,000 274,750
John F. McOuat 2,791 8,725
Monica E. Sloan 1,500 13,600
R. Geoffrey P. Styles 2,000 13,600
Directors and executive 1,004,880(1)(2)(3)
officers as a group
</TABLE>
(1) Represents 0.7 percent of the outstanding common shares of the
Corporation.
(2) Includes 874,268 common shares which directors and officers have the
right to acquire within 60 days of April 15, 1998.
(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
6
<PAGE>
have acted honestly and in good faith with a view to the best interests of
the Corporation and, in the 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 1997 $157,954 $ -- -- $1,363,569(2)
President and Chief Executive 1996 423,582 -- 110,547 46,099
Officer until April 22, 1997 1995 372,274 186,137 143,328 219,958
- ------------------------------------------------------------------------------------------------------
Robert L. Leclerc 1997 $354,208 $305,760 225,000 $ 16,791(1)
Chairman and Chief Executive
Officer
- ------------------------------------------------------------------------------------------------------
Peter H. Cheesbrough 1997 $207,945 $145,600 97,436 $ 12,600(1)
Senior Vice President, Finance 1996 199,462 33,283 39,481 10,928
and Chief Financial Officer 1995 172,000 68,800 64,272 73,614
- ------------------------------------------------------------------------------------------------------
Robert D. Wunder 1997 $207,308 $110,656 96,592 $ 8,235(1)
Senior Vice President, Project 1996 156,385 64,340 100,507 3,069
Development until January 2, 1998
- ------------------------------------------------------------------------------------------------------
Scott A. Caldwell 1997 $159,833 $112,228 41,376 $ 5,535(1)
Vice President, Operations 1996 74,563 18,104 27,731 681
until March 27, 1998
- ------------------------------------------------------------------------------------------------------
Donald C. Ewigleben 1997 $155,988 $ 77,984 48,708 $ 7,799(1)
Vice President, 1996 150,258 26,955 20,936 6,605
Environmental and Public Affairs 1995 144,039 69,230 21,952 4,759
- ------------------------------------------------------------------------------------------------------
</TABLE>
(1) Represents the annual employer contributions to the Corporation's
retirement savings and defined contribution plans.
(2) Represents, as to $1,346,986, the amount paid pursuant to an arrangement
in connection with the termination of the named executive officer's
employment with the Corporation and, as to $16,583, employer
contributions to the Corporation's retirement savings and defined
contribution plans.
7
<PAGE>
EXECUTIVE CASH INCENTIVE PLAN
The Corporation has an executive cash incentive plan (the "ECIP") under
which certain officers are eligible to receive, in addition to their base
salary, incentive compensation if performance objectives related to the
Corporation's annual operating plan as well as certain performance standards
considered applicable to the participant have been met. Awards earned and
paid to officers under the ECIP for 1997 aggregated U.S.$1,115,178. 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 7 under "Bonus".
SHARE OPTIONS
The Corporation has adopted a share incentive plan which provides for
the grant of options to purchase common shares to officers and employees. The
number of common shares currently authorized under the plan is 13,000,000.
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 ten 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 April 15, 1998 options to purchase a total of 4,536,630 common shares
were outstanding with an average exercise price per common share of
Can.$11.73.
The following table shows option grants in the last fiscal year to the
Chief Executive Officer and the next four most highly compensated executive
officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Individual Grants Grant Date Value
- --------------------------------------------------------------------------------------------------------------
Percent of
Total Options
Granted to
Employees Exercise or Grant Date
Options in Fiscal Base Price Present Value
Name Granted (#) Year (Can.$/Sh)(1) Expiration Date U.S.$(2)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Richard C. Kraus -- -- -- -- --
- --------------------------------------------------------------------------------------------------------------
Robert L. Leclerc 225,000 15.9 8.00 May 13, 2007 645,858
- --------------------------------------------------------------------------------------------------------------
Peter H. Cheesbrough 97,436 6.9 8.00 May 13, 2007 279,688
- --------------------------------------------------------------------------------------------------------------
Robert D. Wunder 96,592 6.8 8.00 May 13, 2007 277,266
- --------------------------------------------------------------------------------------------------------------
Scott A. Caldwell 41,376 2.9 8.00 May 13, 2007 118,769
- --------------------------------------------------------------------------------------------------------------
Donald C. Ewigleben 48,708 3.4 8.00 May 13, 2007 139,815
- --------------------------------------------------------------------------------------------------------------
</TABLE>
8
<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 50 percent on the first anniversary of the date of grant and a
further 25 percent on each of the second and third 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 rate of 6.62 percent, a dividend yield
of zero 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.$)(1)
Acquired Value (#)
on Exercise Realized ------------------------------------------------------------
Name (#) (U.S.$) Exercisable Unexercisable Exercisable Unexercisable
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Richard C. Kraus -- -- 439,690 177,867 -- --
- ----------------------------------------------------------------------------------------------------------------
Robert L. Leclerc -- -- 162,250 278,750 -- --
- ----------------------------------------------------------------------------------------------------------------
Peter H. Cheesbrough -- -- 150,405 166,916 -- --
- ----------------------------------------------------------------------------------------------------------------
Robert D. Wunder -- -- 25,127 171,972 -- --
- ----------------------------------------------------------------------------------------------------------------
Scott A. Caldwell -- -- 6,933 62,174 -- --
- ----------------------------------------------------------------------------------------------------------------
Donald C. Ewigleben -- -- 30,810 80,386 -- --
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
(1) At the end of the last completed fiscal year, no unexercised options were
in the money.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
AGREEMENTS
Mr. Kraus, who was the President and Chief Executive Officer of the
Corporation until April 22, 1997, had a contract with the Corporation which
provided for an annual base salary of U.S.$436,800. The contract, which was
for an indefinite term, provided for certain lump sum payments if the
Corporation terminated Mr. Kraus's employment on fewer than two years'
written notice or demoted him and he voluntarily resigned within 60 days
thereof. The contract also contained provisions relating to the termination
of Mr. Kraus's employment in the event of a change of control of the
Corporation. Mr. Kraus's employment was terminated April 22, 1997 and he has
been paid all sums due to him under the contract referred to above. These
payments are reflected in the Summary Compensation Table at page 7.
Mr. Leclerc, Chairman 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.$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
9
<PAGE>
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 plus bonus
under the executive cash incentive plan. The specified circumstances include
(i) the Corporation's termination of Mr. Leclerc's employment within two
years of a change of control or (ii) a voluntary resignation by Mr. Leclerc
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. Leclerc may resign for any reason, or no reason at
all, and be entitled forthwith to the cash payment calculated as specified
above.
There are five officers of the Corporation other than Mr. Leclerc and
all have entered into employment contracts with the Corporation for
indefinite terms. The contracts include provisions for lump sum payments to
the officer in certain circumstances where employment has been terminated.
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. The
Committee makes the final determination of recipients of share options 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
into any filing under the Securities Act of 1933 or under the Securities
Exchange Act of 1934.
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. 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.
10
<PAGE>
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 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.
COMPENSATION COMPONENTS AND PERFORMANCE MEASURES
In evaluating executive compensation for 1997, the Committee adopted a
plan comprising a mix of base compensation (salary), cash bonus and share
options. In considering base compensation and the principle of paying
according to industry quartile standards, the Committee chose ten North
American precious metal producers as a competitor group. Management and an
independent consultant obtained data for the prospective 1997 salary policies
of this group. The Committee considered competitor practices and judged what
would best further the interests of the Corporation both short and long term.
The cash bonus and share option plan components were selected in preference
to and exclusion of other alternatives.
For the financial year ended December 31, 1997 the following summarizes
executive compensation recommended by the Committee and approved by the Board
of Directors.
Salary -- 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 who have
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 be paid on a basis whereby 25 percent of
their industry counterparts would be more highly compensated. In the case of
12 of the 16 most senior executives, salaries were increased by four percent.
Four executives received increases ranging from 8.3 to 11.9 percent, in all
cases attributable to changes in job responsibility and an assessment of what
industry would pay on average for the particular job.
Bonus -- The Committee believes that planned operating results are
critical to the establishment of bonus levels. Accordingly, the 1997 bonus
plan was established to reward executives who met personal performance
targets while helping the Corporation realize the targets for ore reserves,
production cost, production value and support services contemplated by the
1997 Operating Plan. Executives were to have the opportunity to earn a bonus,
the amount of which would be a function of their base salary and would depend
on the extent to which corporate and personal goals were achieved. In
February 1997, the Committee set the corporate goals leaving functional goals
to be determined between the individual and his supervisor. Goals could be
met in whole or in part or surpassed and bonuses would reflect this.
11
<PAGE>
As to safety, all executives would be penalized should the Corporation
fail to meet safety standards. The Committee continued its policy that lost
time accidents at each mine site must not exceed a predetermined target. Lost
time accident performance did not meet target and bonuses were reduced.
If a fatality were to occur, additional safety deductions would be
applied as follows: (i) the vice president in charge of operations 15
percent, (ii) senior executives 10 percent, and (iii) other executives 5
percent. In 1997 there were no fatalities.
Participants received a bonus which reflected the achievement of
personal goals and the Corporation meeting certain objectives set out in the
1997 Operating Plan. Production and cost performance were better than target
but support services cost exceeded target and gold reserves at producing mine
sites declined. Bonus amounts attributable to these components were
calculated accordingly. For 1997 performance a total of U.S.$1,115,178 was
paid to 11 participants in the bonus plan. The Committee recognizes the
dedication and hard work of these executives given the challenges with which
the mining industry has been faced and believes that performance mandates
bonus payments at the formula level measured by the criteria established in
February 1997. The Committee has discretion to adjust bonus payments for
individual executives but declined to exercise that discretion for 1997.
Share options - The share option component of executive compensation 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. 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 7 and 8.
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. The
Corporation's share incentive plan is used as a long-term compensation
technique and aligns management's objectives with those of the shareholders.
Monitoring reserves is an ongoing discipline and the Corporation relies on
its executives to build reserves over time and facilitate future production
and other long term goals designed to create value for the shareholders.
The Committee is of the view that the compensation practices followed
for 1997 have achieved an equitable balance between compensating executives
and managing the business of the Corporation for all shareholders.
John Gilray Christy, Chairman
Pierre Choquette, Monica E. Sloan, R. Geoffrey P. Styles
12
<PAGE>
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.$100 on December 31, 1992 and the reinvestment of dividends paid during
the five year period.
CUMULATIVE RETURNS
<TABLE>
<CAPTION>
- -----------------------------------------------------------
ECHO BAY LONDON PM TSE S&P
YEAR COMMON FIX AU/AG 500
- -----------------------------------------------------------
<S> <C> <C> <C> <C>
1992 100.0 100.0 100.0 100.0
1993 262.4 117.7 205.4 110.1
1994 218.0 115.0 185.3 111.5
1995 212.0 116.1 202.8 153.5
1996 138.3 110.8 155.6 188.7
1997 50.9 87.8 87.8 251.6
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------
LONDON PM BASE YEAR
YEAR FIX COMPARISON
- -------------------------------------
<S> <C> <C>
1992 333 100.0
1993 392 117.7
1994 383 115.0
1995 387 116.1
1996 369 110.8
1997 293 87.8
- -------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------
C$ BASE CURRENT US$ BASE
TSE YEAR EXCHANGE TSE YEAR
YEAR COMMON COMPARISON RATE GOLD COMPARISON
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1992 7,264 100.0 0.7929 5,760 100.0
1993 14,921 205.4 0.7553 11,270 195.7
1994 13,463 185.3 0.7129 9,597 166.6
1995 14,732 202.8 0.7325 10,791 187.4
1996 11,303 155.6 0.7302 8,253 143.3
1997 6,379 87.8 0.6968 4,445 77.2
- -----------------------------------------------------------------------
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL
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
two 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
13
<PAGE>
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,
1997 to April 15, 1998:
<TABLE>
<CAPTION>
Balance
Nature Maximum outstanding
of balance at Interest
Name Capacity loan in period April 15, 1998 rate
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. L. Leclerc Chairman Housing $150,000 $140,134 9.00%
</TABLE>
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.
1997 ANNUAL REPORT
The annual report for the year 1997, 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.
1999 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 March 12, 1999.
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 30th day of April 1998.
(SIGNED)
Lois-Ann L.Brodrick
Vice President and Secretary
ECHO BAY MINES LTD.
1210 Manulife Place
10180 - 101 Street
Edmonton, Alberta, Canada
T5J 3S4
<PAGE>
ECHO BAY MINES LTD.
ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON THE 11TH DAY OF JUNE 1998
The undersigned shareholder of ECHO BAY MINES LTD. appoints ROBERT LEIGH
LECLERC, Q.C. or failing him LOIS-ANN L. BRODRICK 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 General
Meeting of Shareholders to be held on the 11th day of June 1998, 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, Robert Leigh Leclerc,
Q.C., John Frederick McOuat, Monica Elizabeth Sloan and Richard Geoffrey
Pentland Styles; and
2. to vote FOR / / or WITHHOLD vote on / / the appointment of Ernst & Young
as auditors.
DATED _________________________ , 1998 _____________
________________________________________
Signature of Shareholder
(1) If a shareholder specifies a choice with respect to either of the
matters indicated above, the shares represented by the proxy will be
voted for 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 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 AND FOR THE APPOINTMENT OF AUDITORS. 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>
NOTICE TO SHAREHOLDERS OF ECHO BAY MINES LTD.
Within a month of each quarter end Echo Bay issues a detailed news release on
the operating results. Shareholders may access highlights of this news
release within minutes of its release through services such as Dow Jones and
Reuters or Echo Bay (www.echobay.com). A copy of the press release will be
available on the Echo Bay Internet site within 24 hours of release. For this
reason, many shareholders do not wish to receive the subsequent quarterly
reports.
If you wish to receive the quarterly financial statements of Echo Bay Mines
Ltd., please complete and return this card to Echo Bay Mines Ltd., of
Montreal Trust Company of Canada, 8th Floor, 151 Front Street West, Toronto,
Ontario M5J 2N1. IF THE CARD IS NOT RETURNED, YOU WILL NOT RECEIVE QUARTERLY
FINANCIAL STATEMENTS.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
ECHO BAY MINES LTD.
Please put my name on the Echo Bay supplemental mailing list.
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