<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1998.
Registration No. 333-35857
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
ECHO BAY MINES LTD.
and
ECHO BAY RESOURCES INC.
(Exact names of registrants as specified in charters)
ECHO BAY MINES LTD. - CANADA ECHO BAY MINES LTD. - NONE
ECHO BAY RESOURCES INC. - DELAWARE ECHO BAY RESOURCES INC. - 52-1872784
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
6400 SOUTH FIDDLERS GREEN CIRCLE, SUITE 1000
ENGLEWOOD, COLORADO 80111-4957
(303) 714-8600
(Address, including zip code, and telephone number, including area code,
of registrants' principal executive offices)
------------------------
ROBERT L. LECLERC, Q.C.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SUITE 1000, 6400 SOUTH FIDDLERS GREEN CIRCLE
ENGLEWOOD, COLORADO 80111-4957
(303) 714-8600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
RONALD R. LEVINE, II, ESQUIRE MICHAEL GLUCKMAN, ESQUIRE
Davis, Graham & Stubbs LLP Milner Fenerty
370 - Seventeenth Street 2900 ManuLife Place
Denver, Colorado 80201 10180-101 Street
(303) 892-9400 Edmonton, Alberta T5J 3V5
(403) 423-7100
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED OFFERING: FROM TIME TO TIME
AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT, AS DETERMINED BY THE
REGISTRANTS.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=================================================================================================================
Proposed Proposed
Amount maximum maximum
Title of each class of to be offering price aggregate Amount of
securities to be registered registered/(1)/ per unit/(2)/ offering price/(3)/ registration fee/(3)/
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities/(4)/
Common Shares
(without par value)/(5)(6)/
Preferred Stock, par value
$1.00 per share/(7)/
Warrants/(8)/
Guarantees/(9)/
TOTAL $200,000,000/(10)/ 100% $200,000,000/(10)/ $30,304/(10)/
=================================================================================================================
</TABLE>
(1) In US dollars or the equivalent thereof in one or more foreign currencies
or currency units or composite currencies, including the European Currency
Unit.
(2) The proposed maximum initial offering price per unit will be determined,
from time to time, by the Registrants.
(3) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(o) which fee was previously paid by the Registrants.
In no event will the aggregate initial offering price of all securities
issued from time to time pursuant to this Registration Statement exceed
$200,000,000.
(4) Subject to Footnote (3), there are being registered hereunder an
indeterminate principal amount of Debt Securities as may be sold from time
to time by each of the Registrants. If any such Debt Securities are issued
at an original issue discount, then the offering price shall be in such
greater principal amount as shall result in an aggregate initial offering
price of up to $200,000,000. Subject to Footnote (3), there is also being
registered hereunder an indeterminate principal amount of Debt Securities
as may be issuable upon the conversion of Debt Securities or Preferred
Stock, or the exercise of Warrants, registered hereby.
(5) Subject to Footnote (3), there are being registered hereunder an
indeterminate number of Common Shares as may be sold from time to time by
Echo Bay Mines Ltd. Subject to Footnote (3), there are also being
registered hereunder an indeterminate number of Common Shares as may be
issuable upon conversion of the Debt Securities or Preferred Stock, or
exercise of Warrants, registered hereby.
(6) This Registration Statement also applies to Rights under the Company's
Stockholders' Rights Plan, which are attached to and tradeable only with
the Common Shares registered hereby. No registration fees are required for
such rights and the shares underlying such rights as they will be issued
for no additional consideration.
(7) Subject to Footnote (3), there are being registered hereunder an
indeterminate number of shares of Preferred Stock as may be sold from time
to time by Echo Bay Resources Inc.
(8) Subject to Footnote (3), there are being registered hereunder an
indeterminate number of Warrants as may be sold from time to time by Echo
Bay Mines Ltd. Subject to Footnote (3), there are also being registered
hereunder an indeterminate number of Common Shares or shares of Preferred
Stock and indeterminate principal amount of Debt Securities as may be
issuable upon the exercise of the Warrants registered hereby.
(9) Each of the Debt Securities and shares of Preferred Stock issued by Echo
Bay Resources Inc. will be accompanied by a Guaranty to be issued by Echo
Bay Mines Ltd. None of the proceeds will be received by Echo Bay Mines Ltd.
in consideration of the Guarantees.
(10) Of the $200,000,000 of securities registered hereby, $100,000,000 of such
securities were registered pursuant to Registration Statement No. 33-77738
and are unissued as of the date hereof. A registration fee of $34,482.70
was previously paid with respect to such unissued securities and is not
included in the amount stated above.
-------------------------
Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus
included in this Registration Statement will also be used in connection with the
issuance of securities registered pursuant to Registration Statement No. 33-
77738 previously filed by the Registrants on Form S-3 and declared effective on
July 15, 1994. This Registration Statement, which is a new registration
statement, also constitutes Post-Effective Amendment No. 1 to Registration
Statement No. 33-77738, and such Post-Effective Amendment shall hereafter become
effective concurrently with the effectiveness of this Registration Statement and
in accordance with Section 8(c) of the Securities Act of 1933. A fee of
$34,482.70 paid in connection with Registration Statement No. 33-77738 is
carried over to this Registration Statement.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any State.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, Dated February 11, 1998
PROSPECTUS
$200,000,000
ECHO BAY MINES LTD.
DEBT SECURITIES
GUARANTEES
COMMON SHARES
WARRANTS
ECHO BAY RESOURCES INC.
GUARANTEED DEBT SECURITIES
GUARANTEED PREFERRED STOCK
Echo Bay Mines Ltd. (the "Company" or "Echo Bay") may offer from time to
time (i) debt securities ("Debt Securities"), consisting of debentures, notes,
bonds and/or other unsecured evidences of indebtedness in one or more series,
(ii) full, unconditional and irrevocable guarantees ("Guarantees") of Debt
Securities and shares of guaranteed preferred stock ("Preferred Stock") issued
by Echo Bay Resources Inc. ("EBR"), a wholly-owned subsidiary of the Company,
(iii) shares of the Company's common stock, without par value ("Common Shares"),
or (iv) warrants to purchase Debt Securities, Preferred Stock or Common Shares.
EBR may offer from time to time guaranteed Debt Securities, consisting of
debentures, notes or other unsecured evidences of indebtedness in one or more
series and guaranteed Preferred Stock in one or more series, each guaranteed by
the Company. The foregoing securities are collectively referred to as the
"Securities". Any Securities may be offered with other Securities or separately
(except for Guarantees which may only be offered with Debt Securities or
Preferred Stock of EBR). The Securities will be offered at an aggregate initial
offering price not to exceed US $200,000,000 or the equivalent (based on the
applicable exchange rate at the time of sale), if Debt Securities of the Company
or EBR are issued in principal amounts denominated in one or more foreign
currencies or currency units as shall be designated by the Company or EBR, as
the case may be, at prices and on terms to be determined at the time of sale.
SEE "RISK FACTORS" BEGINNING ON PAGE 7 FOR A DISCUSSION OF CERTAIN
CONSIDERATIONS RELEVANT TO AN INVESTMENT IN THE SECURITIES.
This Prospectus will be supplemented by one or more accompanying Prospectus
Supplements, which will set forth with regard to the particular Securities in
respect of which this Prospectus is being delivered (i) in the case of Debt
Securities, the Issuer (which may be the Company or EBR); title; aggregate
principal amount; currency of denomination (which may be in US dollars, in any
other currency, currencies or currency unit, including the European Currency
Unit); maturity; interest rate, if any (which may be fixed or variable), or
method of calculation thereof; time of payment of any interest; form of payment
of any interest whether in the form of cash, additional Debt Securities, Common
Shares or some combination thereof; any terms for redemption at the option of
the Company, EBR or the holder; any terms for sinking fund payments; any index
or other method used to determine the amounts payable; the ranking of such Debt
Securities (whether senior, senior subordinated or subordinated); any conversion
or exchange rights, at the option of the Company, EBR or the holder; any listing
on a securities exchange; whether such Debt Securities will be guaranteed by the
Company; the initial public offering price and any other terms in connection
with the offering and sale of such Debt Securities; (ii) in the case of Common
Shares, the number of Common Shares and the terms of the offering thereof; (iii)
in the case of Preferred Stock, the designation, aggregate principal amount, and
stated value and liquidation preference per share; the initial public offering
price; dividend rate (or method of calculation); dates on which dividends shall
be payable and dates from which dividends shall accrue; any redemption or
sinking fund provisions; any conversion or exchange rights; any listing of the
Preferred Stock on a securities exchange; and any other terms in connection with
the offering and sale of such Preferred Stock; and (iv) in the case of Warrants,
the number and terms thereof, the designation and the number of Securities
issuable and/or cash consideration payable upon their exercise; the exercise
price; any listing of the Warrants or the underlying Securities on a securities
exchange and any other terms in connection with the offering, sale and exercise
of the Warrants. The Prospectus Supplement will also contain information, as
applicable, about certain United States and Canadian Federal income tax
considerations relating to the Securities in respect of which this Prospectus is
being delivered.
The Company's Common Shares are listed on the American Stock Exchange
(Symbol: "ECO") and The Toronto Stock Exchange (Symbol: "ECO"). Any Common
Shares offered will be listed, subject to notice of issuance, on such exchanges.
The Company and EBR may sell Securities to or through one or more
underwriters, and may also sell Securities directly to other purchasers or
through agents. See "Plan of Distribution." Each Prospectus Supplement will set
forth the names of any underwriters, dealers or agents involved in the sale of
the Securities in respect of which this Prospectus is being delivered, and any
applicable fee, commission or discount arrangements with them.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE SALES OF SECURITIES UNLESS
ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
The date of this Prospectus is February __, 1998.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C>
Available Information........................................................................... 2
Enforcement of Certain Civil Liabilities........................................................ 3
Incorporation of Certain Documents by Reference................................................. 3
Canadian Prospectuses........................................................................... 4
The Company..................................................................................... 5
Echo Bay Resources.............................................................................. 6
Risk Factors.................................................................................... 7
Use of Proceeds................................................................................. 14
Ratio of Earnings to Fixed Charges and Earnings to Fixed Charges and Preferred Stock Dividends.. 15
Description of Debt Securities and Guarantees................................................... 16
Description of EBR Preferred Stock.............................................................. 28
Description of Echo Bay Share Capital........................................................... 31
Description of Warrants......................................................................... 32
Plan of Distribution............................................................................ 33
Experts......................................................................................... 34
Legal Matters................................................................................... 34
</TABLE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. The Company is currently subject to the periodic reporting and
other informational requirements of the Exchange Act. Such reports and other
information may be inspected and copied at the public reference facilities of
the Commission, Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, as well as at the following Regional Offices: 7 World Trade Center,
Suite 1300, New York, New York 10048, and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of such material can be
obtained from the Commission by mail at prescribed rates. Requests should be
directed to the Commission's Public Reference Section, Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington D.C. 20549. The Commission also
maintains a website at http://www.sec.gov that contains reports, proxy
statements, and other information. The Company's Common Shares are listed on
the American Stock Exchange (the "AMEX"). Reports proxy and information
statements and other information relating to the Company can be inspected at the
offices of the AMEX at 86 Trinity Place, New York, New York 10006.
EBR is a wholly-owned subsidiary of the Company. It currently is not
independently subject to the information requirements of the Exchange Act. EBR
expects to receive a conditional exemption pursuant to Section 12(h) of the
Exchange Act from the informational requirements of such Act and anticipates
that no independent reports concerning EBR will be sent to holders of Debt
Securities or Preferred Stock issued by EBR.
The Company and EBR have filed with the Commission a Registration Statement
on Form S-3 (herein, together with all amendments and exhibits, referred to as
the "Registration Statement") under the Securities Act of 1933 (the "Securities
Act") with respect to the securities covered by this Prospectus. This
Prospectus, which forms part of the Registration Statement, does not contain all
of the information set forth in the Registration Statement, certain parts of
which have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company, EBR and such
securities, reference is hereby made to such Registration Statement, including
the exhibits filed therewith. The Registration Statement and the exhibits
thereto can be obtained by mail from or inspected and copied at the public
reference facilities maintained by the Commission as provided above.
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<PAGE>
ENFORCEMENT OF CERTAIN CIVIL LIABILITIES
The Company is a Canadian corporation and certain of its directors and
officers, as well as certain of the experts named herein, are neither citizens
nor residents of the United States. A substantial part of the assets of several
of such persons and of the Company are located outside the United States. As a
result, it may be difficult for investors to effect service of process within
the United States upon such persons or to enforce against them or the Company
within the United States judgment of courts of the United States predicated upon
the civil liability provisions of the federal securities laws of the United
States. Milner Fenerty, Canadian counsel to the Company, has advised the
Company that there is doubt as to the enforceability against such persons and
the Company in Canada, in original actions or in actions to enforce judgments of
United States courts, of liabilities predicated solely upon the federal
securities laws of the United States.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the year ended December 31, 1996, as
amended;
(2) Quarterly Report on Form 10-Q for the period ended March 31, 1997;
(3) Quarterly Report on Form 10-Q for the period ended June 30, 1997;
(4) Quarterly Report on Form 10-Q for the period ended September 30, 1997,
as amended;
(5) Current Report on Form 8-K, dated January 15, 1997;
(6) Current Report on Form 8-K, dated March 6, 1997;
(7) Current Report on Form 8-K, dated March 26, 1997;
(8) Current Report on Form 8-K, dated March 31, 1997;
(9) Current Report on Form 8-K, dated April 17, 1997;
(10) Current Report on Form 8-K, dated April 25, 1997;
(11) Current Report on Form 8-K, dated November 6, 1997;
(12) Current Report on Form 8-K, dated January 6, 1998;
(13) Registration Statement on Form 8-A (File No. 1-8542), dated September
12, 1994, relating to the Company's Shareholder Rights Plan;
(14) The description of the Common Shares contained in the Company's
Registration Statement on Form 8-A (File No. 1-8542) dated August 2,
1983; and
(15) The Company's Proxy Circular dated March 31, 1997 for its Annual and
Special Meeting of Shareholders held on May 14, 1997.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering
of the securities offered hereby shall be deemed to be incorporated by reference
in this prospectus and to be a part hereof from the date of filing of such
documents. Any statement contained
-3-
<PAGE>
in a document incorporated or deemed to be incorporated by reference shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein or in any other subsequently filed
document which also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part
of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, on the oral or written request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits, unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to the Secretary,
Echo Bay Mines Ltd., 6400 South Fiddlers Green Circle, Suite 1000, Englewood,
Colorado 80111-4957, telephone (303) 714-8600, facsimile: (303) 714-8999.
CANADIAN PROSPECTUSES
The Company has filed with Canadian securities regulatory authorities a
shelf prospectus relating to the potential offering in Canada of up to
10,000,000 common shares (including the Common Shares offered hereunder) and a
shelf prospectus relating to the potential offering in Canada of debt securities
at an aggregate initial offering price of up to US $125,000,000 (including the
Debt Securities offered hereunder). Canadian securities laws do not permit the
use of an unallocated (as between common shares and debt securities) shelf
prospectus.
-4-
<PAGE>
THE COMPANY
Echo Bay is a major North American gold mining company with interests in
four existing mines, two new gold mines with final stage development deferred
pending gold price improvement, and a number of active early and late stage
exploration projects. Echo Bay mines, processes and explores for gold, and also
produces a significant amount of silver. For the nine months ended September 30,
1997, Echo Bay produced a total of approximately 551,000 ounces of gold and
7,643,000 ounces of silver. For the year 1996, Echo Bay produced a total of
approximately 769,000 ounces of gold and 7,100,000 ounces of silver. As of
December 31, 1996, Echo Bay reported proven and probable ore reserves of
8,573,000 ounces of gold and 53,858,000 ounces of silver. In addition, Echo Bay
has other mineralization at its existing mines consisting of 58.1 million tons
at a grade of 0.033 ounces of gold per ton and 1.5 million tons at a grade of
1.36 ounces of silver per ton. For the nine months ended September 30, 1997,
Echo Bay achieved revenues of $224.1 and incurred a net loss of $365.0 million,
after taking into account a provision of $309.8 million discussed below. For
the year 1996, Echo Bay achieved revenues of $337.3 million and incurred a net
loss of $176.7 million after taking into account provisions totaling $107.1
million related to the write-off of and provision for the Alaska-Juneau
development property and the provision for the McCoy/Cove pit wall
stabilization.
RECENT DEVELOPMENTS
In August 1997, Echo Bay deferred final construction decisions on two
planned gold mines, Paredones Amarillos in Mexico and Aquarius in Canada, and
has deferred further development of the Ulu satellite deposit, all pending an
improvement in gold prices. Echo Bay has continued with the completion of the
frozen underground barrier system at Aquarius, and with engineering, acquisition
of a mill grinding circuit, permitting and water development work at Paredones
Amarillos, in order to permit construction to begin as soon as possible at such
time as a final construction decision is made.
In the third quarter of 1997, Echo Bay conducted a major review of life-of-
mine plans for Echo Bay's four producing gold mines, and a complete evaluation
of the feasibility studies for Echo Bay's portfolio of development projects,
exploration properties and other assets. On completion of this work, Echo Bay
assessed the carrying values of all of Echo Bay's assets in light of both short-
term and long-term views of precious metals prices. As a result of the review,
in the third quarter of 1997, Echo Bay recorded a $309.8 million provision for
impaired assets. The provision was comprised of $50.0 million related to the
Kingking project in the Phillippines, $107.4 million related to Santa Elina's
activities in Brazil, $127.0 million related to operating mines including Lupin
($65.0 million), McCoy/Cove ($47.0 million) and Kettle River ($15.0 million),
and $25.4 million related to certain share investments, closure and legal
costs.
In January 1998, the Company announced that it was temporarily suspending
operations at its Lupin gold mine and reducing operations at its McCoy/Cove mine
until the gold price improves significantly. As a result of these actions, the
Company's 1998 production targets will be 500,000-520,000 ounces of gold (a
reduction of approximately 25%, or 175,000 ounces of gold, from earlier targets)
and 7,000,000-8,000,000 ounces of silver. The Company also reduced its
corporate headquarters staff by 40%, and will record an estimated $11.2 million
charge in the fourth quarter of 1997 in connection with these actions.
The cash operating costs at the Company's four operating mines averaged
$256 per ounce for the first nine months of 1997. Total production costs were
$373 per ounce during the same period. Taking into account the above suspension
and reduction in operations, 1998 cash operating costs are expected to be
approximately $245-255 per ounce of gold produced. In the current low gold
price environment, the Company's cost structure has significant implications for
the Company's liquidity and flexibility to invest funds in exploration and
development. In January 1998, the Company also announced the following
additional actions to reduce costs: (i) reduction in budgeted new project
expenditures for 1998 from $21 million to $3 million and (ii) reduction in the
1998 exploration budget from $11 million to $6 million. The aggregate effect of
these and the other actions set forth above are expected to reduce cash
expenditures by approximately $30-35 million from earlier projections. While
the Company continues to generate cash flow from operations at current gold
prices before taking into account cash exploration and development expenses, the
amount of cash flow available for acquisitions, investments, exploration and
development is extremely limited.
-5-
<PAGE>
The Company's existing credit facilities provide some additional liquidity.
At December 31, 1997, the Company had not utilized $109.6 million of the amounts
committed thereunder, of which $14 million was actually available for borrowing
in view of the credit facility covenant limitations. However, the amounts
available for borrowing under the credit facilities vary with precious metals
prices, among other factors, and continuation of those prices at current levels
could have the effect of reducing or eliminating the Company's capacity to
borrow under the credit facilities. The Company and its lenders are in
negotiations aimed at restructuring the terms of its credit facilities in order
to provide more liquidity than is currently available in the event of a
continued period of depressed gold prices. If the Company is not successful in
renegotiating these terms and gold prices fall below current levels, the Company
will not be eligible for any additional borrowing under the credit facilities
after March 31, 1998 and may be required to reduce its outstanding borrowings.
The Company believes it is currently in compliance in all respects with the
covenants under the credit facility. To remain in compliance throughout 1998
(assuming the credit facilities are not amended), the Company has taken the
actions set forth above to reduce its expenses, and may be required to seek
additional external financing and to further reduce discretionary spending,
absent a substantial improvement in gold prices. There can be no assurance that
the Company will be successful in attracting external financing on terms and
conditions favorable to it. In the event the Company is unsuccessful in
accessing external financing on acceptable terms, it may be required to curtail
other discretionary expenditures.
The Company was incorporated in Canada in 1964. Its executive office is
located at 6400 South Fiddlers Green Circle, Suite 1000, Englewood, CO 80111-
4957, telephone (303) 714-8600, and its registered office is located at Suite
1210 ManuLife Place, 10180 - 101 Street, Edmonton, Alberta, Canada , T5J 3S4,
telephone (403) 496-9002.
ECHO BAY RESOURCES
EBR is a wholly-owned subsidiary of the Company which was incorporated
under the laws of the state of Delaware on April 6, 1994. The primary purpose
of EBR is to issue guaranteed Debt Securities and guaranteed Preferred Stock and
to loan to or invest the proceeds in the Company or its subsidiaries. EBR will
be prohibited from issuing any common stock to any person other than the Company
and its subsidiaries. EBR does not now, and in the near future does not expect
to, lease or own any material facilities or operating property. EBR's principal
executive offices are located at 6400 South Fiddlers Green Circle, Suite 1000,
Englewood, CO 80111-4957, telephone (303) 714-8600.
Separate financial statements are not being provided with respect to EBR
because EBR is a wholly-owned finance subsidiary of the Company with essentially
no independent operations whose obligations in respect of the securities are
fully and unconditionally guaranteed by the Company. Under rulings adopted by
the Commission, in such instances, separate financial statements of the finance
subsidiary are not required to be filed. The Company intends to file with the
Commission a request that the Commission refrain from taking action in
opposition to this position.
-6-
<PAGE>
RISK FACTORS
Purchasers of the Securities being offered hereby should carefully read
this entire Prospectus and the documents incorporated by reference herein.
Purchasers should consider, among other things, the risk factors set forth below
as well as any additional risk factors contained in any Prospectus Supplement
delivered herewith.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
Statements that are not historical facts contained or incorporated by
reference in this Prospectus and the accompanying Prospectus Supplement are
forward-looking statements. Such forward-looking statements include statements
regarding targets for gold and silver production, cash operating costs and
certain significant expenses, percentage increases and decreases in production
from the Company's principal mines, schedules for completion of detailed
feasibility studies and initial feasibility studies, potential increases in
reserves and production, the timing and scope of future drilling and other
exploration activities, expectations regarding receipt of permits and
commencement of mining or production, anticipated recovery rates and potential
acquisitions or increases in property interests. Factors that could cause
actual results to differ materially include, among others, changes in gold,
silver and other metals prices, unanticipated grade, geological, metallurgical,
processing, access, transportation of supplies, water availability or other
problems, results of current exploration activities, results of pending and
future feasibility studies, changes in project parameters as plans continue to
be refined, success in renegotiating the Company's bank credit facilities,
political, economic and operational risks of foreign operations, joint venture
relationships, availability of materials and equipment, the timing of receipt of
governmental permits, force majeure events, the failure of plant, equipment or
processes to operate in accordance with specifications or expectations,
accidents, labor disputes, delays in start-up dates, environm ental costs and
risks, the outcome of acquisition negotiations and general domestic and
international economic and political conditions and other factors described in
this Prospectus and the accompanying Prospectus Supplement and in the Company's
annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports
on Form 8-K filed with the Securities and Exchange Commission. Many of such
factors are beyond the Company's ability to control or predict.
Actual results may differ materially from those projected. Prospective
investors are cautioned not to put undue reliance on forward-looking statements,
and should not infer that there has been no change in the affairs of the Company
since the date of this Prospectus that would warrant any modification of any
forward-looking statement made in this Prospectus or the accompanying Prospectus
Supplement. For a discussion of certain of such risks and uncertainties, see
the "Risk Factors" set forth below, those in the accompanying Prospectus
Supplement, and the discussions contained in the Company's annual reports on
Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K filed
with the Securities and Exchange Commission. The Company disclaims any intent
or obligation to update publicly these forward-looking statements, whether as a
result of new information, future events or otherwise.
RECENT LOSSES
For the nine months ended September 30, 1997 and the year ended December
31, 1996, Echo Bay incurred net losses of $365.0 million and $176.7 million,
respectively. The loss in 1997 included a $309.8 million provision related to
the Kingking project ($50.0 million); Santa Elina ($107.4 million); the Lupin
($65.0 million), McCoy/Cove ($47.0 million) and Kettle River ($15.0 million)
operating properties; and other items ($25.4 million). Subsequent to September
30, 1997, the Company announced further provisions of $11.2 million related to
severance costs. The loss in 1996 included a $77.1 million write-down of and
reclamation and closure provision for the Alaska-Juneau development property and
a $30.0 million provision for McCoy/Cove pit wall stabilization. During those
periods, Echo Bay incurred exploration and development costs of $27.6 million
and $63.6 million, respectively. Cash operating costs per ounce of gold
increased from $254 in the full year 1996 to $256 in the nine months ended
September 30, 1997. Echo Bay expects that it will continue to incur losses in
the near future, and that its return to profitability will depend on, among
other things, an increase in the price of gold over current prices, the ability
to bring into commercial production the projects that have been the subject of
Echo Bay's exploration and development program and the profitability of
production at existing and new mines. See "Gold and Silver Prices," "Uncertainty
of Reserve and Other Mineralization Estimates" and "Estimation of Asset Carrying
Values" for additional disclosure with respect
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<PAGE>
to factors which may affect the carrying values of the Company's assets, and the
Company's results of operations and financial condition generally.
LIQUIDITY
The cash operating costs at the Company's four operating mines averaged
$256 per ounce for the first nine months of 1997. Total production costs were
$373 per ounce during the same period. In the current low gold price
environment, the Company's cost structure has significant implications for the
Company's liquidity and flexibility to invest funds in exploration and
development. While the Company continues to generate cash flow from operations
at current gold prices before taking into account cash exploration and
development expenses, the amount of cash flow available for acquisitions,
investments, exploration and development is very limited. As a result, the
Company is carefully monitoring its discretionary spending, though it intends to
continue to conduct exploration and development activities consistent with the
more focused program described elsewhere in this Prospectus and in the documents
incorporated by reference herein.
The Company's existing credit facilities provide some additional liquidity.
At December 31, 1997, the Company had not utilized $109.6 million of the amounts
committed thereunder, of which $14 million was actually available for borrowing
in view of the credit facility covenant limitations. However, the amounts
available for borrowing under the credit facilities vary with precious metals
prices, among other factors, and continuation of those prices at current levels
could have the effect of reducing or eliminating the Company's capacity to
borrow under the credit facilities. The Company and its lenders are in
negotiations aimed at restructuring the terms of its credit facilities in order
to provide more liquidity than is currently available in the event of a
continued period of depressed gold prices. If the Company is not successful in
renegotiating these terms and gold prices fall below current levels, the Company
will not be eligible for any additional borrowing under the credit facilities
after March 31, 1998 and may be required to reduce its outstanding borrowings.
The Company believes it is currently in compliance in all respects with
covenants under the credit facility. To remain in compliance throughout 1998
(assuming the credit facilities are not amended), the Company has taken certain
actions identified under "The Company--Recent Developments" to reduce its
expenses, and may be required to seek additional external financing and to
further reduce discretionary spending, absent a substantial improvement in gold
prices. There can be no assurance that the Company will be successful in
attracting external financing on terms and conditions favorable to it. In the
event the Company is unsuccessful in accessing external financing on acceptable
terms, it may be required to curtail other discretionary expenditures.
GOLD AND SILVER PRICES
The profitability of Echo Bay's current operations is directly related and
sensitive to the market price of gold and silver, which are currently at
depressed levels. Gold, silver and other metal prices fluctuate widely and are
affected by numerous factors beyond Echo Bay's control, including global supply
and demand, expectations with respect to the rate of inflation, the exchange
rates of the dollar and other currencies, interest rates, forward selling by
producers, central bank sales and purchases, production and cost levels in major
gold-producing regions such as South Africa and the former Soviet Union, global
or regional political, economic or financial situations and a number of other
factors.
The current demand for, and supply of, gold and silver affect the prices of
such metals, but not necessarily in the same manner as current demand and supply
affect the prices of other commodities. The potential supply of gold consists
of new mine production plus existing stocks of bullion and fabricated gold held
by governments, financial institutions, industrial organizations and
individuals. Since mine production in any single year constitutes a very small
portion of the total potential supply of gold, normal variations in current
production do not necessarily have a significant effect on the supply of gold or
on its price. If gold or silver prices should decline below Echo Bay's cash
costs of production at any of its mines and remain at such levels for any
sustained period, Echo Bay could determine that it is not economically feasible
to continue commercial production at such mines. In January 1998, the Company
announced that it would temporarily suspend operations at its Lupin mine and
reduce operations at its McCoy/Cove mine pending significant improvement in gold
prices. Although Echo Bay has a hedging program in place to reduce the risk
associated with gold and silver price volatility, there is no assurance that
Echo Bay's hedging strategies will be successful. Furthermore, as discussed
below in "Uncertainty of Reserve and Other Mineralization Estimates" and
"Estimation of Asset Carrying Value," should the Company experience a prolonged
period of depressed gold prices and prepare its
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reserve calculations and/or life of mine plans at significantly lower prices
than those used at year-end 1996 or 1997, Echo Bay could experience additional
material write-downs of its investment in mining properties.
The absolute level and volatility of gold and silver prices are illustrated
in the following table which sets forth the average of the daily closing prices
for gold and silver for the periods indicated:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
1998/(1)/ 1997 1996 1995 1994 1993 1992
--------- ---- ---- ---- ---- ---- ----
Gold(2) ($ per ounce) 291 331 388 384 384 360 344
Silver(3) ($ per ounce) 5.94 4.89 5.18 5.19 5.29 4.30 3.94
</TABLE>
(1) For the period from January 1, 1998 to February 4, 1998
(2) On the London Bullion Market
(3) As quoted by Handy and Harman
As of February 4, 1998, the closing prices for gold and silver were $298
per ounce and $6.93 per ounce, respectively.
ESTIMATION OF ASSET CARRYING VALUES
Echo Bay periodically undertakes a detailed review of the life-of-mine
plans for its four operating properties and an evaluation of the Company's
portfolio of development projects, exploration projects and other assets. In
light of both the short-term and long-term views of precious metals prices and
the results of feasibility and engineering studies, the Company assesses the
recoverability of the carrying values of those assets. For operating mines, the
carrying values are compared to estimated future net cash flows from existing
reserves; for development properties, share investments and other assets,
carrying values are compared to estimated net realizable values based on market
comparables and quoted market values. For purposes of estimating future cash
flows for its producing gold mines and development projects in its 1996 and 1997
reviews, the Company has used price assumptions of $375 per ounce for gold,
except that for purposes of the 1997 estimation, a price assumption of $325 per
ounce was used for 1998. Actual gold prices for 1996 and 1997 are set forth
above at "Gold and Silver Prices." As a result of the 1997 carrying value
analysis, in the third quarter of 1997, the Company recorded a $309.8 million
provision for impaired assets. Analysis of the components of the write-down
follows:
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<TABLE>
<CAPTION>
ACQUISITION CLOSURE
DEFERRED AND DEVELOPMENT PLANT AND OTHER AND
PROPERTY MINING COSTS EQUIPMENT ASSETS LEGAL COSTS TOTAL
- ----------------------- -------- --------------- --------- ------ ----------- --------
<S> <C> <C> <C> <C> <C> <C>
OPERATING MINES:
McCoy/Cove $47,000 $ 47,000
Lupin 17,198 $ 43,435 $4,367 65,000
Kettle River 11,220 3,780 15,000
DEVELOPMENT PROJECTS:
Kingking 46,183 314 $ 3,467 49,964
Santa Elina 107,389 107,389
Share Investments 15,641 15,641
Other 2,116 7,690 9,806
------- -------- ------ ------- ------ --------
Total $64,198 $208,227 $8,461 $21,224 $7,690 $309,800
</TABLE>
See Note 7 to the Notes to Interim Consolidated Financial Statements in the
Company's Form 10-Q/A-1 for the period ended September 30, 1997, which is
incorporated herein by reference, for additional detail on the 1997 provision
for impaired assets.
The Company intends to assess the carrying values of its assets on an
ongoing basis as required by generally accepted accounting principles. Factors
which may affect carrying values include, but are not limited to, gold and
silver prices, capital cost estimates, mining, processing and other operating
costs, grade and metallurgical characteristics of ore, mine design and timing of
production. There can be no assurance that, particularly in the event of a
prolonged period of depressed gold prices, the Company will not be required to
take additional material write-downs of its operating and development
properties.
UNCERTAINTY OF RESERVE AND OTHER MINERALIZATION ESTIMATES
There are numerous uncertainties inherent in estimating proven and probable
reserves and other mineralization, including many factors beyond the control of
Echo Bay. The estimation of reserves and other mineralization involves
subjective judgments about many relevant factors, and the accuracy of any such
estimate is a function of the quality of available data and of engineering and
geological interpretation and judgment. Results of drilling, testing and
production subsequent to the date of an estimate may justify revision of such
estimate. Assumptions about prices are subject to great uncertainty and gold
and silver prices have fluctuated widely in recent years, and are currently at
depressed levels. See "--Gold and Silver Prices." No assurance can be given
that the volume and grade of reserves mined and processed and recovery rates
will not be less than anticipated. Declines in the market price of gold and
related precious metals also may render reserves or other mineralization
containing relatively lower grades of mineralization uneconomic to exploit. The
prices used in estimating Echo Bay's ore reserves at December 31, 1996 were $375
per ounce of gold and $5.00 per ounce of silver. The market prices were $369
per ounce of gold and $4.87 per ounce of silver at December 31, 1996
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and the market price of gold was $298 per ounce at February 4, 1997, which is
below the price at which Echo Bay has estimated its reserves. The Company has
determined that it will calculate reserves for the year ended December 31, 1997
using a $350 per ounce gold price. If Echo Bay were to determine that its
reserves and future cash flows should be calculated at a significantly lower
gold price than that used at December 31, 1996 or 1997, there would likely be a
material reduction in the amount of gold reserves. In addition, if the price
realized by Echo Bay for its gold or silver bullion were to decline
substantially below the price at which ore reserves were calculated for a
sustained period of time, Echo Bay potentially could experience material write-
downs of its investment in its mining properties. Under certain of such
circumstances, Echo Bay may discontinue the development of a project or mining
at one or more of its properties. In January 1998, the Company announced that it
would temporarily suspend operations at its Lupin mine and reduce operations at
its McCoy/Cove mine pending significant improvement in gold prices. Further,
changes in operating and capital costs and other factors, including but not
limited to short-term operating factors such as the need for sequential
development of ore bodies and the processing of new or different ore grades and
ore types, may materially and adversely affect reserves.
MINING AND PROCESSING
The Company's business operations are subject to risks and hazards inherent
in the mining industry, including but not limited to unanticipated variations in
grade and other geological problems, water conditions, surface or underground
conditions, metallurgical and other processing problems, mechanical equipment
performance problems, the unavailability of materials and equipment, accidents,
labor force disruptions, force majeure factors, unanticipated transportation
costs, and weather conditions, any of which can materially and adversely affect,
among other things, the development of properties, production quantities and
rates, costs and expenditures and production commencement dates.
The Company's processing facilities are dependent on continuous mine feed
to remain in operation. Insofar as the Company's mines may not maintain
material stockpiles of ore or material in process, any significant disruption in
either mine feed or processing throughput, whether due to equipment failures,
adverse weather conditions, supply interruptions, labor force disruptions or
other issues, may have an immediate adverse effect on the results of operations
of the Company. A significant reduction in mine feed or processing throughput
at a particular mine could cause the unit cost of production to increase to the
point where the Company could determine that some or all of the Company's
reserves were uneconomic to exploit.
The Company periodically reviews mining schedules, production levels and
asset lives in its life-of-mine planning for all of its operating and
development properties. Significant changes in the life-of-mine plans can occur
as a result of mining experience, new ore discoveries, changes in mining methods
and rates, process changes, investments in new equipment and technology,
precious metals price assumptions, and other factors. Based on this analysis,
the Company reviews its accounting estimates and in the event of an impairment,
may be required to write-down the carrying value of a mine or mines. The
Company recently completed a major review of life-of-mine plans for the
Company's four producing gold mines, and a complete evaluation of the
feasibility studies for its portfolio of development projects, exploration
properties and other assets. As a result of this process, at September 30, 1997
the Company recorded provisions to write down the carrying values of Lupin
($65.0 million), McCoy/Cove ($47.0 million) and Kettle River ($15.0 million).
This complex process continues for the life of every mine.
As a result of the foregoing risks, among other things, expenditures on any
and all projects, actual production quantities and rates, and cash costs may be
materially and adversely affected and may differ materially from anticipated
expenditures, production quantities and rates, and costs, just as estimated
production dates may be delayed materially, in each case especially to the
extent development projects are involved. Any such events can materially and
adversely affect the Company's business, financial condition, results of
operations and cash flows.
MINE DEVELOPMENT RISKS
The Company's ability to maintain, or increase, its annual production of
gold and silver will be dependent in significant part on its ability to bring
new mines into production, including the Aquarius project in Canada and the
Paredones Amarillos project in Mexico, and to expand existing mines. Recently
the Company deferred final construction decisions on Aquarius and Paredones
Amarillos and deferred further development of the Ulu satellite deposit in
Canada.
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<PAGE>
Although the Company utilizes the operating history of its existing mines to
derive estimates of future operating costs and capital requirements, such
estimates may differ materially from actual operating results at new mines or at
expansions of existing mines. The economic feasibility analysis with respect to
any individual project is based upon, among other things, the interpretation of
geological data obtained from drill holes and other sampling techniques,
feasibility studies (which derive estimates of cash operating costs based upon
anticipated tonnage and grades of ore to be mined and processed), precious
metals price assumptions, the configuration of the ore body, expected recovery
rates of metals from the ore, comparable facility and equipment costs,
anticipated climatic conditions, estimates of labor productivity, royalty or
other ownership burdens and other factors. In addition, many of the risks
identified below at "--Exploration Risks" are also applicable to the Company's
development projects. Such development projects also are subject to the
successful completion of final feasibility studies, issuance of necessary
permits and receipt of adequate financing. Although the Company's feasibility
studies are completed with the Company's knowledge of the operating history of
similar ore bodies in the region, the actual operating results of its
development projects may differ materially from those anticipated, and
uncertainties related to operations are even greater in the case of development
projects.
EXPLORATION RISKS
Since mines have limited lives based on proven and probable ore reserves,
the Company continually seeks to replace and expand its reserves. Moreover, two
of the Company's mines, McCoy/Cove and Lupin (without taking into account
supplemental production from Ulu) are entering a period of declining production
as the existing ore reserves are depleted, which has led to significant emphasis
on the Company's exploration program. Mineral exploration, at both newly
acquired properties and existing mining operations, is highly speculative in
nature, involves many risks and frequently does not result in the discovery of
minable reserves. There can be no assurance that the Company's exploration
efforts will result in the discovery of significant gold or silver
mineralization or that any mineralization discovered will result in an increase
of the Company's proven or probable reserves. If proven or probable reserves
are developed, it may take a number of years and substantial expenditures from
the initial phases of drilling until production is possible, during which time
the economic feasibility of production may change. For example, a new
feasibility study completed in December 1996 on the Alaska-Juneau project
concluded that the project was uneconomic as designed, and the Company recorded
a $77.1 million provision in connection with the decision not to proceed. No
assurance can be given that the Company's exploration programs will result in
the replacement of current production with new reserves or that the Company's
development program will be able to extend the life of the Company's existing
mines. In the event that new reserves are not developed, the Company will not
be able to sustain any mine's current level of gold or silver production beyond
the life of its existing reserve estimates.
The Company encounters strong competition from other mining companies in
connection with the acquisition of properties producing or capable of producing
precious metals. As a result of this competition, some of which is with
companies with greater financial resources than the Company, the Company may be
unable to acquire attractive mining properties on terms it considers acceptable.
In addition, there are a number of uncertainties inherent in any program
relating to the location of economic ore reserves, the development of
appropriate metallurgical processes, the receipt of necessary governmental
permits and the construction of mining and processing facilities. Accordingly,
there can be no assurance that the Company's acquisition and exploration
programs will yield new reserves to replace and expand current reserves.
RISKS RELATED TO JOINT VENTURE RELATIONSHIPS
The Company has entered into a number of strategic alliances and joint
venture relationships as part of its exploration and development activities and
expects to enter into additional such relationships in the future. The terms of
these relationships vary, but in many cases the Company is dependent on its co-
venturer for expertise in operating in environments outside of North America as
well as its relationships with governmental officials and the indigenous people
generally. In addition, under certain of the Company's arrangements, including
Santa Elina, the co-venturer has approval rights with respect to capital and/or
operating budgets and expenditures; in these circumstances, the constraints of
the capital available to the co-venturer from third parties and/or other
exploration and development or other opportunities available to the co-venturer
may affect its willingness to proceed with the Company's projects on terms
acceptable to the Company. Further, in connection with the development of a
property, the Company may be required to seek a partner or partners for
technical expertise in the development and operation phases of the project, and,
in certain
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<PAGE>
instances, for financing until cash flow is generated from the project for the
Company's account. There can be no assurance that the Company will be successful
in partnering with companies on terms that are commercially attractive.
MINING RISKS AND INSURANCE
The business of gold and silver mining is generally subject to a number of
risks and hazards, including environmental conditions, industrial accidents,
labor disputes, unusual or unexpected geological conditions, ground or slope
failures, cave-ins, changes in the regulatory environment and natural phenomena
such as inclement weather conditions, floods, blizzards and earthquakes. Such
occurrences could result in damage to, or destruction of, mineral properties or
production facilities, personal injury or death, environmental damage to the
Company's properties or the properties of others, delays in mining, monetary
losses and possible legal liability. The Company maintains insurance against
certain risks that are typical in the gold mining industry and in amounts that
the Company believes to be reasonable, but which may not provide adequate
coverage in certain circumstances. However, insurance against certain risks
(including certain liabilities for environmental pollution or other hazards as a
result of exploration and production) is not generally available to the Company
or to other companies in the industry on acceptable terms. During 1996, the
Company recorded a $30.0 million provision related to estimated costs to remove
waste rock from an unstable portion of the pit wall at McCoy/Cove.
GOVERNMENTAL REGULATION
The Company's mining operations and exploration activities are subject to
extensive foreign or US federal, state and local laws and regulations governing
exploration, development, production, exports, taxes, labor standards, waste
disposal, protection and remediation of the environment, reclamation, historic
and cultural resources preservation, mine safety and occupational health, toxic
substances and other matters. The costs of discovering, evaluating, planning,
designing, developing, constructing, operating and closing the Company's mines
and other facilities in compliance with such laws and regulations is
significant. It is possible that the costs and delays associated with
compliance with such laws and regulations could become such that the Company
would not proceed with the development or operation of a mine.
As part of its normal course operating and development activities, the
Company has expended significant resources, both financial and managerial, to
comply with governmental regulations and permitting requirements, and will
continue to do so in the future. Moreover, it is possible that future
regulatory developments, such as increasingly strict environmental protection
laws, regulations and enforcement policies thereunder, and claims for damages to
property and persons resulting from the Company's operations, could result in
substantial costs and liabilities in the future.
The Company is required to obtain governmental permits to develop its
reserves and for expansion or advanced exploration activities at its operating
and exploration properties. Obtaining the necessary governmental permits is a
complex and time-consuming process involving numerous foreign or US federal,
state and local agencies. The duration and success of each permitting effort
are contingent upon many variables not within the Company's control. In the
case of foreign operations, governmental approvals, licenses and permits are, as
a practical matter, subject to the discretion of the applicable governments or
governmental officials. In the context of environmental protection permitting,
including the approval of reclamation plans, the Company must comply with known
standards, existing laws and regulations that may entail greater or lesser costs
and delays depending on the nature of the activity to be permitted and the
interpretation of the laws and regulations implemented by the permitting
authority. The failure to obtain certain permits, or the imposition of
extensive conditions upon certain permits, could have a material adverse effect
on the Company's business, operations and prospects.
In past sessions of the United States Congress, both the House of
Representatives and Senate have considered legislation that seeks to reform the
General Mining Law of 1872, as amended (the "Mining Law"), which governs the
location and maintenance of unpatented mining claims and related activities on
federal lands. As part of the most recent budget reconciliation process, each
of the Senate and the House of Representatives passed separate legislation that
sought to reform the Mining Law, although such legislation was not enacted into
law. Similar legislation has also been proposed in the current session of the
US Congress, as has other legislation which could have the effect of increasing
costs of
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<PAGE>
operations. The Company anticipates that if Congress were to enact
legislation modifying the Mining Law, such legislation may impose a royalty on
production of minerals from unpatented mining claims, and could contain new
requirements for mined land reclamation and other environmental control
measures. The Bureau of Land Management of the US Department of the Interior
has commenced a program to revise the federal regulations applicable to
activities on unpatented mining claims to impose more stringent reclamation and
environmental protection requirements on those activities. The extent to which
any such new legislation or administrative action would affect existing
unpatented mining claims or mining operations thereon is unclear at this time.
Any reform of the Mining Law based on these initiatives could increase the costs
of mining activities on unpatented mining claims, and as a result could have an
adverse effect on the Company and its results of operations, particularly the
Company's operations at McCoy/Cove and, to a lesser extent, Round Mountain.
Until such time, if any, as new reform legislation is enacted or administrative
action is taken, the ultimate effects and costs of compliance on the Company
cannot be estimated.
RISK OF INTERNATIONAL OPERATIONS
Many of the mineral rights and interests of the Company are subject to
government approvals, licenses and permits. Such approvals, licenses and
permits are, as a practical matter, subject to the discretion of the applicable
governments or governmental officials. No assurance can be given that the
Company will be successful in obtaining any or all of the various approvals,
licenses and permits that it seeks, that it will obtain them in a timely fashion
or that it will be able to maintain them in full force and effect without
modification or revocation.
In certain countries in which the Company has assets and operations, such
assets and operations are subject to various political, economic and other
uncertainties, including, among other things, the risks of war or civil unrest,
expropriation, nationalization, renegotiation or nullification of existing
concessions, licenses, permits, approvals and contracts, taxation policies,
foreign exchange and repatriation restrictions, changing political conditions,
international monetary fluctuations, currency controls and foreign governmental
regulations that favor or require the awarding of contracts to local contractors
or require foreign contractors to employ citizens of, or purchase supplies from,
a particular jurisdiction. In addition, in the event of a dispute arising from
foreign operations, the Company may be subject to the exclusive jurisdiction of
foreign courts or may not be successful in subjecting foreign persons to the
jurisdiction of courts in the United States or Canada. The Company also may be
hindered or prevented from enforcing its rights with respect to a governmental
instrumentality because of the doctrine of sovereign immunity. It is not
possible for the Company to accurately predict such developments or changes in
law or policy or to what extent any such developments or changes may have a
material adverse effect on the Company's operations.
TITLE TO PROPERTIES
Certain of the Company's United States mineral rights, including at the
McCoy/Cove and Round Mountain properties, consist of unpatented lode mining
claims. Unpatented mining claims may be located on US federal public lands open
to appropriation, and may be either lode claims or placer claims depending upon
the nature of the deposit within the claim. In addition, unpatented millsite
claims, which may be used for processing operations or other activities
ancillary to mining operations, may be located on federal public lands that are
non-mineral in character. Unpatented mining claims and millsites are unique
property interests, and are generally considered to be subject to greater title
risk than other real property interests because the validity of unpatented
mining claims is often uncertain and is always subject to challenges of third
parties or contests by the federal government. The validity of an unpatented
mining claim, in terms of both its location and its maintenance, is dependent on
strict compliance with a complex body of federal and state statutory and
decisional law. In addition, there are few public records that definitively
control the issues of validity and ownership of unpatented mining claims.
Private parties acting on behalf of the United States in a qui tam action
have commenced suit in federal court against 14 mining companies, including the
Company. The complaint asserts that because of the foreign ownership of the
companies, they are not entitled to locate, operate or patent mining claims on
federal public lands. It seeks invalidation of all such mining claims held by
the companies and recovery of triple the value of production from them, and from
their allegedly unlawfully patented claims. Legal counsel is unable at this
early stage to predict the outcome of this action, but counsel has advised the
Company that it believes upon initial analysis that the complaint lacks
substantial merit. The Company intends to take appropriate responses and
defenses.
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INFLATION AND CURRENCY RISKS
The Company directly or indirectly holds mining interests in several
countries, including Mexico, Brazil, Russia, Burkina Faso, Mali, Ghana, Chile
and Honduras, which historically have had unstable currencies as a result of
inflation, currency controls or other reasons. Although the production
resulting from such mining interests is generally sold in US dollars, the
Company is vulnerable to the effects of inflation in its operations in certain
countries, and profitability levels may be eroded by unfavorable exchange rates.
None of the countries in which the Company holds mineral interests currently
restricts the repatriation of profits, other than through the requirement to
register such distributions. While recent years have seen a generally positive
trend toward lowering inflation and stabilizing exchange rates in these
countries, there is no assurance that governments will continue with current
economic policies or that inflation will be lower than it has been
historically.
ABSENCE OF PROTECTION FOR NOTEHOLDERS IN HIGHLY LEVERAGED TRANSACTION
As indicated under "Description of Debt Securities and Guarantees," the
Indentures do not currently contain any specific covenants or provisions that
apply in the event that the Company engages in or becomes the subject of a
highly leveraged transaction, other than the limitation on mergers,
consolidations and transfers of substantially all of the Company's properties
and assets. Such protection, if any, will be provided at the time of issuance
of a particular series of Debt Securities, and will be set forth in the
Prospectus Supplement describing the terms of such Debt Securities.
SUBORDINATED NATURE OF CERTAIN DEBT SECURITIES AND GUARANTEES
Certain Debt Securities may be subordinated in right of payment to all
Senior Indebtedness of the Company or EBR whether now outstanding or hereafter
created, incurred, assumed or guaranteed by the Company or EBR, as the case may
be. The Guarantees of Debt Securities may be subordinated in right of payment
to all Senior Indebtedness of the Company. The Indentures under which any Debt
Securities will be issued may not limit the amount of Senior Indebtedness or
other indebtedness that the Company or EBR may incur. In addition, the Debt
Securities and the Guarantees may be effectively subordinated to all liabilities
of the Company's other consolidated subsidiaries. Further, it is expected that
the Guarantees in respect of EBR Preferred Stock will rank junior to all other
obligations of the Company. By reason of such subordination, in any bankruptcy
or insolvency of the Company, holders of subordinated Debt Securities or
Guarantees may receive less, ratably, than holders of indebtedness ranking
senior to them. See "The Company," "Description of Debt Securities and
Guarantees," and "Description of EBR Preferred Stock--Guarantees."
USE OF PROCEEDS
Unless a Prospectus Supplement indicates otherwise, the net proceeds to be
received by the Company, or EBR, as the case may be, from the issue and sale
from time to time of the Securities will be added to the general funds of the
Company to be used to finance the Company's operations and for other general
corporate purposes. Pending such application, such net proceeds may be invested
in short-term marketable securities. Each Prospectus Supplement will contain
specific information concerning the use of proceeds from the sale of Securities
to which it relates.
-15-
<PAGE>
RATIO OF EARNINGS TO FIXED CHARGES AND EARNINGS
TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
RATIO OF EARNINGS TO FIXED CHARGES
Canadian GAAP. The Company's ratio of earnings to fixed charges (or
-------------
deficiency) as computed based on the Company's results of operations as
determined under accounting principles generally accepted in Canada was as
follows for the nine months ended September 30, 1997 and for each of the five
years ended December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
- -----------------
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------- ----------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
/(1)/ /(1)/ /(1)/ 2.8 2.3 /(1)/
</TABLE>
/(1)/ The Company's earnings were insufficient to cover fixed charges by $363.8
million for the nine months ended September 30, 1997. The Company's
earnings were also insufficient to cover fixed charges for each of the
following years ended December 31, as follows: by $176.1 million in 1996,
by $44.7 million in 1995 and by $31.1 million in 1992.
U. S. GAAP. The Company's ratio of earnings to fixed charges (or
----------
deficiency) as computed based on the Company's results of operations as
determined under accounting principles generally accepted in the United States
was as follows for the nine months ended September 30, 1997 and for each of the
five years ended December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
- -----------------
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------- ----------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
/(1)/ /(1)/ /(1)/ 3.7 2.9 /(1)/
</TABLE>
/(1)/ The Company's earnings were insufficient to cover fixed charges by $408.4
million for the nine months ended September 30, 1997. The Company's
earnings were also insufficient to cover fixed charges for each of the
following years ended December 31, as follows: by $173.1 million in 1996,
by $39.2 million in 1995 and by $29.8 million in 1992.
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
Canadian GAAP. The ratio of earnings to combined fixed charges and
-------------
preferred stock dividends of a subsidiary (or deficiency) as computed based on
the Company's results of operations as determined under accounting principles
generally accepted in Canada was as follows for the Company for the nine months
ended September 30, 1997 and for each of the five years ended December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
- -----------------
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------- ----------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
/(1)/ /(1)/ /(1)/ /(1)/ /(1)/ /(1)/
</TABLE>
-16-
<PAGE>
/(1)/ The Company's earnings were insufficient to cover combined fixed charges
and preferred stock dividends of a subsidiary for the nine months ended
September 30, 1997 by $363.8 million. Earnings were also insufficient to
cover combined fixed charges and preferred stock dividends for each of the
following years ended December 31, as follows: by $176.1 million in 1996,
by $58.8 million in 1995, by $4.6 million in 1994, by $7.4 million in 1993
and by $38.5 million in 1992.
U. S. GAAP. The ratio of earnings to combined fixed charges and preferred
----------
stock dividends of a subsidiary (or deficiency) as computed based on the
Company's results of operations as determined under accounting principles
generally accepted in the United States was as follows for the Company for the
nine months ended September 30, 1997 and for each of the five years ended
December 31, 1996.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
- -----------------
SEPTEMBER 30, YEARS ENDED DECEMBER 31,
------------- ----------------------------------------
1997 1996 1995 1994 1993 1992
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
/(1)/ /(1)/ /(1)/ 1.1 /(1)/ /(1)/
</TABLE>
/(1)/ The Company's earnings were insufficient to cover combined fixed charges
and preferred stock dividends of a subsidiary for the nine months ended
September 30, 1997 by $408.4 million. Earnings were also insufficient to
cover combined fixed charges and preferred stock dividends for each of the
following years ended December 31, as follows: by $173.1 million in 1996,
by $53.3 million in 1995, by $3.2 million in 1993 and by $37.2 million in
1992.
As used in the above calculations, "earnings" means earnings before income
taxes and fixed charges, and "fixed charges" means interest on all indebtedness
and that portion of rental expense that management believes to be representative
of interest expense and capitalized interest. In addition, for purposes of
calculating the ratio of earnings to fixed charges (or deficiency) on amounts as
determined under accounting principles generally accepted in Canada, the
portions of interest expense and financing costs included in shareholders'
equity related to the capital securities financing ($5.7 million for the nine
months ended September 30, 1997) has not been included. Interest expense and
financing costs related to the capital securities are classified as either
interest expense on the earnings statement or as a direct charge to retained
earnings based on the allocation of the carrying value of the capital securities
between debt and equity. If the portions of interest expense and financing
costs classified as equity were included in the calculation as fixed charges,
the deficiency of earnings to fixed charges would be $369.5 million for the nine
months ended September 30, 1997.
DESCRIPTION OF DEBT SECURITIES AND GUARANTEES
Debt Securities may be issued from time to time in one or more series by
the Company or by EBR. In the event that any series of Debt Securities is
issued by EBR, such Debt Securities will be offered together with full,
unconditional and irrevocable guarantees issued by the Company. In the
following description, references to the Issuer refer to the Company, in the
case of a series of Debt Securities issued by the Company, and to the Company
and EBR, in the case of a series of Debt Securities issued by EBR and Guaranteed
by the Company.
The Debt Securities will constitute either indebtedness designated as
Senior Indebtedness ("Senior Debt Securities"), indebtedness designated as
Senior Subordinated Indebtedness ("Senior Subordinated Debt Securities") or
indebtedness designated as Subordinated Indebtedness ("Subordinated Debt
Securities"). The particular terms of each series of Debt Securities offered by
a particular Prospectus Supplement and, if such Debt Securities are offered by
EBR, the particular terms of the Guarantees offered in connection therewith,
will be described therein. Senior Debt Securities,
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<PAGE>
Senior Subordinated Debt Securities and Subordinated Debt Securities will each
be issued under a separate indenture (individually an "Indenture" and
collectively the "Indentures") to be entered into prior to the issuance of such
Debt Securities. The Indentures will be substantially identical, except for
provisions relating to subordination and Guarantees. See "Subordination of
Senior Subordinated Debt Securities, Subordinated Debt Securities and
Guarantees". There will be a separate Trustee (individually a "Trustee" and
collectively the "Trustees") under each Indenture. Information regarding the
Trustee under an Indenture will be included in any Prospectus Supplement
relating to the Debt Securities issued thereunder.
The following discussion includes a summary description of the material
terms of the Indentures, other than terms which are specific to a particular
series of Debt Securities and which will be described in the Prospectus
Supplement relating to such series. The following summaries do not purport to
be complete and are subject to, and are qualified in their entirety by reference
to, all of the provisions of the Indentures, including the definitions therein
of certain terms capitalized in this Prospectus. Wherever particular Sections,
Articles or defined terms of the Indentures are referred to herein or in a
Prospectus Supplement, such Sections, Articles or defined terms are incorporated
herein or therein by reference.
GENERAL
The Debt Securities will be general unsecured obligations of the Company.
The Indentures do not limit the aggregate amount of Debt Securities which may be
issued thereunder, and Debt Securities may be issued thereunder from time to
time in separate series up to the aggregate amount from time to time authorized
for each series. Debt Securities of a series may be issuable in registered form
without coupons ("Registered Debt Securities"), in bearer form with or without
coupons attached ("Bearer Debt Securities") or in the form of one or more Global
Securities in registered or bearer form (each, a "Global Security"). Bearer
Debt Securities, if any, will be offered only to non-United States persons and
to offices located outside the United States of certain United States financial
institutions.
Any Debt Security issued by EBR will be fully, unconditionally and
irrevocably guaranteed by the Company as to payment of principal, premium, if
any, and interest.
The applicable Prospectus Supplement or Prospectus Supplements will
describe the following terms of the series of Debt Securities in respect of
which this Prospectus is being delivered: (1) the Issuer (which may be the
Company or EBR) and title of such Debt Securities; (2) any limit on the
aggregate principal amount of such Debt Securities; (3) whether such Debt
Securities will be issued as Registered Debt Securities, Bearer Debt Securities
or any combination thereof, and any limitation on issuance of such Bearer Debt
Securities and any provisions regarding the transfer or exchange of such Bearer
Debt Securities, including exchange for Registered Debt Securities of the same
series; (4) whether any of such Debt Securities are to be issuable in permanent
global form ("Global Security") and, if so, the terms and conditions, if any,
upon which interests in such Debt Securities in global form may be exchanged, in
whole or in part, for the individual Debt Securities represented thereby; (5)
the person to whom any interest on any Debt Security of the series shall be
payable, if other than the person in whose name the Debt Security is registered
on the Regular Record Date; (6) the date or dates on which such Debt Securities
will mature; (7) the rate or rates of interest (which may be fixed or variable),
if any, or the method of calculation thereof, which such Debt Securities will
bear, and the basis upon which interest will be calculated if other than that of
a 360-day year of twelve 30-day months; (8) the date or dates from which any
such interest will accrue, the Interest Payment Dates on which any such interest
on such Debt Securities will be payable, the Regular Record Date for any
interest payable on any Interest Payment Date and any provision for the deferral
of interest payments; (9) whether any such interest will be payable in cash,
through the issuance of additional Debt Securities, through the issuance of
Common Shares, through some combination of cash and additional Debt Securities
or through some combination of cash and Common Shares; (10) the place or places
where the principal of, premium, if any, and interest on such Debt Securities
will be payable; (11) the period or periods within which, the events upon the
occurrence of which, and the price or prices at which, such Debt Securities may,
pursuant to any optional or mandatory provisions, be redeemed or purchased, in
whole or in part, by the Issuer and any terms and conditions relevant thereto;
(12) the obligations of the Issuer, if any, to redeem or repurchase such Debt
Securities pursuant to any sinking fund or analogous provisions or at the option
of the Holders thereof; (13) the denominations in which any such Debt Securities
will be issuable, if other than denominations of US $1,000 and any integral
multiple thereof; (14) the units of payment of principal of, premium, if any,
and interest on such Debt Securities if other than US dollars, which
-18-
<PAGE>
units may consist of currency, currencies, currency unit or units, or securities
and the manner of determining the U.S. dollar equivalent of foreign currency;
(15) any index or formula to be used to determine the amount of payments of
principal, premium, if any, and interest on such Debt Securities, and any
commodities, currencies, currency units or indices, or value, rate or price,
relevant to such determination; (16) if the principal of, premium, if any, or
interest on such Debt Securities is to be payable, at the election of the Issuer
or a Holder thereof, in one or more currencies or currency units other than that
or those in which such Debt Securities are stated to be payable, the currencies
or currency units in which payment of the principal of, premium, if any, and
interest on such Debt Securities as to which election is made shall be payable,
and the periods within which and the terms and conditions upon which such
election is to be made; (17) if other than the principal amount thereof, the
portion of the principal amount of such Debt Securities of the series which will
be payable upon acceleration of the Maturity thereof; (18) whether such Debt
Securities are subordinate in right of payment to any Senior Indebtedness of the
Issuer and, if so, the terms and conditions of such subordination and the
aggregate principal amount of such Senior Indebtedness outstanding as of a
recent date; (19) any covenants to which the Issuer may be subject with respect
to such Debt Securities, including whether the Issuer is required to offer to
purchase all Debt Securities of a series upon a change of control; (20) the
applicability of the provisions described under "--Defeasance" below; (21) the
terms and conditions, if any, pursuant to which such Debt Securities are
convertible into or exchangeable for Common Shares or other securities; (22)
United States and Canadian Federal income tax consequences, if any; (23) the
provisions for the payment of additional amounts with respect to any Canadian
withholding taxes in certain cases; and (24) any other terms of such Debt
Securities.
Debt Securities may be issued at a discount from their principal amount.
United States and Canadian Federal income tax considerations and other special
considerations applicable to any such Original Issue Discount Securities will be
described in the applicable Prospectus Supplement.
If the purchase price of any series of Debt Securities is denominated in a
foreign currency or currencies or a foreign currency unit or units or if the
principal of, premium, if any, and interest on any series of Debt Securities are
payable in a foreign currency or currencies, a foreign currency unit or units or
in securities, the restrictions, elections, general tax considerations, specific
terms and other information with respect to such series of Debt Securities will
be set forth in the applicable Prospectus Supplement.
Debt Securities may be issued from time to time with payment terms which
are calculated by reference to the value, rate or price of one or more
commodities, currencies, currency units or indices. Holders of such Debt
Securities may receive a principal amount (including premium, if any) on any
principal payment date, or a payment of interest on any interest payment date,
that is greater than or less than the amount of principal (including premium, if
any) or interest otherwise payable on such dates, depending upon the value, rate
or price on the applicable dates of the applicable currency, currency unit,
commodity or index. Information as to the methods for determining the amount of
principal, premium, if any, or interest payable on any date, the currencies,
currency units, commodities or indices to which the amount payable on such date
is linked and any additional tax considerations will be set forth in the
applicable Prospectus Supplement.
Except as may be set forth in the applicable Prospectus Supplement, Holders
of Debt Securities will not have the benefit of any specific covenants or
provisions in the applicable Indenture or such Debt Securities in the event that
the Issuer engages in or becomes the subject of a highly leveraged transaction,
other than the limitations on mergers, consolidations and transfers of
substantially all of the Issuer's properties and assets as an entirety to any
person as described below under "--Consolidation, Merger and Sale of Assets."
INCURRENCE OF ADDITIONAL INDEBTEDNESS
The Indentures generally do not prohibit the Issuer from incurring
indebtedness in addition to the Debt Securities. The Indentures provide that
the Issuer shall not issue, assume, guarantee, incur or otherwise become liable,
directly or indirectly, for any indebtedness which is subordinate or junior in
right of payment to any Senior Indebtedness unless such indebtedness constitutes
Debt Securities or is pari passu or expressly subordinated in right of payment
to any Debt Securities. Any additional limitations on the Issuer's ability to
incur additional indebtedness will be described in the applicable Prospectus
Supplement.
-19-
<PAGE>
GUARANTEES
The Company will fully, unconditionally and irrevocably guarantee, on a
senior, senior subordinated or subordinated basis, the due and punctual payment
of principal of, premium, if any, and interest on any Debt Securities that are
issued by EBR, and the due and punctual payment of any sinking fund payments
thereon, when and as the same shall become due and payable, whether at the
maturity date, by declaration of acceleration, call for redemption or otherwise.
See "--Subordination of Senior Subordinated Debt Securities, Subordinated Debt
Securities and Guarantees."
SENIOR DEBT SECURITIES
The Senior Debt Securities will rank pari passu with all other unsecured
and unsubordinated debt of the Issuer and senior to the Senior Subordinated Debt
Securities and Subordinated Debt Securities.
SUBORDINATION OF SENIOR SUBORDINATED DEBT SECURITIES, SUBORDINATED DEBT
SECURITIES AND GUARANTEES
The payment of the principal of, premium, if any, and interest on the
Senior Subordinated Debt Securities and the Subordinated Debt Securities will,
to the extent set forth in the respective Indentures governing such Senior
Subordinated Debt Securities and Subordinated Debt Securities, be subordinated
in right of payment to the prior payment in full of all Senior Indebtedness.
Upon any payment or distribution of assets to creditors upon any liquidation,
dissolution, winding up, reorganization, assignment for the benefit of
creditors, marshalling of assets or any bankruptcy, insolvency or similar
proceedings of the Issuer, the holders of all Senior Indebtedness will be
entitled to receive payment in full of all amounts due or to become due thereon
before the Holders of the Senior Subordinated Debt Securities or the
Subordinated Debt Securities will be entitled to receive any payment in respect
of the principal of, premium, if any, or interest on such Senior Subordinated
Debt Securities or Subordinated Debt Securities, as the case may be. In the
event of the acceleration of the maturity of any Senior Subordinated Debt
Securities or Subordinated Debt Securities, the holders of all Senior
Indebtedness will be entitled to receive payment in full of all amounts due or
to become due thereon before the Holders of the Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be, will be entitled
to receive any payment upon the principal of, premium, if any, or interest on
such Senior Subordinated Debt Securities or Subordinated Debt Securities, as the
case may be. No payments on account of principal, premium, if any, or interest
in respect of the Senior Subordinated Debt Securities or Subordinated Debt
Securities may be made if there shall have occurred and be continuing a default
in the payment of principal of (or premium, if any) or interest on any Senior
Indebtedness beyond any applicable grace period, or a default with respect to
any Senior Indebtedness permitting the holders thereof to accelerate the
maturity thereof, or if any judicial proceedings shall be pending with respect
to any such default. For purposes of the subordination provisions, the payment,
issuance or delivery of cash, property or securities (other than stock, and
certain subordinated securities, of the Issuer) upon conversion or exchange of a
Senior Subordinated Debt Security or Subordinated Debt Security will be deemed
to constitute payment on account of the principal of such Senior Subordinated
Debt Security or Subordinated Debt Security, as the case may be.
By reason of such provisions, in the event of insolvency, holders of Senior
Subordinated Debt Securities and Subordinated Debt Securities may recover less,
ratably, than holders of Senior Indebtedness with respect thereto.
The term "Senior Indebtedness", when used with respect to any series of
Senior Subordinated Debt Securities or Subordinated Debt Securities, is defined
to include all amounts due on and obligations in connection with any of the
following, whether outstanding at the date of execution of the Indenture or
thereafter incurred, assumed, guaranteed or otherwise created (including,
without limitation, interest accruing on or after a bankruptcy or other similar
event, whether or not an allowed claim therein):
(a) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Issuer for money borrowed or evidenced by securities,
bonds, debentures, notes or similar instruments;
(b) reimbursement obligations and other liabilities (contingent or
otherwise) of the Issuer with respect to letters of credit or bankers'
acceptances issued for the account of the Issuer and interest rate
protection agreements and currency exchange or purchase agreements;
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<PAGE>
(c) obligations and liabilities (contingent or otherwise) of the Issuer
related to capitalized lease obligations;
(d) indebtedness, obligations and other liabilities (contingent or
otherwise) of the Issuer related to agreements or arrangements designed
to protect the Issuer against fluctuations in commodity prices,
including without limitation, interest rate swaps, commodity futures
contracts or similar hedging instruments;
(e) indebtedness of others of the kinds described in the preceding clauses
(a) through (d) that the Issuer has assumed, guaranteed or otherwise
assured the payment of, directly or indirectly;
(f) indebtedness of another Person of the type described in the preceding
clauses (a) through (e) secured by any mortgage, pledge, lien or other
encumbrance on property owned or held by the Issuer; and
(g) deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any indebtedness, obligation or
liability described in the preceding clauses (a) through (f) whether or
not there is any notice to or consent of the Holders of such series of
Senior Subordinated Debt Securities or Subordinated Debt Securities, as
the case may be;
except that, with respect to the Senior Subordinated Debt Securities, any
particular indebtedness, obligation, liability, guaranty, assumption, deferral,
renewal, extension or refunding shall not constitute "Senior Indebtedness" if it
is expressly stated in the governing terms, or in the assumption or guarantee,
thereof that the indebtedness involved is not senior in right of payment to the
Senior Subordinated Debt Securities or that such indebtedness is pari passu with
or junior to the Senior Subordinated Debt Securities and, with respect to
Subordinated Debt Securities, any particular indebtedness, obligation,
liability, guaranty, assumption, deferral, renewal, extension or refunding shall
not constitute "Senior Indebtedness" if it is expressly stated in the governing
terms, or in the assumption or guarantee, thereof that the indebtedness involved
is not senior in right of payment to the Subordinated Debt Securities or that
such indebtedness is pari passu with or junior to the Subordinated Debt
Securities.
In certain circumstances, such as the bankruptcy or insolvency of the
Issuer, Canadian or US bankruptcy or insolvency legislation may be applicable
and the application of such legislation may lead to different results with
respect to, for example, payments to be made to Holders of Debt Securities, or
priorities between Holders of the Debt Securities and holders of Senior
Indebtedness, than those provided for in the applicable Indenture.
If this Prospectus is being delivered in connection with a series of Senior
Subordinated Debt Securities or Subordinated Debt Securities, the accompanying
Prospectus Supplement or the information incorporated herein by reference will
set forth the approximate amount of Senior Indebtedness outstanding as of the
end of the Issuer's most recent fiscal quarter.
In the event that Senior Subordinated Debt Securities or Subordinated Debt
Securities are issued by EBR, the related Guarantees issued by the Company will
be subordinate and junior in right of payment to Senior Indebtedness of the
Company on substantially the same terms and conditions as the obligations of EBR
under the Senior Subordinated Debt Securities or the Subordinated Debt
Securities, as the case may be, will be subordinate and junior in right of
payment to Senior Indebtedness of EBR.
CONVERSION OR EXCHANGE OF DEBT SECURITIES
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, such series will be convertible or
exchangeable into Common Shares or other securities of the Company (including
rights to receive payments in cash or securities based on the value, rate or
price of one or more specified commodities, currencies, currency units or
indices) on the terms and conditions set forth therein.
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<PAGE>
FORM, EXCHANGE, REGISTRATION, CONVERSION, TRANSFER AND PAYMENT
Debt Securities are issuable in definitive form as Registered Debt
Securities, as Bearer Debt Securities or both. Unless otherwise indicated in an
applicable Prospectus Supplement, Bearer Debt Securities will have interest
coupons attached. Debt Securities are also issuable in temporary or permanent
global form.
Registered Debt Securities of any series will be exchangeable for other
Registered Debt Securities of the same series and of a like aggregate principal
amount and tenor of different authorized denominations. In addition, with
respect to any series of Bearer Debt Securities, at the option of the holder,
subject to the terms of the Indenture, such Bearer Debt Securities (with all
unmatured coupons, except as provided below, and all matured coupons in default)
will be exchangeable into Registered Debt Securities of the same series of any
authorized denominations and of a like aggregate principal amount and tenor.
Bearer Debt Securities surrendered in exchange for Registered Debt Securities
between a Regular Record Date or a Special Record Date and the relevant date for
payment of interest shall be surrendered without the coupon relating to such
date for payment of interest, and interest accrued as of such date will not be
payable in respect of the Registered Debt Security issued in exchange for such
Bearer Debt Security, but will be payable only to the holder of such coupon when
due in accordance with the terms of the Indenture.
In connection with its sale during the restricted period (as defined
below), no Bearer Debt Security (including a Debt Security in permanent global
form that is either a Bearer Debt Security or exchangeable for Bearer Debt
Securities) shall be mailed or otherwise delivered to any location in the United
States (as defined under "--Limitations on Issuance of Bearer Debt Securities")
and a Bearer Debt Security may be delivered outside the United States in
definitive form in connection with its original issuance only if prior to
delivery the person entitled to receive such Bearer Debt Security furnishes
written certification, in the form required by the Indenture, to the effect that
such Bearer Debt Security is owned by: (a) a person (purchasing for its own
account) who is not a United States person (as defined under "--Limitations on
Issuance of Bearer Debt Securities"); (b) a United States person who (i) is a
foreign branch of a United States financial institution purchasing for its own
account or for resale or (ii) acquired such Bearer Debt Security through the
foreign branch of a United States financial institution and who for purposes of
the certification holds such Bearer Debt Security through such financial
institution on the date of certification and, in either case, such United States
financial institution certifies to the Issuer or the distributor selling the
Bearer Debt Security within a reasonable time stating that it agrees to comply
with the requirements of Section 165(j)(3)(A), (B) or (C) of the United States
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
thereunder, or (c) a United States or foreign financial institution for purposes
of resale within the "restricted period" as defined in United States Treasury
Regulations Section 1.163-5(c)(2)(i)(D)(7). A financial institution described
in clause (c) of the preceding sentence (whether or not also described in
clauses (a) and (b)) must certify that it has not acquired the Bearer Debt
Security for purpose of resale, directly or indirectly, to a United States
person or to a person within the United States or its possessions. In the case
of a Bearer Debt Security in permanent global form, such certification must be
given in connection with notation of a beneficial owner's interest therein in
connection with the original issuance of such Debt Security or upon exchange of
a portion of a temporary global Debt Security.
Debt Securities may be presented for exchange as provided above, and
Registered Debt Securities may be presented for registration of transfer (with
the form of transfer endorsed thereon duly executed), at the office or agency of
the Issuer maintained for such purposes and at any other office or agency
maintained for such purpose with respect to any series of Debt Securities and
referred to in the applicable Prospectus Supplement, without a service charge
and upon payment of any taxes and other governmental charges as described in the
Indenture. Such transfer or exchange will be effected upon the Issuer or its
agent, as the case may be, being satisfied with the documents of title and
identity of the person making the request.
In the event of any redemption in part, the Issuer shall not be required to
(i) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days prior to the
selection of Debt Securities of that series for redemption and ending on the
close of business on (A) if Debt Securities of the series are issued only as
Registered Debt Securities, the day of mailing of the relevant notice of
redemption and (B) if Debt Securities of the series are issued as Bearer Debt
Securities, the day of the first publication of the relevant notice of
redemption except that, if Securities of the series are also issued as
Registered Debt Securities and there is no publication, the day of mailing of
the relevant notice of redemption; (ii) register the transfer of or exchange any
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<PAGE>
Registered Debt Security, or portion thereof, called for redemption, except the
unredeemed portion of any Registered Debt Security being redeemed in part; or
(iii) exchange any Bearer Debt Security called for redemption, except to
exchange such Bearer Debt Security for a Registered Debt Security of that series
and like tenor which is simultaneously surrendered for redemption.
FORM OF INTEREST PAYMENTS
If so indicated in the applicable Prospectus Supplement with respect to a
particular series of Debt Securities, any interest payable on such series will
be payable (i) in cash, (ii) through the issuance of additional Debt Securities,
(iii) through the issuance of the Company's Common Shares, or (iv) some
combination of either (i) and (ii) or (i) and (iii), above, and on the terms and
conditions set forth in such Prospectus Supplement.
PAYMENT AND PAYING AGENTS
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and interest on Bearer Debt Securities
will be payable, subject to any applicable laws and regulations, in the
designated currency or currency unit, at the offices of such Paying Agents
("Paying Agents") outside the United States as the Issuer may designate from
time to time, at the option of the holder, by check or by transfer to an account
maintained by the payee with a bank located outside the United States; provided,
however, that the written certification described above under "-- Form,
Exchange, Registration, Conversion, Transfer and Payment" has been delivered
prior to the first actual payment of interest. Unless otherwise indicated in
the applicable Prospectus Supplement, payment of interest on Bearer Debt
Securities on any Interest Payment Date will be made only against surrender to
the Paying Agent of the coupon relating to such Interest Payment Date. No
payment with respect to any Bearer Debt Security will be made at any office or
agency of the Issuer in the United States or by check mailed to any address in
the United States or by transfer to any account maintained with a bank located
in the United States, nor shall any payments be made in respect of Bearer Debt
Securities upon presentation to the Issuer or its designated Paying Agents
within the United States. Notwithstanding the foregoing, payments of principal
of (and premium, if any) and interest on Bearer Debt Securities denominated and
payable in US dollars will be made at the office of the Issuer's Paying Agent in
the United States, if (but only if) payment of the full amount thereof in US
dollars at all offices or agencies outside the United States is illegal or
effectively precluded by exchange controls or other similar restrictions.
Unless otherwise indicated in the applicable Prospectus Supplement, payment
of principal of (and premium, if any) and interest on Registered Debt Securities
will be made in the designated currency or currency unit at the office of such
Paying Agent or Paying Agents as the Issuer may designate from time to time,
except that at the option of the Issuer payment of any interest may be made by
check mailed to the address of the person entitled thereto as such address shall
appear in the Security Register. Unless otherwise indicated in an applicable
Prospectus Supplement, payment of any installment of interest on Registered Debt
Securities will be made to the person in whose name such Registered Debt
Security is registered at the close of business on the Regular Record Date for
such interest.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Corporate Trust Office of the Trustee will be designated as a Paying Agent for
the Trustee for payments with respect to Debt Securities which are issuable
solely as Registered Debt Securities, and the Issuer will maintain a Paying
Agent outside the United States for payments with respect to Debt Securities
(subject to limitations described above in the case of Bearer Debt Securities)
which are issued solely as Bearer Debt Securities, or as both Registered Debt
Securities and Bearer Debt Securities. Any Paying Agents outside the United
States and any other Paying Agents in the United States initially designated by
the Issuer for the Debt Securities will be named in an applicable Prospectus
Supplement. The Issuer may at any time designate additional Paying Agents or
rescind the designation of any Paying Agent or approve a change in the office
through which any Paying Agent acts, except that, if Debt Securities of a series
are issued solely as Registered Debt Securities, the Issuer will be required to
maintain a Paying Agent in each Place of Payment for such series and, if Debt
Securities of a series are issued as Bearer Securities, the Issuer will be
required to maintain (i) a Paying Agent in the United States for principal
payments with respect to any Registered Debt Securities of the series (and for
payments with respect to Bearer Debt Securities of the series in the
circumstances described above, but not otherwise), and (ii) a Paying Agent in a
Place of Payment located outside the United States where Securities of such
series and any coupons appertaining thereto may be presented and surrendered for
payment.
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All monies paid by the Issuer to a Paying Agent for the payment of
principal of and any premium or interest on any Debt Security which remain
unclaimed at the end of two years after such principal, premium or interest
shall have become due and payable will (subject to applicable escheat laws) be
repaid to the Issuer and the holder of such Debt Security or any coupon will
thereafter look only to the Issuer for payment thereof.
TEMPORARY GLOBAL SECURITIES
If so specified in the applicable Prospectus Supplement, all or any portion
of the Debt Securities of a series which are issuable as Bearer Debt Securities
will initially be represented by one or more temporary global Debt Securities,
without interest coupons, to be deposited with a common depository in London for
the Euroclear System ("Euroclear") and CEDEL S.A. ("CEDEL") for credit to the
designated accounts. On and after the date determined as provided in any such
temporary global Debt Security and described in the applicable Prospectus
Supplement, each such temporary global Debt Security will be exchangeable for
definitive Bearer Debt Securities, definitive Registered Debt Securities or all
or a portion of a permanent global security, or any combination thereof, as
specified in the applicable Prospectus Supplement, but, unless otherwise
specified in the applicable Prospectus Supplement, only upon written
certification in the form and to the effect described under "-- Form, Exchange,
Registration, Conversion, Transfer and Payment." No Bearer Debt Security
delivered in exchange for a portion of a temporary global Debt Security will be
mailed or otherwise delivered to any location in the United States in connection
with such exchange.
Unless otherwise specified in the applicable Prospectus Supplement,
interest in respect of any portion of a temporary global Debt Security payable
in respect of an Interest Payment Date occurring prior to the issuance of
definitive Debt Securities or a permanent global Debt Security will be paid to
each of Euroclear and CEDEL with respect to the portion of the temporary global
Debt Security held for its account. Each of Euroclear and CEDEL will undertake
in such circumstances to credit such interest received by it in respect of a
temporary global Debt Security to the respective accounts for which it holds
such temporary global Debt Security only upon receipt in each case of written
certification in the form and to the effect described above under "-- Form,
Exchange, Registration, Conversion, Transfer and Payment" as of the relevant
Interest Payment Date regarding the portion of such temporary global Debt
Security on which interest is to be so credited.
PERMANENT GLOBAL SECURITIES
If any Debt Securities of a series are issuable in permanent global form,
the applicable Prospectus Supplement will describe the circumstances, if any,
under which beneficial owners of interests in any such permanent global Debt
Securities may exchange such interests for Debt Securities of such series and of
like tenor and principal amount in any authorized form and denomination. No
Bearer Debt Security delivered in exchange for a portion of a permanent global
Debt Security shall be mailed or otherwise delivered to any location in the
United States in connection with such exchange.
BOOK-ENTRY DEBT SECURITIES
The Debt Securities of a series may be issued in whole or in part in the
form of one or more Global Securities that will be deposited with, or on behalf
of, a depositary ("Depositary") or its nominee identified in the applicable
Prospectus Supplement. In such a case, one or more Global Securities will be
issued in a denomination or aggregate denomination equal to the portion of the
aggregate principal amount of Outstanding Debt Securities of the series to be
represented by such Global Security or Securities. Unless and until it is
exchanged in whole or in part for Debt Securities in registered form, a Global
Security may not be registered for transfer or exchange except as a whole by the
Depositary for such Global Security to a nominee of such Depositary or by a
nominee of such Depositary to such Depositary or another nominee of such
Depositary or by such Depositary or any nominee to a successor Depositary or a
nominee of such successor Depositary and except in the circumstances described
in the applicable Prospectus Supplement.
The specific terms of the depositary arrangement with respect to any
portion of a series of Debt Securities to be represented by a Global Security
will be described in the applicable Prospectus Supplement. The Issuer expects
that the following provisions will apply to depositary arrangements.
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Unless otherwise specified in the applicable Prospectus Supplement, Debt
Securities which are to be represented by a Global Security to be deposited with
or on behalf of a Depositary will be represented by a Global Security registered
in the name of such Depositary or its nominee. Upon the issuance of such Global
Security, and the deposit of such Global Security with or on behalf of the
Depositary for such Global Security, the Depositary will credit, on its book-
entry registration and transfer system, the respective principal amounts of the
Debt Securities represented by such Global Security to the accounts of
institutions that have accounts with such Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters or agents of such Debt Securities or by the Issuer, if such Debt
Securities are offered and sold directly by the Issuer. Ownership of beneficial
interests in such Global Security will be limited to participants or Persons
that may hold interests through participants. Ownership of beneficial interests
by participants in such Global Security will be shown on, and the transfer of
that ownership interest will be effected only through, records maintained by the
Depositary or its nominee for such Global Security. Ownership of beneficial
interests in such Global Security by Persons that hold through participants will
be shown on, and the transfer of that ownership interest within such participant
will be effected only through, records maintained by such participant. The laws
of some jurisdictions require that certain purchasers of securities take
physical delivery of such securities in certificated form. The foregoing
limitations and such laws may impair the ability to transfer beneficial
interests in such Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or Holder of the Debt
Securities represented by such Global Security for all purposes under the
applicable Indenture. Unless otherwise specified in the applicable Prospectus
Supplement, owners of beneficial interests in such Global Security will not be
entitled to have Debt Securities of the series represented by such Global
Security registered in their names, will not receive or be entitled to receive
physical delivery of Debt Securities of such series in certificated form and
will not be considered the Holders thereof for any purposes under the applicable
Indenture. Accordingly, each Person owning a beneficial interest in such Global
Security must rely on the procedures of the Depositary for such Global Security
and, if such Person is not a participant, on the procedures of the participant
through which such Person owns its interest, to exercise any rights of a Holder
under the applicable Indenture. The Issuer understands that under existing
industry practices, if the Issuer requests any action of Holders or an owner of
a beneficial interest in such Global Security desires to give notice or take any
action a Holder is entitled to give or take under an Indenture, the Depositary
for such Global Security would authorize the participants to give such notice or
take such action, and participants would authorize beneficial owners owning
through such participants to give such notice or take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
Principal of, premium, if any, and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
Unless otherwise specified in the applicable Prospectus Supplement, if the
Depositary for any series of Debt Securities represented by a Global Security is
at any time unwilling or unable to continue as Depositary or ceases to be a
clearing agency registered or in good standing under the Exchange Act and a
successor Depositary is not appointed by the Issuer within 90 days after the
Issuer receives notice or becomes aware of such condition, the Issuer will issue
such Debt Securities in definitive certificated form in exchange for such Global
Security. In addition, the Company may at any time and in its sole discretion
determine not to have any of the Debt Securities of a series represented by one
or more Global Securities and, in such event, will issue Debt Securities of such
series in definitive certificated form in exchange for all of the Global
Security or Securities representing such Debt Securities.
LIMITATIONS ON ISSUANCE OF BEARER DEBT SECURITIES
In compliance with United States Federal tax laws and regulations, Bearer
Debt Securities (including securities in permanent global form that are either
Bearer Debt Securities or exchangeable for Bearer Debt Securities) will not be
offered or sold during the restricted period (as defined in United States
Treasury Regulations Section 1.163-5(c)(2)(i)(D)(7)) (generally, the first 40
days after the closing date, and, with respect to unsold allotments, until sold)
within the United States or to United States persons (each as defined below)
other than to an office located outside the United States of a United States
financial institution (as defined in Section 1.165-12(c)(1)(v) of the United
States Treasury Regulations), purchasing for its own account or for resale or
for the account of certain customers, that provides a certificate stating that
it agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of
the
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Code and the United States Treasury Regulations thereunder, or to certain other
persons described in Section 1.163-5(c)(2)(i)(D)(1)(iii)(B) of the United States
Treasury Regulations. Moreover, such Bearer Debt Securities will not be
delivered in connection with their sale during the restricted period within the
United States. Any underwriters and dealers participating in the offering of
Bearer Debt Securities must covenant that they will not offer or sell during the
restricted period any Bearer Debt Securities within the United States or to
United States persons (other than the persons described above) or deliver in
connection with the sale of Bearer Debt Securities during the restricted period
any Bearer Debt Securities within the United States and that they have in effect
procedures reasonably designed to ensure that their employees and agents who are
directly engaged in selling the Bearer Debt Securities are aware of the
restrictions described above. No Bearer Debt Security (other than a temporary
global Bearer Debt Security) will be delivered in connection with its original
issuance nor will interest be paid on any Bearer Debt Security until receipt by
the Issuer of the written certification described above under "--Form, Exchange,
Registration, Conversion, Transfer and Payment." Each Bearer Debt Security,
other than a temporary global Bearer Debt Security, will bear a legend to the
following effect: "Any United States person who holds this obligation will be
subject to limitations under the United States Federal income tax laws,
including the limitations provided in Sections 165(j) and 1287(a) of the
Internal Revenue Code."
As used herein, "United States person" means any citizen or resident of the
United States, any corporation, partnership or other entity created or organized
in or under the laws of the United States and any estate or trust the income of
which is subject to United States Federal income taxation regardless of its
source, and "United States" means the United States of America (including the
states and the District of Columbia) and its possessions.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture with respect to
Debt Securities of any series: (a) failure to pay principal (or premium, if any)
on any Debt Security of that series when due, whether or not such failure is a
result of the subordination provisions of the Indenture with respect to such
series; (b) failure to pay any interest on any Debt Security of that series when
due, continued for 30 days, whether or not such failure is a result of the
subordination provisions of the Indenture with respect to such series; (c)
failure to make any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) failure to perform any other covenant of the Issuer
in the applicable Indenture or any other covenant to which the Issuer may be
subject with respect to Debt Securities of that series (other than a covenant
solely for the benefit of a series of Debt Securities other than that series),
continued for 90 days after written notice as provided in the applicable
Indenture; (e) certain events of bankruptcy, insolvency or reorganization; and
(f) any other Event of Default provided with respect to Debt Securities of that
series.
If an Event of Default with respect to Outstanding Debt Securities of any
series shall occur and be continuing, either the Trustee or the Holders of at
least 25% in principal amount of the Outstanding Debt Securities of that series,
by notice as provided in the applicable Indenture, may declare the principal
amount (or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all Debt Securities of that series to be due and
payable immediately, except that upon the occurrence of an Event of Default
specified in (f) above, the principal amount (or in the case of Original Issue
Discount Securities, such portion) of all Debt Securities shall be immediately
due and payable without notice. However, at any time after a declaration of
acceleration with respect to Debt Securities of any series has been made, but
before judgment or decree based on such acceleration has been obtained, the
Holders of a majority in principal amount of the Outstanding Debt Securities of
that series may, under certain circumstances, rescind and annul such
acceleration. For information as to waiver of defaults, see "--Modification and
Waiver" below.
The Indentures will provide that, subject to the duty of the respective
Trustees thereunder during an Event of Default to act with the required standard
of care, each such Trustee will be under no obligation to exercise any of its
rights or powers under the respective Indentures at the request or direction of
any of the Holders, unless such Holders shall have offered to such Trustee
reasonable security or indemnity. Subject to certain provisions, including
those requiring security or indemnification of the applicable Trustee, the
Holders of a majority in principal amount of the Outstanding Debt Securities of
any series will have the right to direct the time, method and place of
conducting any proceeding for any remedy available to such Trustee, or
exercising any trust or power conferred on such Trustee, with respect to the
Debt Securities of that series.
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No Holder of a Debt Security of any series will have any right to institute
any proceeding with respect to the applicable Indenture or for any remedy
thereunder, unless such Holder shall have previously given to the applicable
Trustee written notice of a continuing Event of Default and unless also the
Holders of at least 25% in aggregate principal amount of the Outstanding Debt
Securities of the same series shall have written requests, and offered
reasonable indemnity, to such Trustee to institute such proceeding as trustee,
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of the Outstanding Debt Securities of the same series
a direction inconsistent with such request and shall have failed to institute
such proceeding within 60 days. However, such limitations do not apply to a
suit instituted by a Holder of a Debt Security for enforcement of payment of the
principal of and interest on such Debt Security on or after the respective due
dates expressed in such Debt Security.
The Issuer will be required to furnish to the Trustees annually a statement
as to the performance by the Issuer of its obligations under the respective
Indentures and as to any default in such performance.
MODIFICATION AND WAIVER
Without the consent of any Holder of Outstanding Debt Securities, the
Issuer and the Trustees may amend or supplement the Indentures or the Debt
Securities to cure any ambiguity, defect or inconsistency, or to make any change
that does not adversely affect the rights of any Holder of Debt Securities.
Other modifications and amendments of the respective Indentures may be made by
the Issuer and the applicable Trustee with the consent of the Holders of not
less than a majority in aggregate principal amount of the Outstanding Debt
Securities of each series affected thereby; provided, however, that no such
modification or amendment may, without the consent of the Holder of each
Outstanding Debt Security affected thereby: (a) change the Stated Maturity of
the principal of, or any instalment of principal of, or premium, if any, or
interest on any Debt Security; (b) reduce the principal amount of, the rate of
interest on, or the premium, if any, payable upon the redemption of, any Debt
Security; (c) reduce the amount of principal of an Original Issue Discount
Security payable upon acceleration of the Maturity thereof; (d) change the place
or currency of payment of principal of, premium, if any, or interest on any Debt
Security; (e) impair the right to institute suit for the enforcement of any
payment on or with respect to any Debt Security on or after the Stated Maturity
or Redemption Date thereof; (f) modify the conversion or exchange provisions
applicable to convertible or exchangeable Debt Securities in a manner adverse to
the holders thereof; (g) modify the subordination provisions applicable to
Senior Subordinated Debt Securities or Subordinated Debt Securities in a manner
adverse to the Holders thereof; (h) reduce the percentage in principal amount of
Outstanding Debt Securities of any series, the consent of the Holders of which
is required for modification or amendment of the applicable Indenture or for
waiver of compliance with certain provisions of the applicable Indenture or for
waiver of certain defaults or (i) modify any of the provisions of certain
sections as specified in the Indenture including the provisions summarized in
this paragraph, except to increase any such percentage or to designate
additional provisions of the Indenture, which, with respect to such series,
cannot be modified or waived without the consent of the Holder of each
Outstanding Debt Security affected thereby.
The Holders of at least a majority in principal amount of the Outstanding
Debt Securities of any series may on behalf of the Holders of all Debt
Securities of that series waive, insofar as that series is concerned, compliance
by the Company with certain covenants of the applicable Indenture. The Holders
of not less than a majority in principal amount of the Outstanding Debt
Securities of any series may, on behalf of the Holders of all Debt Securities of
that series, waive any past default under the applicable Indenture with respect
to that series, except a default in the payment of the principal of, premium, if
any, or interest on, any Debt Security of that series or in respect of a
provision which under the applicable Indenture cannot be modified or amended
without the consent of the Holder of each Outstanding Debt Security of that
series affected.
CONSOLIDATION, MERGER AND SALE OF ASSETS
The Issuer, without the consent of any Holders of any series of outstanding
Debt Securities, may not consolidate with or merge into, or transfer or lease
its assets substantially as an entirety (treating the Issuer and each of its
Subsidiaries as a single consolidated entity) to, any corporation, and any other
corporation may not consolidate with or merge into, or transfer or lease its
assets substantially as an entirety to, the Issuer, unless the corporation (if
other than the Issuer) formed by such consolidation or into which the Issuer is
merged or which acquires or leases the assets of the Issuer substantially as an
entirety is organized and existing under the laws of the United States of
America or Canada
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or any political subdivision of either, and assumes the Issuer's obligations
under each series of Outstanding Debt Securities and the Indentures applicable
thereto and unless the Trustee is satisfied that the transaction will not result
in the successor being required to make any deduction or withholding on account
of certain Canadian taxes from any payments in respect of the Securities, and
unless, after giving effect to such transaction, no Event of Default, and no
event which, after notice or lapse of time or both, would become an Event of
Default, shall have occurred and be continuing, and unless the Issuer delivers
an officer's certificate and an opinion of counsel with respect to compliance
with the foregoing requirements. There is little case law interpreting the
phrase "substantially as an entirety" in the context of an indenture. Because
there is no precise established definition of this phrase, the ability of a
holder of Debt Securities to determine whether a consolidation, merger or sale
of assets substantially as an entirety has occurred and to require the Issuer to
accelerate payment on the Debt Securities as a result of such consolidation,
merger or sale of assets may be uncertain.
DEFEASANCE
If so indicated in the applicable Prospectus Supplement with respect to the
Debt Securities of a series, the Issuer at its option (i) will be discharged
from any and all obligations in respect of the Debt Securities of such series
(except for certain obligations to register the transfer or exchange of Debt
Securities of such series, to replace destroyed, stolen, lost or mutilated Debt
Securities of such series, and to maintain an office or agency in respect of the
Debt Securities and hold moneys for payment in trust) or (ii) will be released
from its obligations to comply with certain covenants specified in the
applicable Prospectus Supplement with respect to the Debt Securities of such
series, and the occurrence of an event described in clause (d) under "Events of
Default" above with respect to any defeased covenants, and clauses (e) and (g)
under "Events of Default" above shall no longer be an Event of Default, if in
either case the Issuer irrevocably deposits with the applicable Trustee, in
trust, money, Government Obligations of the government issuing the currency in
which the Debt Securities of the relevant series are denominated or a
combination thereof that through the payment of interest thereon and principal
thereof in accordance with the terms will provide money in an amount sufficient
to pay all the principal of and premium, if any, and interest on the Securities
of such series on the dates such payments are due (up to the Stated Maturity
Date, or the Redemption Date, as the case may be) in accordance with the terms
of such Debt Securities. Such a trust may only be established if, among other
things, (a) no Event of Default described under "Events of Default" above or
event that, after notice or lapse of time, or both, would become an Event of
Default under the applicable Indenture, shall have occurred and be continuing on
the date of such deposit, or, with regard to an Event of Default described under
clause (f) under "Events of Default" above or an event that, after notice or
lapse of time, or both, would become an Event of Default described under such
clause (f), shall have occurred and be continuing at any time during the period
ending on the 123rd day following such date of deposit, (b) the Issuer shall
have delivered an Opinion of Counsel to the effect that the Holders of the Debt
Securities will not recognize gain or loss for United States Federal income tax
purposes as a result of such deposit or defeasance and will be subject to United
States Federal income tax in the same manner as if such defeasance had not
occurred, and (c) such defeasance or covenant defeasance will not result in the
trust being in violation of the Investment Company Act of 1940. Such opinion,
in the case of defeasance under clause (i) above, must refer to and be based
upon a ruling of the Internal Revenue Service or a change in applicable Federal
income tax law occurring after the date of the applicable Indenture. In the
event the Issuer omits to comply with its remaining obligations under the
applicable Indenture after a defeasance of such Indenture with respect to the
Debt Securities of any series as described under clause (ii) above and the Debt
Securities of such series are declared due and payable because of the occurrence
of any undefeased Event of Default, the amount of money and Government
Obligations on deposit with the applicable Trustee may be insufficient to pay
amounts due on the Debt Securities of such series at the time of the
acceleration resulting from such Event of Default. However, the Issuer will
remain liable in respect to such payments.
Notwithstanding the description set forth under "--Subordination of Senior
Subordinated Debt Securities, Subordinated Debt Securities and Guarantees"
above, in the event that the Issuer deposits money or Government Obligations in
compliance with the Indenture that governs any Senior Subordinated Debt
Securities or Subordinated Debt Securities, as the case may be, in order to
defease all or certain of its obligations with respect to the applicable series
of Debt Securities, the money or Government Obligations so deposited will not be
subject to the subordination provisions of the applicable Indenture and the
indebtedness evidenced by such series of Debt Securities will not be
subordinated in right of payment to the holders of applicable Senior
Indebtedness to the extent of the money or Government Obligations so deposited.
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GOVERNING LAW
The Indentures, the Debt Securities and the Guarantees will be governed by,
and construed in accordance with, the laws of the State of New York.
ENFORCEABILITY OF JUDGMENTS
Since a significant portion of the assets of the Company and its
subsidiaries are outside the United States, any judgment obtained in the United
States against the Company, including judgments with respect to the payment of
principal, premium, if any, or interest on the Debt Securities or with respect
to the Guarantees may not be collectible within the United States.
The Company has been informed by its Canadian counsel, Milner Fenerty, that
the laws of the Province of Alberta (the "Relevant Province") permit an action
to be brought against the Company in a court of competent jurisdiction in the
Relevant Province on any final and conclusive judgment in personam of any
federal or state court located in The City of New York ("New York Court") that
has not been stayed and is not impeachable as void or voidable under the
internal laws of the State of New York and that is for a sum certain if (i) the
New York Court rendering such judgment has jurisdiction over the judgment
debtor, as recognized by the courts of the Relevant Province (and submission by
the Company in the applicable Indenture to the jurisdiction of the New York
Court will be sufficient for the purpose); (ii) such judgment was not obtained
by fraud or in a manner contrary to natural justice and the enforcement thereof
would not be inconsistent with public policy, as such term is understood under
the laws of the Relevant Province; (iii) the enforcement of such judgment does
not constitute, directly or indirectly, the enforcement of foreign revenue,
exproprietory or penal laws; (iv) no new admissible evidence relevant to the
action is discovered prior to the rendering of judgment by the court in the
Relevant Province; (v) the action to enforce such judgment is commenced within 6
years after the date of such judgment; and (vi) subject to the discretion of the
courts in the Relevant Province to find that the choice of the laws of the New
York Court is not bona fide (in the sense that it was made with a view to
avoiding the consequences of the law of any other jurisdiction). In the opinion
of such counsel, there are no reasons under present law of the Relevant Province
for avoiding recognition of a judgment of the New York Court under the Indenture
or on the Debt Securities and Guarantees based upon public policy.
REGARDING THE TRUSTEES
The Indentures contain certain limitations on the right of each Trustee,
should it become a creditor of the Issuer, to obtain payment of claims in
certain cases, or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. Each Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Debt Securities issued
under the applicable Indenture, it must eliminate such conflict or resign.
DESCRIPTION OF EBR PREFERRED STOCK
The following is a description of certain general terms and provisions of
the EBR Preferred Stock. The particular terms of any series of Preferred Stock
will be described in the applicable Prospectus Supplement. If so indicated in a
Prospectus Supplement, the terms of any such series may differ from the terms
set forth below.
The summary of terms of EBR's preferred stock (including the Preferred
Stock) contained in this Prospectus does not purport to be complete and is
subject to, and qualified in its entirety by, the provisions of EBR's
Certificate of Incorporation and the certificate of designations relating to
each series of the Preferred Stock (the "Certificate of Designations"), which
will be filed as an exhibit to or incorporated by reference in the Registration
Statement of which this Prospectus is a part at or prior to the time of issuance
of such series of the Preferred Stock.
EBR's Certificate of Incorporation permits its preferred stock to be issued
from time to time in one or more series, without stockholder approval. Subject
to limitations prescribed by law, the Board of Directors of EBR is authorized to
determine the voting powers (if any), designation, preferences and relative,
participating, optional or other
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special rights, and qualifications, limitations or restrictions thereof, for
each series of preferred stock that may be issued, and to fix the number of
shares of each such series.
The Preferred Stock issued by EBR shall have the dividend, liquidation,
redemption and voting rights set forth in the applicable Prospectus Supplement,
except as specifically provided below. The applicable Prospectus Supplement
will describe the following terms of the series of Preferred Stock in respect of
which this Prospectus is being delivered: (1) the designation and stated value
per share of such Preferred Stock and the number of shares offered; (2) the
amount of liquidation preference per share; (3) the initial public offering
price at which such Preferred Stock will be issued; (4) the dividend rate (or
method of calculation), the dates on which dividends shall be payable, the
option, if any, to extend the period for dividend payment or to pay partial
dividends, and the dates from which dividends shall commence to cumulate, if
any; (5) any redemption or sinking fund provisions; (6) any conversion or
exchange rights; and (7) any additional voting, dividend, liquidation,
redemption, sinking fund and other rights, preferences, privileges, limitations
and restrictions.
GENERAL
The Preferred Stock offered hereby will be issued in one or more series.
The holders of Preferred Stock will have no preemptive rights. The Preferred
Stock, upon issuance against full payment of the purchase price therefor, will
be fully paid and nonassessable. Neither the par value nor the liquidation
preference is indicative of the price at which the Preferred Stock will actually
trade on or after the date of issuance. The applicable Prospectus Supplement
will contain a description of certain United States and Canadian Federal income
tax consequences relating to the purchase and ownership of the series of
Preferred Stock offered by such Prospectus Supplement.
RANK
The Preferred Stock shall, with respect to dividend rights and rights on
liquidation, winding up and dissolution of EBR, rank prior to EBR's Common Stock
and to all other classes and series of equity securities of the Issuer now or
hereafter authorized, issued or outstanding (the Common Stock and such other
classes and series of equity securities collectively may be referred to herein
as the "Junior Stock"), other than any classes or series of equity securities of
the Issuer ranking on a parity with (the "Parity Stock") or senior to (the
"Senior Stock") the Preferred Stock as to dividend rights and rights upon
liquidation, winding up or dissolution of the Issuer. The Preferred Stock shall
be junior to all outstanding debt of EBR. The Preferred Stock shall be subject
to creation of Senior Stock, Parity Stock and Junior Stock to the extent not
expressly prohibited by EBR's Certificate of Incorporation.
DIVIDENDS
Holders of shares of Preferred Stock shall be entitled to receive, when, as
and if declared by the Board of Directors out of funds of EBR legally available
for payment, cash dividends, payable at such dates and at such rates per share
per annum as set forth in the applicable Prospectus Supplement. Such rate may
be fixed or variable or both. Each declared dividend shall be payable to
holders of record as they appear at the close of business on the stock books of
EBR on such record dates, not more than 60 calendar days preceding the payment
dates therefor, as are determined by the Board of Directors (each of such dates,
a "Record Date").
Such dividends may be cumulative or noncumulative, as provided in the
Prospectus Supplement. If dividends on a series of Preferred Stock are
noncumulative and if the Board of Directors fails to declare a dividend in
respect of a dividend period with respect to such series, then holders of such
Preferred Stock will have no right to receive a dividend in respect of such
dividend period, and EBR will have no obligation to pay the dividend for such
period, whether or not dividends are declared payable on any future Dividend
Payment Dates. Dividends on the shares of each series of Preferred Stock for
which dividends are cumulative will accrue from the date on which EBR initially
issues shares of such series.
No full dividends shall be declared or paid or set apart for payment on
preferred stock of EBR of any series ranking, as to dividends, on a parity with
or junior to the series of Preferred Stock offered by the Prospectus Supplement
attached hereto for any period unless full dividends for the immediately
preceding dividend period on such Preferred
-30-
<PAGE>
Stock (including any accumulation in respect of unpaid dividends for prior
dividend periods, if dividends on such Preferred Stock are cumulative) have been
or contemporaneously are declared and paid or declared and a sum sufficient for
the payment thereof is set apart for such payment. When dividends are not so
paid in full (or a sum sufficient for such full payment is not so set apart)
upon such Preferred Stock and any other preferred stock of EBR ranking on a
parity as to dividends with the Preferred Stock, dividends upon shares of such
Preferred Stock and dividends on such other preferred stock shall be declared
pro rata so that the amount of dividends declared per share on such Preferred
Stock and such other preferred stock shall in all cases bear to each other the
same ratio that accrued dividends for the then-current dividend period per share
on the shares of such Preferred Stock (including any accumulation in respect of
unpaid dividends for prior dividend periods, if dividends on such Preferred
Stock are cumulative) and accrued dividends, including required or permitted
accumulations, if any, on shares of such other preferred stock, bear to each
other. Unless full dividends on the series of Preferred Stock offered by the
Prospectus Supplement attached hereto have been declared and paid or set apart
for payment for the immediately preceding dividend period (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such Preferred Stock are cumulative) (a) no cash dividend or
distribution (other than in shares of Junior Stock) may be declared, set aside
or paid on the Junior Stock, (b) EBR may not repurchase, redeem or otherwise
acquire any shares of its Junior Stock (except by conversion into or exchange
for Junior Stock) and (c) EBR may not, directly or indirectly, repurchase,
redeem or otherwise acquire any shares of Preferred Stock or Parity Stock
otherwise than pursuant to certain pro rata offers to purchase or a concurrent
redemption of all, or a pro rata portion, of the outstanding shares of such
Preferred Stock and Parity Stock (except by conversion into or exchange for
Junior Stock). EBR currently has no outstanding Parity Stock.
CONVERTIBILITY
The terms, if any, on which shares of Preferred Stock of any series may be
exchanged for or converted (mandatorily or otherwise) into Common Shares or
other securities of the Company registered hereunder will be set forth in the
Prospectus Supplement relating thereto. See "Description of Echo Bay Share
Capital."
REDEMPTION
The terms, if any, on which shares of Preferred Stock of any series may be
redeemed will be set forth in the related Prospectus Supplement.
LIQUIDATION
Unless otherwise specified in the applicable Prospectus Supplement, in the
event of a voluntary or involuntary liquidation, dissolution or winding up of
the affairs of EBR, the holders of a series of Preferred Stock will be entitled,
subject to the rights of creditors, but before any distribution or payment to
the holders of Common Stock or any other security ranking junior to the
Preferred Stock on liquidation, dissolution or winding up of EBR, to receive an
amount per share as set forth in the related Prospectus Supplement plus accrued
and unpaid dividends for the then-current dividend period (including any
accumulation in respect of unpaid dividends for prior dividend periods, if
dividends on such series of Preferred Stock are cumulative). If the amounts
available for distribution with respect to the Preferred Stock and all other
outstanding stock of EBR ranking on a parity with the Preferred Stock upon
liquidation are not sufficient to satisfy the full liquidation rights of all the
outstanding Preferred Stock and stock ranking on a parity therewith, then the
holders of each series of such stock will share ratably in any such distribution
of assets in proportion to the full respective preferential amount (which in the
case of preferred stock may include accumulated dividends) to which they are
entitled. After payment of the full amount of the liquidation preference,
unless otherwise specified in the applicable Prospectus Supplement, the holders
of shares of Preferred Stock will not be entitled to any further participation
in any distribution of assets by EBR.
VOTING
The Preferred Stock of a series will not be entitled to vote, except as
provided in the applicable Prospectus Supplement, the Certificate of
Incorporation, the applicable certificate of designations and as required by
applicable law.
-31-
<PAGE>
GUARANTEES
The Company will fully, unconditionally and irrevocably guarantee the
payment of accumulated and unpaid dividends, and payments due on liquidation or
redemption, as and when due, regardless of any defense, right of set-off or
counterclaim that EBR may have or assert. This obligation will rank junior to
all other obligations of the Company, and may be subject to the ability of the
Company to pay such amounts as a dividend on its own capital stock from funds
legally available therefor. The obligation will effectively rank senior to the
Company's common stock.
NO OTHER RIGHTS
The shares of a series of Preferred Stock will not have any preferences,
voting powers or relative, participating, optional or other special rights
except as set forth above or in the related Prospectus Supplement, the
Certificate of Incorporation and in the certificate of designations or as
otherwise required by law.
TRANSFER AGENT AND REGISTRAR
The transfer agent for each series of Preferred Stock will be designated in
the related Prospectus Supplement.
DESCRIPTION OF ECHO BAY SHARE CAPITAL
GENERAL
The authorized share capital of the Company consists of an unlimited number
of Common Shares, without par value, of which 139,370,031 were outstanding on
February 4, 1998, and an unlimited number of preferred shares, issuable in
series, none of which are currently outstanding. In addition, as of February 4,
1998, 4,817,000 Common Shares have been reserved for issuance upon the exercise
of outstanding options.
COMMON SHARES
The holders of Common Shares have one vote for each share held and are not
entitled to cumulative votes for the election of directors. Each Common Share
is entitled to participate equally in such dividends as may be declared by the
Board of Directors of the Company out of funds legally available therefor and is
entitled to share equally in any distribution to holders of Common Shares on
liquidation. The holders of Common Shares have no preemptive, conversion or
redemption rights. Each outstanding Common Share is fully paid and
nonassessable.
PREFERRED SHARES
The Board of Directors of the Company may issue preferred shares from time
to time in one or more series, subject to the provisions of the Articles of
Incorporation of the Company. When any preferred shares of the Company are
outstanding, no dividends may be paid or declared on outstanding Common Shares
unless all dividends on preferred shares of all series shall have been paid in
full with respect to past dividend periods, and the full dividends thereon for
the then current dividend period shall have been declared and a sum set apart
for payment thereof. Any sinking fund requirements with respect to preferred
shares of the Company must also be complied with before dividends on Common
Shares may be paid.
SHAREHOLDER RIGHTS PLAN
Under the Company's shareholder rights plan, if any person or group were to
announce an intention to acquire, or were to acquire, 20% or more of the
Company's Common Shares without complying with the conditions of a "permitted
bid," then the owners of each share of common stock (other than the acquiring
person or group) would become entitled to exercise a right to buy one additional
Common Share at 50% of the lowest share price on The Toronto Stock Exchange
during the prior 90 days. The plan expires in 2004, subject to reconfirmation
by shareholders in 1999.
-32-
<PAGE>
A "permitted bid," which does not trigger the entitlement to acquire shares
under the plan, is one that complies with applicable securities law in all
jurisdictions where at least 5% of the Company's Common Shares are owned; is
made to all shareholders for all outstanding shares; is open for a minimum of 60
days; takes up no shares until at least 66 2/3% of the outstanding shares have
been tendered to the bid, including those owned by the acquiring person or
group; and meets certain other conditions.
DESCRIPTION OF WARRANTS
GENERAL
The Company may issue Warrants, including Warrants to purchase Debt
Securities ("Debt Warrants"), as well as other types of Warrants. Warrants may
be issued independently or together with any Debt Securities and may be attached
to or separate from such Debt Securities. Each series of Warrants will be
issued under a separate warrant agreement (each a "Warrant Agreement") to be
entered into between the Company and a warrant agent ("Warrant Agent"). The
Warrant Agent will act solely as an agent of the Company in connection with the
Warrants of such series and will not assume any obligation or relationship of
agency or trust for or with any holders or beneficial owners of Warrants. The
following sets forth certain general terms and provisions of the Warrants
offered hereby. Further terms of the Warrants and the applicable Warrant
Agreement will be set forth in the applicable Prospectus Supplement.
DEBT WARRANTS
The applicable Prospectus Supplement will describe the following terms of
the Debt Warrants in respect of which this Prospectus is being delivered: (1)
the title of such Debt Warrants; (2) the aggregate number of such Debt Warrants;
(3) the price or prices at which such Debt Warrants will be issued; (4) the
currency or currencies, including composite currencies, in which the price of
such Debt Warrants may be payable; (5) the designation, aggregate principal
amount and terms of the Debt Securities purchasable upon exercise of such Debt
Warrants; (6) if applicable, the designation and terms of the Debt Securities
with which such Debt Warrants are issued and the number of such Debt Warrants
issued with each such Debt Security; (7) the currency or currencies, including
composite currencies, in which the principal of or any premium or interest on
the Debt Securities purchasable upon exercise of such Debt Warrant will be
payable; (8) if applicable, the date on and after which such Debt Warrants and
the related Debt Securities will be separately transferable; (9) the price at
which and currency or currencies, including composite currencies, in which the
Debt Securities purchasable upon exercise of such Debt Warrants may be
purchased; (10) the date on which the right to exercise such Debt Warrants shall
commence and the date on which such right shall expire; (11) if applicable, the
minimum or maximum amount of such Debt Warrants which may be exercised at any
one time; (12) if applicable, any index or formula used to determine the amount
of payments of principal of and any premium and interest on Debt Securities
purchasable upon exercise of Debt Warrants; (13) information with respect to
book-entry procedures, if any; (14) if applicable, a discussion of certain
United States Federal income tax considerations; and (15) any other terms of
such Debt Warrants, including terms, procedures and limitations relating to the
exchange and exercise of such Debt Warrants.
OTHER WARRANTS
The Company may issue other Warrants. The applicable Prospectus Supplement
will describe the following terms of any such other Warrants in respect of which
this Prospectus is being delivered: (1) the title of such Warrants; (2) the
designation and number of securities (which may include Preferred Stock or
Common Stock) and/or amount of cash consideration for which such Warrants are
exercisable; (3) the price or prices at which such Warrants will be issued; (4)
the currency or currencies, including composite currencies, in which the price
of such Warrants may be payable; (5) if applicable, the designation and terms of
the Debt Securities or Preferred Stock with which such Warrants are issued and
the number of such Warrants issued with each such Debt Security or share of
Preferred Stock or Common Stock; (6) if applicable, the date on and after which
such Warrants and the related Debt Securities, Preferred Stock or Common Stock
will be separately transferable; (7) if applicable, any index or formula used to
determine the price or prices at which such other securities and/or cash
consideration will be issued; (8) if applicable, a discussion of certain United
-33-
<PAGE>
States Federal income tax considerations; and (9) any other terms of such
Warrants, including terms, procedures and limitations relating to the exchange
and exercise of such Warrants.
PLAN OF DISTRIBUTION
The Company may offer and sell the Debt Securities, Common Shares and
Warrants to or through underwriters or dealers, and also may offer and sell Debt
Securities, Common Shares and Warrants directly to other purchasers or through
agents. EBR may sell the Debt Securities and Preferred Stock, together with
Guarantees issued by the Company, to or through underwriters, and may also sell
Debt Securities and Preferred Stock, together with Guarantees issued by the
Company, directly to other purchasers through agents.
Each Prospectus Supplement will set forth the terms of the offering of the
particular series of Securities to which the Prospectus Supplement relates,
including the name or names of any underwriters, dealers or agents, the purchase
price or prices of the Securities, the proceeds to the Company or EBR from the
sale of such series of Securities, the use of such proceeds, any initial public
offering price or purchase price of such series of Securities, any underwriting
discount or commission, any discounts, concessions or commissions allowed or
reallowed or paid by any underwriters to other dealers, any commissions paid to
any agents and the securities exchanges, if any, on which such Securities will
be listed. Any initial public offering price or purchase price and any
discounts, concessions or commissions allowed or reallowed or paid by any
underwriter to other dealers may be changed from time to time.
Sales of Common Shares offered pursuant to any Prospectus Supplement may be
effected from time to time in one or more transactions on the American Stock
Exchange or, in appropriate circumstances, The Toronto Stock Exchange, or in
negotiated transactions or any combination of such methods of sale, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at other negotiated prices.
In connection with distributions of Common Shares or otherwise, the Company
may enter into hedging transactions with broker-dealers in connection with which
such broker-dealers may sell Common Shares registered hereunder in the course of
hedging through short sales the positions they assumed with the Company.
In connection with the sale of Securities, underwriters or agents may
receive compensation from the Company or EBR or from purchasers of Securities
for whom they may act as agents in the form of discounts, concessions or
commissions, Underwriters may sell Securities to or through dealers, and such
dealers may receive compensation in the form of discounts, concessions or
commissions from the underwriters and/or commissions from the purchasers for
whom they may act as agents. Underwriters, dealers and agents that participate
in the distribution of Securities may be deemed to be underwriters, and any
discounts or commissions received by them from the Company or EBR and any profit
on the resale of Securities by them may be deemed to be underwriting discounts
and commissions under the Securities Act. Any such underwriter or agent will be
identified, and any such compensation received from the Company or EBR will be
described, in the applicable Prospectus Supplement.
Under agreements which may be entered into by the Company or EBR,
underwriters and agents who participate in the distribution of Securities may be
entitled to indemnification by the Company or EBR against certain liabilities,
including liabilities under Canadian and US securities legislation.
If so indicated in the applicable Prospectus Supplement, the Company will
authorize underwriters or other persons acting as the Company's agent to solicit
offers by certain institutions to purchase Debt Securities, Preferred Stock or
Warrants to purchase Debt Securities or Preferred Stock from the Company or EBR
pursuant to contracts providing for payment and delivery on a future date.
Institutions with which such contracts may be made include commercial and
savings banks, insurance companies, pension funds, investment companies,
educational and charitable institutions and others, but in all cases such
institutions must be approved by the Company. The obligations of any purchaser
under any such contract will be subject to the condition that the purchase of
the offered Debt Securities or Preferred Stock shall not at the time of delivery
be prohibited under the laws of the jurisdiction to which such purchaser is
subject. The underwriters and such other agents will not have any
responsibility in respect of the validity or performance of such contracts.
-34-
<PAGE>
The Company and EBR may grant underwriters who participate in the
distribution of Securities an option to purchase additional Securities to cover
over-allotments, if any.
The place and date of delivery for the Securities in respect of which this
Prospectus is being delivered will be set forth in the applicable Prospectus
Supplement.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Securities in respect of which this Prospectus is being delivered (other than
Common Shares) will be a new issue of securities, will not have an established
trading market when issued and will not be listed on any securities exchange.
Any underwriters or agents to or through whom such Securities are sold by the
Company or EBR for public offering and sale may make a market in such
Securities, but such underwriters or agents will not be obligated to do so and
may discontinue any market making at any time without notice. No assurance can
be given as to the liquidity of the trading market for any such Securities.
Certain of the underwriters and their affiliates may from time to time
perform various commercial banking and investment banking services for the
Company, for which customary compensation is received.
EXPERTS
The consolidated financial statements of the Company included in its Annual
Report on Form 10-K for the year ended December 31, 1996, as amended, have been
audited by Ernst & Young, independent chartered accountants, as set forth in
their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are, and audited financial statements to
be included in subsequently filed documents will be, incorporated herein by
reference in reliance upon the reports of Ernst & Young pertaining to such
financial statements (to the extent covered by consents filed with the
Securities and Exchange Commission) given upon the authority of such firm as
experts in accounting and auditing.
LEGAL MATTERS
Certain legal matters relating to the validity of the securities, other
than the validity of the Common Shares, will be passed upon for the Company by
Davis, Graham & Stubbs LLP, Denver, Colorado. Certain legal matters relating to
the validity of the Common Shares, and certain other matters with respect to
Canadian law in connection with the Securities, will be passed upon for the
Company by Milner Fenerty, Edmonton, Alberta. Certain legal matters will be
passed upon for the underwriters, if any, by the counsel named in the applicable
Prospectus Supplement.
-35-
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 16 EXHIBITS
12.1 Statement re Computation of Ratios*
23.1 Consent of Ernst & Young*
* Filed herewith.
II-1
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Englewood, County of Arapahoe, State of Colorado, on
the 11th day of February, 1998.
ECHO BAY MINES LTD.
By: /s/ Robert L. Leclerc*
---------------------------
Robert L. Leclerc, Q.C., Chairman,
Chief Executive Officer and US
Authorized Representative
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert L. Leclerc* Chairman, Chief Executive Officer and February 11, 1998
- ----------------------------- Director (Principal Executive Officer)
Robert L. Leclerc, Q.C.
/s/ Peter H. Cheesbrough* Senior Vice-President, Finance and February 11, 1998
- ----------------------------- Chief Financial Officer (Principal
Peter H. Cheesbrough Financial Officer)
/s/ Tom S. Q. Yip Controller (Principal Accounting February 11, 1998
- ----------------------------- Officer)
Tom S. Q. Yip
/s/ John N. Abell* Director February 11, 1998
- -----------------------------
John N. Abell
/s/ Latham C. Burns* Director February 11, 1998
- -----------------------------
Latham C. Burns
/s/ Pierre Choquette* Director February 11, 1998
- -----------------------------
Pierre Choquette
/s/ John Gilray Christy* Director February 11, 1998
- -----------------------------
John Gilray Christy
/s/ Peter Clarke* Director February 11, 1998
- -----------------------------
Peter Clarke
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John F. McOuat* Director February 11, 1998
- -----------------------------
John F. McOuat
/s/ Monica E. Sloan* Director February 11, 1998
- -----------------------------
Monica E. Sloan
/s/ R. Geoffrey P. Styles* Director February 11, 1998
- -----------------------------
R. Geoffrey P. Styles
</TABLE>
*By: /s/ Tom S. Q. Yip
-------------------
Attorney-in-Fact
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Englewood, County of Arapahoe, State of Colorado, on
the 11th day of February, 1998.
ECHO BAY RESOURCES INC.
By: /s/ Robert L. Leclerc*
---------------------------
Robert L. Leclerc, Q.C., Chairman,
Chief Executive Officer and US
Authorized Representative
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Robert L. Leclerc* Chairman, Chief Executive Officer and February 11, 1998
- --------------------------- Director (Principal Executive Officer)
Robert L. Leclerc, Q.C.
/s/ Peter H. Cheesbrough* Senior Vice-President, Finance and February 11, 1998
- --------------------------- Chief Financial Officer (Principal
Peter H. Cheesbrough Financial Officer)
/s/ Tom S. Q. Yip Controller (Principal Accounting February 11, 1998
- --------------------------- Officer)
Tom S. Q. Yip
</TABLE>
*By: /s/ Tom S. Q. Yip
-------------------
Attorney-in-Fact
II-4
<PAGE>
EXHIBIT INDEX
12.1 Statement re Computation of Ratios*
23.1 Consent of Ernst & Young*
* Filed herewith.
<PAGE>
ECHO BAY MINES LTD.
RATIO OF EARNINGS TO FIXED CHARGES
A:\[FXDCHGA.XLS]WITH PREF'D - CDN
<TABLE>
<CAPTION>
REG. 229.503
ITEM 503
REFERENCE 9/30/97 1996 1995 1994 1993 1992
EARNINGS
====================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
(d) (3) Pre-tax income - Canadian GAAP $ (363.3) $ (176.1) $ (44.7) $ 13.0 $ 9.7 $ (29.4)
(d) (3) (i) Add fixed charges pursuant to (d) (4) 9.0 9.3 20.2 24.7 24.6 15.7
(d) (3) (i) (A) Less adjustments:
(d) (3) (i) (B) Interest capitalized (0.5) - - - - (1.7)
Actual amount of preferred stock dividend
requirements included in fixed charges NOT
deducted in determination of-pre-tax income - - (14.1) (17.6) (17.1) (7.4)
-------------------------------------------------------------
Total earnings $ (354.8) $ (166.8) $ (38.6) $ 20.1 $ 17.2 $ (22.8)
====================================================================================================================
FIXED CHARGES
====================================================================================================================
(d) (4) (i) (A) Interest
Expensed 7.0 8.2 5.0 6.1 6.8 5.5
Capitalized 0.5 - - - - 1.7
(d) (4) (i) (B) Amortization of debt expense, discounts and premiums
of related debt * * * * * *
(d) (4) (i) (C) Portion of rental expense attributable to interest 1.5 1.1 1.1 1.0 0.7 1.1
(d) (4) (i) (D) Preferred stock dividends - - 14.1 17.6 17.1 7.4
-------------------------------------------------------------
Total fixed charges $ 9.0 $ 9.3 $ 20.2 $ 24.7 $ 24.6 $ 15.7
====================================================================================================================
CALCULATED SUFFICIENCY (DEFICIENCY) $ (363.8) $ (176.1) $ (58.8) $ (4.6) $ (7.4) $ (38.5)
=============================================================
RATIO OF EARNINGS TO FIXED CHARGES ** ** ** ** ** **
=============================================================
</TABLE>
* Included in interest expense line item.
** Earnings are insufficient to cover fixed charges.
<TABLE>
<CAPTION>
====================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Preferred share dividends $ - $ - $ 8,031 $ 10,062 $ 10,062 $ 4,332
Tax rate - - 0.432 0.429 0.410 0.411
-------------------------------------------------------------
Tax effected $ - $ - $ 14,139 $ 17,622 $ 17,054 $ 7,355
====================================================================================================================
</TABLE>
<PAGE>
ECHO BAY MINES LTD.
RATIO OF EARNINGS TO FIXED CHARGES
A:\[FXDCHGA.XLS]SIMPLE - CDN
<TABLE>
<CAPTION>
REG. 229.503
ITEM 503
REFERENCE 9/30/97 1996 1995 1994 1993 1992
EARNINGS
==================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
(d) (3) Pre-tax income - Canadian GAAP $ (363.3) $ (176.1) $ (44.7) $ 13.0 $ 9.7 $ (29.4)
(d) (3) (i) Add fixed charges pursuant to (d) (4) 9.0 9.3 6.1 7.1 7.5 8.3
(d) (3) (i) (A) Less adjustments:
(d) (3) (i) (B) Interest capitalized (0.5) - - - - (1.7)
-------------------------------------------------------------
Total earnings $ (354.8) $ (166.8) $ (38.6) $ 20.1 $ 17.2 $ (22.8)
==================================================================================================================
FIXED CHARGES
==================================================================================================================
(d) (4) (i) (A) Interest
Expensed $ 7.0 $ 8.2 $ 5.0 $ 6.1 $ 6.8 $ 5.5
Capitalized 0.5 - - - - 1.7
(d) (4) (i) (B) Amortization of debt expense, discounts and premiums
of related debt * * * * * *
(d) (4) (i) (C) Portion of rental expense attributable to interest 1.5 1.1 1.1 1.0 0.7 1.1
-------------------------------------------------------------
Total fixed charges $ 9.0 $ 9.3 $ 6.1 $ 7.1 $ 7.5 $ 8.3
==================================================================================================================
CALCULATED SUFFICIENCY (DEFICIENCY) $ (363.8) $ (176.1) $ (44.7) $ 13.0 $ 9.7 $ (31.1)
=============================================================
RATIO OF EARNINGS TO FIXED CHARGES ** ** ** 2.8 2.3 **
=============================================================
</TABLE>
* Included in interest expense line item.
** Earnings are insufficient to cover fixed charges.
<PAGE>
ECHO BAY MINES LTD.
RATIO OF EARNINGS TO FIXED CHARGES
A:\[FXDCHGA.XLS]WITH PREF'D - US
<TABLE>
<CAPTION>
REG. 229.503
ITEM 503
REFERENCE 9/30/97 1996 1995 1994 1993 1992
<C> <S> <C> <C> <C> <C> <C> <C>
EARNINGS
================================================================================================================
(d) (3) Pre-tax income - US GAAP $ (407.9) $ (173.1) $ (39.2) $ 19.2 $ 13.9 $ (28.1)
(d) (3) (i) Add fixed charges pursuant to (d) (4) 14.7 9.3 20.2 24.7 24.6 15.7
(d) (3) (i) (A) Less adjustments:
(d) (3) (i) (B) Interest capitalized (0.5) - - - - (1.7)
Actual amount of preferred
stock dividend requirements
included in fixed charges NOT
deducted in determination of
pre-tax income - - (14.1) (17.6) (17.1) (7.4)
---------------------------------------------------------------------------
Total earnings $ (393.7) $ (163.8) $ (33.1) $ 26.3 $ 21.4 $ (21.5)
================================================================================================================
FIXED CHARGES
================================================================================================================
(d) (4) (i) (A) Interest
Expensed $ 12.7 8.2 5.0 6.1 6.8 5.5
Capitalized 0.5 - - - - 1.7
(d) (4) (i) (B) Amortization of debt expense,
discounts and premiums
of related debt * * * * * *
(d) (4) (i) (C) Portion of rental expense
attributable to interest 1.5 1.1 1.1 1.0 0.7 1.1
(d) (4) (i) (D) Preferred stock dividends - - 14.1 17.6 17.1 7.4
------------------------------------------------------------------------------
Total fixed charges $ 14.7 $ 9.3 $ 20.2 $ 24.7 $ 24.6 $ 15.7
================================================================================================================
CALCULATED SUFFICIENCY (DEFICIENCY) $ (408.4) $ (173.1) $ (53.3) $ 1.6 $ (3.2) $ (37.2)
=============================================================================
RATIO OF EARNINGS TO FIXED CHARGES ** ** ** 1.1 ** **
=============================================================================
</TABLE>
* Included in interest expense line item.
** Earnings are insufficient to cover fixed charges.
<TABLE>
<CAPTION>
<C> <S> <C> <C> <C> <C> <C> <C>
================================================================================================================
Preferred share dividends $ - $ - $ 8,031 $ 10,062 $ 10,062 $ 4,332
Tax rate - - 0.432 0.429 0.410 0.411
------------------------------------------------------------------------------
Tax effected $ - $ - $14,139 $ 17,622 $ 17,054 $ 7,355
================================================================================================================
</TABLE>
<PAGE>
EXHIBIT 12.1
ECHO BAY MINES LTD.
RATIO OF EARNINGS TO FIXED CHARGES
A:\[FXDCHGA.XLS]SIMPLE - US
REG. 229.503
ITEM 503
REFERENCE
<TABLE>
<CAPTION>
EARNINGS 9/30/97 1996 1995 1994 1993 1992
================================================================================================================
<C> <S> <C> <C> <C> <C> <C> <C>
(d) (3) Pre-tax income - US GAAP $ (407.9) $ (173.1) $ (39.2) $ 19.2 $ 13.9 $ (28.1)
(d) (3) (i) Add fixed charges pursuant to (d) (4) 14.7 9.3 6.1 7.1 7.5 8.3
(d) (3) (i) (A) Less adjustments:
(d) (3) (i) (B) Interest capitalized (0.5) - - - - (1.7)
--------------------------------------------------------------------
Total earnings $ (393.7) $ (163.8) $ (33.1) $ 26.3 $ 21.4 $ (21.5)
================================================================================================================
FIXED CHARGES
================================================================================================================
(d) (4) (i) (A) Interest
Expensed $ 12.7 $ 8.2 $ 5.0 $ 6.1 $ 6.8 $ 5.5
Capitalized 0.5 - - - - 1.7
(d) (4) (i) (B) Amortization of debt expense,
discounts and premiums of related
debt * * * * * *
(d) (4) (i) (C) Portion of rental expense attributable
to interest 1.5 1.1 1.1 1.0 0.7 1.1
--------------------------------------------------------------------
Total fixed charges $ 14.7 $ 9.3 $ 6.1 $ 7.1 $ 7.5 $ 8.3
================================================================================================================
CALCULATED SUFFICIENCY (DEFICIENCY) $(408.4) $ (173.1) $ (39.2) $ 19.2 $ 13.9 $ (29.8)
====================================================================
RATIO OF EARNINGS TO FIXED CHARGES ** ** ** 3.7 2.9 **
====================================================================
</TABLE>
* Included in interest expense line item.
** Earnings are insufficient to cover fixed charges.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT CHARTERED ACCOUNTANTS
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 2 to the Registration Statement (Form S-3 No. 333-35857) and related
prospectus of Echo Bay Mines Ltd. (the "Company") and Echo Bay Resources Inc.
("EBR"), dated February 11, 1998 for the shelf registration of up to US $200
million securities of the Company and EBR and to the incorporation by reference
therein of our report dated January 27, 1997, with respect to the consolidated
financial statements of the Company included in its Annual Report on Form
10-K/A-1 for the year ended December 31, 1996, filed with the Securities and
Exchange Commission.
Edmonton, Canada /s/Ernst & Young
February 11, 1998 Chartered Accountants
