<PAGE>
ECHO BAY MINES LTD.
NOTICE OF ANNUAL GENERAL MEETING
OF SHAREHOLDERS
JUNE 3, 1999
NOTICE IS HEREBY GIVEN that the Annual General Meeting of the
shareholders of Echo Bay Mines Ltd. will be held in the Toronto II Room of
the Toronto Hilton Hotel, 145 Richmond Street West, Toronto, Ontario on
Thursday, the 3rd day of June 1999, at 9:30 in the morning, for the following
purposes:
1. to receive and consider the annual report containing financial
statements for the year ended December 31, 1998 together with the
report of the auditors thereon;
2. to elect directors;
3. to appoint auditors; and
4. to transact such other business as may properly come before the
meeting or any adjournment thereof.
Only shareholders of record at the close of business on April 21, 1999
will be entitled to notice of the meeting.
DATED at Edmonton, Alberta, Canada this 26th day of April 1999.
By Order of the Board,
Lois-Ann L. Brodrick
Vice President and Secretary
NOTE: IF YOU ARE UNABLE TO ATTEND IN PERSON, PLEASE FILL IN AND SIGN THE
ENCLOSED FORM OF PROXY AND RETURN IT TO THE SECRETARY OF THE
CORPORATION IN THE ENVELOPE PROVIDED.
<PAGE>
MANAGEMENT PROXY CIRCULAR
SOLICITATION OF PROXIES
THIS MANAGEMENT PROXY CIRCULAR IS FURNISHED IN CONNECTION WITH THE
SOLICITATION BY THE MANAGEMENT OF ECHO BAY MINES LTD. (THE "cORPORATION") OF
PROXIES TO BE USED AT THE ANNUAL GENERAL MEETING OF THE SHAREHOLDERS OF THE
CORPORATION TO BE HELD AT THE TIME AND PLACE AND FOR THE PURPOSES SET FORTH IN
THE FOREGOING NOTICE. This material was first sent to shareholders on or about
April 26, 1999. The Corporation will bear all costs in connection with the
printing and mailing of the enclosed materials as well as the cost of
solicitation of proxies. D.F. King & Company, Inc. will solicit proxies from
nominee accounts for a fee of U.S. $20,000 plus expenses. To the extent
necessary to assure adequate representation at the meeting, solicitation of
proxies may be made by directors, officers and regular employees of the
Corporation directly as well as by mail and by telephone.
APPOINTMENT AND REVOCATION OF PROXIES
The persons designated in the enclosed form of proxy are officers of the
Corporation. A shareholder has the right to appoint a person other than the
persons designated in the accompanying form of proxy to represent him at the
meeting. The person need not be a shareholder. This right may be exercised
either by inserting in the space provided the name of the other person a
shareholder wishes to appoint or by completing another proper form of proxy.
Shareholders who wish to be represented at the meeting by proxy must deposit
their form of proxy prior to 5:00 o'clock in the afternoon local time on June 2,
1999 either at the principal office of the Corporation, 1210 Manulife Place,
10180 - 101 Street, Edmonton, Alberta, Canada T5J 3S4 or at the office of
Montreal Trust Company of Canada, 151 Front Street West, Toronto, Ontario,
Canada M5J 2N1, or bring the proxy to the meeting and deliver it to the Chairman
or Secretary of the Corporation prior to the commencement of the meeting.
A shareholder who has given a proxy has the right to revoke it at any time
by an instrument in writing executed by the shareholder or his attorney
authorized in writing or, if the shareholder is a corporation, under its
corporate seal or by an officer or attorney thereof duly authorized, and
deposited either at the principal office of the Corporation, 1210 Manulife
Place, 10180 - 101 Street, Edmonton, Alberta, Canada T5J 3S4 or at the office of
Montreal Trust Company of Canada, 151 Front Street West, Toronto, Ontario,
Canada M5J 2N1 addressed to the Secretary of the Corporation, c/o Montreal Trust
Company of Canada, at any time up to and including the last business day
preceding the day of the meeting, or any adjournment thereof, at which the proxy
is to be used, or with the Chairman or Secretary of the Corporation on the day
of the meeting, or any adjournment thereof.
<PAGE>
VOTING SHARES AND PRINCIPAL HOLDERS THEREOF
On April 9, 1999, there were outstanding 140,607,145 common shares of the
Corporation, each of which carries the right to one vote. A quorum of
shareholders will be established at the meeting if the holders of a majority of
the shares entitled to vote at the meeting are present in person or represented
by proxy. Abstentions will be counted for quorum but for no other purpose. A
majority of the votes cast at the meeting in person or by proxy is required for
the approval of each matter being submitted to a vote of the shareholders at the
meeting.
Shareholders of record at the close of business on April 21, 1999 will be
entitled to vote at the meeting except to the extent they have transferred the
ownership of any of their shares after the record date and the transferee of
those shares has produced properly endorsed share certificates or has otherwise
established ownership of the shares and, in either case, has asked, not later
than May 24, 1999, to be included in the list of shareholders entitled to vote
at the meeting.
As of April 9, 1999, based upon information available to the Corporation,
no one shareholder was the beneficial owner of more than five percent of the
common shares.
VOTING OF PROXIES
Common shares of the Corporation, represented by a valid proxy in favour of
the person or persons designated in the enclosed form of proxy, will be voted on
any ballot which may be called for in respect of matters referred to in the
accompanying notice of meeting and, where a choice with respect to any matter to
be acted upon has been specified in the proxy, the shares will be voted in
accordance with the specification so made. THE COMMON SHARES WILL BE VOTED IN
FAVOUR OF ANY MATTER FOR WHICH NO SPECIFICATION HAS BEEN MADE.
The enclosed form of proxy confers discretionary authority upon the persons
named therein with respect to amendments to the matters identified in the notice
of meeting and other matters that may properly come before the meeting.
Management is not aware of any amendments to matters identified in the notice of
meeting or of any other matters that are to be presented for action to the
meeting.
ELECTION OF DIRECTORS
Under the articles of the Corporation, the Board of Directors may consist
of a minimum of three and a maximum of 15 directors. At present, the Board
consists of nine directors and the Board of Directors has fixed the number of
directors at nine for the term of office commencing with this election.
Management proposes to nominate and the persons named in the enclosed form of
proxy intend to vote for the election of the nine persons named below, all of
whom are already directors. Management does not contemplate that any of the
nominees will be unable to serve as a director. Each director elected will hold
office until the next annual general meeting or until a successor is duly
elected.
2
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NAME AND MUNICIPALITY AGE DIRECTOR PRINCIPAL OCCUPATION AND DIRECTORSHIPS OF OTHER
OF RESIDENCE SINCE BUSINESS EXPERIENCE WITHIN PUBLIC CORPORATIONS
THE LAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
JOHN NORMAN ABELL (2) 67 1980 Corporate director Stelco Inc.; AT Plastics Inc.
Ramsbury, Wilts., England
LATHAM CAWTHRA BURNS (1) 68 1980 Corporate director since June
Toronto, Ontario 1995; prior thereto Honorary
Chairman, Nesbitt Burns Inc.
(investment dealers)
PIERRE CHOQUETTE (2) 56 1996 President and Chief Executive Methanex Corporation;
Vancouver, British Columbia Officer, Methanex Corporation Gennum Corporation;
since 1994; President Novacorp BCT.Telus Communication
International from 1991 to1994 Inc.
JOHN GILRAY CHRISTY (2) 66 1980 Chairman, Chestnut Capital The Philadelphia
Wyndmoor, Pennsylvania Corporation (holding company) Contributionship;
and corporate director The 1838 Bond Debenture
Trading Fund Limited
PETER CLARKE (1) 68 1993 Consultant - metals and
Nanoose Bay, British Columbia mining industries
ROBERT LEIGH LECLERC, Q.C. 54 1992 Chairman and Chief Executive Minefinders Corporation Ltd.
Highlands Ranch, Colorado Officer of the Corporation
since April 1997, Chairman
of the Corporation from
May 1996 to April 1997;
prior thereto Chairman and
Chief Executive Officer of
and partner in Milner Fenerty
(barristers and solicitors)
JOHN FREDERICK McOUAT (1) 65 1989 Chairman, Watts, Griffis and Cominco Ltd.;
Toronto, Ontario McOuat Limited (consulting Euro Nevada Mining
geologists and engineers) Corporation Ltd.
since January 1998; prior
thereto President, Watts,
Griffis and McOuat Limited
MONICA ELIZABETH SLOAN 45 1994 President, Kelman Technologies
(2) Inc. (oil and gas services
Calgary, Alberta company) since January 1998;
management consultant from
July 1997 to December 1997;
President, Telus Advanced
Communications from August 1995
to June 1997; prior thereto
Assistant Vice President
Strategy Development,
Telus Corporation
3
<PAGE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
NAME AND MUNICIPALITY AGE DIRECTOR PRINCIPAL OCCUPATION AND DIRECTORSHIPS OF OTHER
OF RESIDENCE SINCE BUSINESS EXPERIENCE WITHIN PUBLIC CORPORATIONS
THE LAST FIVE YEARS
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RICHARD GEOFFREY 68 1987 Corporate director Onex Corp.; Working
PENTLAND STYLES (1) Ventures Canadian Fund
Toronto, Ontario Inc.; The Geon Company
</TABLE>
(1) Member of the Audit Committee
(2) Member of the Compensation Committee
MEETINGS AND COMPENSATION OF THE BOARD OF DIRECTORS
In 1998 the Board of Directors held six meetings. All directors, except Mr.
Leclerc, received an annual retainer fee of U.S.$12,500 and U.S.$500 for
attendance at each meeting of the Board of Directors and of each committee on
which they served. Committee chairmen received an additional annual fee of
U.S.$7,500. Mr. Leclerc receives meeting attendance fees but does not receive an
annual retainer fee. The committee chairmen were: Audit - Mr. Burns, and
Compensation - Mr. Christy.
In 1994 the Corporation established a director equity plan which provides
for the grant of options to permit eligible directors to acquire common shares
of the Corporation. Eligible directors are neither officers nor employees of the
Corporation and options may be granted according to a formula which calls for
grants annually on the date of the Corporation's annual meeting of shareholders.
The number of shares covered by the grant shall be not less than 2,500 nor more
than 6,500. On June 11, 1998 each eligible director received an option to
acquire 6,500 common shares of the Corporation at a price of Can.$3.70, the
closing price reported by The Toronto Stock Exchange on that date.
COMMITTEES OF THE BOARD OF DIRECTORS
The Audit Committee reviews the annual financial statements and the annual
audit with the Corporation's independent auditors and also reviews quarterly
financial information which is published and disseminated to shareholders. The
Compensation Committee reviews the performance and recommends the compensation
of corporate officers and makes grants under the employee share incentive plan.
During 1998 the Audit Committee met four times and the Compensation Committee
twice. Mr. Choquette attended fewer than 75 percent of the aggregate of the
total number of meetings of the Board of Directors and the total number of
meetings held by all committees of the Board on which he served.
4
<PAGE>
STATEMENT OF CORPORATE GOVERNANCE PRACTICES
The Toronto Stock Exchange requires companies listed on that exchange to
disclose their approach to corporate governance in their annual reports or
information circulars and make the disclosure with reference to published
guidelines (the "Guidelines"). The following discusses the Corporation's
adherence to the Guidelines.
MANDATE OF THE BOARD OF DIRECTORS
The Board of Directors is responsible for managing the business and affairs
of the Corporation, participates in strategic planning and reviews and approves
operating plans. The Board identifies the principal risks of the business and
ensures they are effectively monitored and controlled. The Board is responsible
for corporate governance generally and for specific tasks such as selecting a
chief executive officer, assessing that individual's performance and replacing
that individual if appropriate. It is also responsible for all key executive
appointments and for setting equitable compensation for these and other
executives.
The Board ensures there is a sound basis for making key business decisions,
facilitates realization of corporate goals and ensures compliance, to the
greatest extent possible, with sound safety and environmental standards. It also
makes certain the Corporation has sufficient financial resources to meet its
commitments.
In all instances the Board must ensure that the interests of shareholders,
creditors, employees and the communities in which the Corporation operates are
properly served. The Board must be able and willing to take action, separate
from management, on issues which by law or practice require independent thought
and action. In all of this the Board has a duty to be certain the Corporation
acts in a lawful, ethical and responsible manner.
COMPOSITION OF THE BOARD
The Guidelines require the Corporation to address the extent to which the
Board has a majority of unrelated directors and the basis for reaching this
conclusion. An "unrelated director" is defined as a director who is independent
of management and is free from any interest and any business or other
relationship which could, or could reasonably be perceived to, materially
interfere with the director's ability to act with a view to the best interests
of the Corporation. Of the present nine directors, eight are unrelated. Each of
them has business and other interests entirely unrelated to those of the
Corporation other than interests arising from holding shares of the Corporation.
The only related director is Mr. Leclerc, who is employed by the Corporation.
Although Mr. McOuat is a principal in a firm which from time to time provides
consulting services to the Corporation, the amount of business done for the
Corporation does not represent a material percentage of that firm's gross annual
revenue and Mr. McOuat is considered unrelated.
5
<PAGE>
INDEPENDENT FUNCTIONING OF THE BOARD
The positions of chairman and chief executive officer have been combined
since April 1997. The Board believes the Corporation is well served and the
independence of the Board from management is not compromised by the combined
role. The Board has only nine members, one of which is the chairman, and at its
meetings often considers matters with the chairman being the only member of
management present. If required to deal effectively with a situation, the Board
will excuse the chairman during discussions. The Corporation's by-laws provide
that any two directors may call a meeting of the Board at any time for any
purpose.
The Board allows each director to seek the advice of independent experts,
if deemed appropriate.
BOARD COMMITTEES
The Board has an Audit and a Compensation Committee and their mandates are
described at page 4 of this management proxy circular. All members of each
committee are unrelated, outside directors. The Board believes the challenges
facing the Corporation should receive the attention of the full Board and no
other committees are required. Functioning as a full Board, rather than several
committees, allows management to have the advantage of the collective wisdom of
all members of the Board. As well, management is encouraged to consult Board
members informally on matters not requiring a formal Board meeting and on which
a specific Board member has expertise.
Realizing the responsibility for selection of board nominees remains that
of the Board, a nominating committee is considered unnecessary. The Board
searches for and recruits new directors. From time to time the Board reviews its
compliance with the Guidelines and other relevant corporate governance
requirements and evaluates its own effectiveness.
DECISIONS REQUIRING PRIOR APPROVAL BY THE BOARD
Prior Board approval is required for sales of securities of the
Corporation, incurring debt except under approved credit arrangements with banks
and financial institutions, and employment and compensation arrangements for
officers of the Corporation. Board approval is also required for any material
transaction and for capital expenditures in excess of U.S.$2,500,000.
SHAREHOLDER FEEDBACK
Shareholders are encouraged to convey their concerns to management. They
may do so by writing to the Corporation's Investor Relations Department.
THE BOARD'S EXPECTATIONS OF MANAGEMENT
The Board expects management to conduct the business of the Corporation in
keeping with the strategies and operating plans adopted by the Board. Management
is also expected to assess the potential of properties to become profitable
commercial producers of gold and other metals, and to
6
<PAGE>
develop plans, arrange financing and hire and train capable staff in order to
bring these properties into production. At the same time, management is expected
to effectively manage the major mines that today provide essentially all of the
Corporation's cash flow.
SECURITY OWNERSHIP
The following table shows equity securities of the Corporation beneficially
owned as of April 9, 1999 by all directors of the Corporation, the Chief
Executive Officer and next four most highly compensated executive officers of
the Corporation, and directors and executive officers of the Corporation as a
group.
<TABLE>
<CAPTION>
Amount and nature of Options to acquire common shares
beneficial ownership as of the Corporation exercisable
Beneficial Owner of April 9, 1999 within 60 days of April 9, 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
John N. Abell 10,000 18,100
Latham C. Burns 2,000 18,100
Peter H. Cheesbrough 26,868 257,154
Pierre Choquette 2,500 3,250
John G. Christy 42,553 18,100
Peter Clarke 18,500 174,567
Donald C. Ewigleben 400 83,363
Robert L. Leclerc 10,000 353,500
Jerry L. J. McCrank -- 30,944
John F. McOuat 2,791 11,600
Monica E. Sloan 1,500 18,100
R. Geoffrey P. Styles 2,000 18,100
Tom S. Q. Yip 300 34,121
Directors and executive
officers as a group 1,171,881(1)(2)(3)
</TABLE>
(1) Represents 0.83 percent of the outstanding common shares of the
Corporation.
(2) Includes 1,052,469 common shares which directors and officers have the
right to acquire within 60 days of April 9, 1999.
(3) No individual director or officer owns common shares of the Corporation
representing 1.0 percent or more of the number of outstanding shares.
7
<PAGE>
LIABILITY INSURANCE
The Corporation has purchased liability insurance and has, in addition,
agreed to indemnify directors and officers of the Corporation against all costs,
charges and expenses reasonably incurred by them in respect of certain
proceedings to which they may be made party by reason of their status as
directors or officers of the Corporation. The indemnification is extended to
directors and officers provided they have acted honestly and in good faith with
a view to the best interests of the Corporation and, in the case of a criminal
or administrative action or proceeding that is enforced by a monetary penalty,
on the condition the director or officer had reasonable grounds for believing
his conduct was lawful. The amount of the premium paid in respect of directors
and officers as a group was U.S.$113,500; the policy coverage is U.S.$35,000,000
per claim and in aggregate in any policy year. The first U.S.$500,000 of expense
for the Corporation per claim is not covered by the policy.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The table below shows the compensation of the Chief Executive Officer and
the next four most highly compensated executive officers for each of the
Corporation's last three completed fiscal years or, where an individual was not
an executive officer for the last three completed fiscal years, for those fiscal
years in which the individual was an executive officer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Long-Term
Annual Compensation Compensation
---------------------------------- ----------------
Share All Other
Salary Bonus Option Compensation
Name/Principal Position Year (U.S.$) (U.S.$) Awards (#) (U.S.$)
- ------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ROBERT L. LECLERC 1998 363,462(1) 318,202 160,110 28,601(2)
Chairman and Chief Executive Officer 1997 350,000 305,760 225,000 20,999
- ------------------------------------------------------------------------------------------------------------------------------
PETER H. CHEESBROUGH 1998 216,000(1) 198,083 71,363 15,360(3)
Senior Vice President, Finance 1997 207,945 145,600 97,436 12,600
and Chief Financial Officer 1996 199,462 33,283 39,481 10,928
- ------------------------------------------------------------------------------------------------------------------------------
DONALD C. EWIGLEBEN 1998 161,965(1) 147,368 35,674 9,106(3)
Vice President, Environmental 1997 155,988 77,984 48,708 7,799
and Public Affairs 1996 150,258 26,955 20,936 6,605
- ------------------------------------------------------------------------------------------------------------------------------
JERRY L. J. MCCRANK 1998 112,192 152,603 41,171 6,732(3)
Vice President, Operations
- ------------------------------------------------------------------------------------------------------------------------------
TOM S. Q. YIP 1998 111,635(1) 125,164 24,588 6,698(3)
Vice President and Controller 1997 107,058 103,375 29,004 6,246
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
(1) No salary increase in 1998. The variance from 1997 salary arises because
salaries are paid bi-weekly and there was one more pay period in 1998 than
in 1997.
(2) Represents the annual employer contributions to the Corporation's
retirement savings and defined contribution plans ($25,601) and fees for
attendance at meetings of the Board of Directors ($3,000).
(3) Represents the annual employer contributions to the Corporation's
retirement savings and defined contribution plans.
EXECUTIVE CASH INCENTIVE PLAN
The Corporation has an executive cash incentive plan (the "ECIP") under
which certain officers are eligible to receive, in addition to their base
salary, incentive compensation if certain performance objectives related to the
Corporation's annual operating plan as well as certain performance standards
considered applicable to the participant have been met. Awards earned and paid
to officers under the ECIP for 1998 aggregated U.S.$1,066,584. The amounts paid
to the Chief Executive Officer and the next four most highly compensated
executive officers are shown in the Summary Compensation Table at page 8 under
"Bonus".
SHARE OPTIONS
The Corporation has adopted a share incentive plan which provides for the
grant of options to purchase common shares to officers and employees. The number
of common shares currently authorized under the plan is 13,000,000. The exercise
price of all options granted to date has been 100 percent of the market value of
the common shares on the date of each grant. Options may be granted for a term
of not more than ten years and must be granted at no less than 100 percent of
fair market value on the date of grant. The exercise price must be paid in full
at the time of exercise of an option and may be paid either in cash or by the
surrender or delivery to the Corporation of common shares.
The Compensation Committee of the Board of Directors exercises its judgment
as to eligibility for participation in the plan and the amount of any particular
grant. It also determines the date on which each option shall become exercisable
and may provide that options shall be exercisable in installments. The Committee
may in its sole discretion accelerate the time at which any option may be
exercised in whole or in part. Such discretion may be exercised in any
circumstances deemed appropriate by the Committee including, but without
limitation, the threat (actual or perceived) of a take-over bid for voting
control of the Corporation.
At April 9, 1999 options to purchase a total of 4,671,606 common shares
were outstanding with an average exercise price per common share of Can.$10.32.
The following table shows option grants in the last fiscal year to the
Chief Executive Officer and the next four most highly compensated executive
officers.
9
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Individual Grants Grant Date Value
- ----------------------------------------------------------------------------------------------------------
Percent of
Total Options
Granted to
Employees Exercise or Grant Date
Options in Fiscal Base Price Present Value
Name Granted (#) Year (Can.$/Sh)(1) Expiration Date U.S.$(2)
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert L. Leclerc 160,110 18.7 3.59 Nov. 5, 2008 203,113
- ----------------------------------------------------------------------------------------------------------
Peter H. Cheesbrough 71,363 8.3 3.59 Nov. 5, 2008 90,530
- ----------------------------------------------------------------------------------------------------------
Donald C. Ewigleben 35,674 4.2 3.59 Nov. 5, 2008 45,255
- ----------------------------------------------------------------------------------------------------------
Jerry L. J. McCrank 41,171 4.8 3.59 Nov. 5, 2008 52,229
- ----------------------------------------------------------------------------------------------------------
Tom S.Q. Yip 24,588 2.9 3.59 Nov. 5, 2008 31,192
- ----------------------------------------------------------------------------------------------------------
</TABLE>
(1) All grants under the share incentive plan were made for a ten year period
at the closing price for the shares as published by The Toronto Stock
Exchange on the date of grant. The Compensation Committee of the Board of
Directors determines the date on which each option shall become exercisable
and has decided that the options shall become exercisable as to 25 percent
on the first anniversary of the date of grant and a further 25 percent on
each of the second, third and fourth anniversaries of the date of grant.
(2) The Black-Scholes option valuation model has been used to estimate the fair
value of options granted, assuming a weighted average option life of six
years, a risk-free interest rate of 4.87 percent, a dividend yield of zero
percent and a volatility factor of 50 percent. Values were calculated in
Can.$ and converted to U.S.$ using the exchange rate on the date of grant
(Can.$1.5176=U.S.$1.00).
10
<PAGE>
The following table shows aggregated option exercises in the last fiscal
year and year-end option values for the Chief Executive Officer and the next
four most highly compensated executive officers of the Corporation.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
Value of Unexercised
Number of Unexercised In-The-Money Options
Shares Options at Fiscal Year-End at Fiscal Year-End (U.S.$)(1)
Acquired Value
on Exercise Realized -------------------------------------------------------------
Name (#) (U.S.$) Exercisable Unexercisable Exercisable Unexercisable
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Robert L. Leclerc -- -- 297,250 303,860 -- --
Peter H. Cheesbrough -- -- 232,795 155,889 -- --
Donald C. Ewigleben -- -- 70,886 75,984 -- --
Jerry L. J. McCrank -- -- 28,988 51,115 -- --
Tom S. Q. Yip -- -- 26,870 41,707 -- --
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
(1) At the end of the last completed fiscal year, no unexercised options were
in the money.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
AGREEMENTS
Mr. Leclerc and the Corporation have entered into a contract which is for
an indefinite term and provides for certain lump sum payments if the Corporation
terminates Mr. Leclerc's employment on less than two years' written notice or
demotes him and he voluntarily resigns within 60 days thereof. If a change of
control of the Corporation is followed by a termination of Mr. Leclerc's
employment under specified circumstances, Mr. Leclerc shall be paid a cash
payment equal to three times the total of his annual base salary plus bonus
under the executive cash incentive plan. The specified circumstances include (i)
the Corporation's termination of Mr. Leclerc's employment within two years of a
change of control or (ii) a voluntary resignation by Mr. Leclerc for "good
reason" within one year of a change of control. The expression "good reason" is
defined to include any one of four acts of employer constructive dismissal: the
assignment of lower level status or responsibility, a reduction in base salary,
a requirement to relocate, or a change in employee participation in or benefits
under the Corporation's benefit plans. Additionally, in the final 30 days of the
one-year period referred to above, Mr. Leclerc may resign for any reason, or no
reason at all, and be entitled forthwith to the cash payment calculated as
specified above.
11
<PAGE>
Each of the other named executive officers has entered into an employment
contract for an indefinite term. Mr. Cheesbrough's contract is identical in
structure to Mr. Leclerc's contract. The contract of each of the other named
executive officers provides for certain lump sum payments if the Corporation
terminates his employment on less than one year's written notice or demotes him
and he voluntarily resigns within 60 days thereof. If a change of control of the
Corporation is followed by a termination of his employment under specified
circumstances, he shall be paid a cash payment equal to twice the total of his
annual base salary plus bonus under the executive cash incentive plan. The
specified circumstances are the same as those set out in Mr. Leclerc's contract
but there is no provision entitling the officer to resign for any reason, or no
reason at all.
All the employment contracts referred to above also provide that, if a
payment is to be made in the context of a change of control followed by
termination of employment and the payment when made would constitute a
"parachute payment" as defined in the U.S. Internal Revenue Code, the payment
will be reduced to the largest amount that would result in no portion being
subject to the excise tax imposed by (or the disallowance of a deduction under)
certain provisions of the Code.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors was established in
1983 and has always been comprised of outside directors. Among other activities,
the Committee sets guidelines for executive compensation and recommends
compensation for executive officers of the Corporation. The Committee makes the
final determination of recipients of share options and the amount of the awards.
For other significant components of executive compensation, the Committee
recommends action to the full Board of Directors. In all cases the directors
have acted upon Compensation Committee recommendations without modification in
any material way.
The following report is submitted by the undersigned directors in their
capacity as the Compensation Committee of the Board. Neither this report nor the
Performance Graph following it shall be deemed incorporated by reference into
any filing under the Securities Act of 1933 or under the Securities Exchange Act
of 1934.
COMPENSATION PHILOSOPHY
The Corporation's policy on compensation attempts to show consistent
application for all executive officers, with variations given to differences in
the level of responsibility for certain areas of corporate management, or in the
nature of the functions performed by particular individuals or groups. The goals
of the compensation program include creating a relationship between business
objectives and performance which will encourage the creation of value for
shareholders. No particular attempt is made to differentiate the chief executive
officer for compensation purposes. The Committee views the chief executive
officer as one member of the senior management team and applies compensation
criteria evenly to the team members.
12
<PAGE>
The Committee recognizes that management of a precious metal producer must
take the initiative in identifying and developing properties which will be of
long-term benefit and create value for shareholders. At the same time,
properties which are in production must be judiciously managed, with metal
production carefully planned and delivered for sale at an efficient cost for
each ounce produced. Management has limited control over the prices at which
gold and silver are sold but does attempt to secure prices for future production
using prudent hedging techniques.
Regardless of the stage of property activity, management must also be
mindful of the need to maintain a safe work environment. The failure to do
better than standard in this area should result in a deduction from compensation
otherwise payable. In addition, management must take steps to ensure the
development of ore reserves and to plan for mining these reserves efficiently
and with due regard for cost, safety and environmental concerns.
COMPENSATION COMPONENTS AND PERFORMANCE MEASURES
In evaluating executive compensation for 1998, the Committee adopted a plan
comprising a mix of base compensation (salary), cash bonus and share options. In
the past the Committee reviewed competitor practices and used data obtained in
respect of other North American precious metal producers to assist in setting
compensation. For 1998, competitor practices were considered but the Committee
recognized that senior management had been reduced significantly, compared with
1997, and roles and objectives changed.
For the financial year ended December 31, 1998 the following summarizes
executive compensation recommended by the Committee and approved by the Board of
Directors.
Salary - For the salary component, the Committee decided there would be no
salary increases for the four executive officers named in the Summary
Compensation Table who were executive officers at the end of the previous
financial year. As to the other named executive officer, Jerry L. J. McCrank,
his base salary was increased but not to a level consistent with that paid to
the individual who had held the position of Vice President, Operations prior to
Mr. McCrank's appointment in early 1998.
Bonus -- The Committee recognized that the six executive officers of the
Corporation would be asked to meet a difficult challenge in 1998. The financial
condition of the Corporation was particularly vulnerable as the year began with
a gold price of $290 per ounce, a level that did not improve by year end. While
the Committee decided to contain base salaries, as described above, it believed
strongly in making a bonus opportunity available if certain objectives were met.
First, the Committee decided that a base bonus pool would be established and
executive performance would be measured against an objective target for 60 per
cent of the base and subjectively as to the balance. Second, if and to the
extent a bonus was earned, the Committee would allocate bonus to executives
having regard in part, but not exclusively, to the level of each executive's
base compensation.
As to the objective test for bonus, the Committee decided that executives
would earn bonus if the net debt of the Corporation did not exceed a certain
level (in this case a range of between $50 and $54 million at December 31,
1998). If net debt were less, a greater amount of bonus would be earned.
13
<PAGE>
In fact, net debt at year end 1998 was $44.8 million and, according to the
formula established by the Committee and the Board of Directors, executives
were entitled to a bonus payout equal to 150 percent of the 60 percent of the
bonus pool measured by objective financial criteria.
The Committee decided that the executive officers should be paid a bonus
prorata on the same basis for the discretionary component of the bonus pool. In
reaching this recommendation, particular attention was paid to these performance
factors: excellent performance at all operations including the reduction of cash
operating costs at the mine sites to $208 per ounce, compared with $249 at year
end 1997 and $247 in the 1998 operating plan; achieving a realized cash price of
$340 per ounce of gold sold in 1998 compared with the average spot price of $294
per ounce experienced in the year; a significant reduction in general and
administrative costs; the disposition of certain non-core assets and resolution
of all disputes relative to the underlying transactions.
Share options - The share option component of executive compensation was
set as a function of base salary and the price for the Corporation's common
shares measured at 100 percent of market on the date of grant. Share option
grants were generally made in accordance with this formula and for the reasons
described above. The numbers of shares covered by option grants to the named
executive officers are set out in the Summary Compensation Table and the Table
of Option Grants shown at pages 8 and 10.
LIMITATION ON DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code limits the deductibility of
compensation for each of the Chief Executive Officer and the four other highest
paid executive officers to $1,000,000 per year (subject to certain exceptions).
None of the Corporation's officers receive annual compensation in excess of the
maximum deductible amount. If, because of competitive factors and individual
performance, the Committee should determine that it is appropriate to pay one or
more executive officers in excess of the annual maximum deductible amount it
will consider establishing performance criteria that will allow the Corporation
to avail itself of all appropriate tax deductions.
OTHER REMARKS
In summary, the Committee believes it is important to compensate officers
on a basis which reflects industry practice but which also considers corporate
objectives and performance. Base salaries are established by reference to
competitor practice, and the Corporation tends to pay its executives at an
average rate compared with other North American precious metal producers. The
cash bonus plan is aligned to short-term objectives and performance. The
Corporation's share incentive plan is used as a long-term compensation technique
and aligns management's objectives with those of the shareholders. Monitoring
reserves is an ongoing discipline and the Corporation relies on its executives
to build reserves over time and facilitate future production and other long term
goals designed to create value for the shareholders.
14
<PAGE>
The Committee is of the view that the compensation practices followed for
1998 have achieved an equitable balance between compensating executives and
managing the business of the Corporation for all shareholders.
John Gilray Christy, Chairman
Pierre Choquette, Monica E. Sloan, R. Geoffrey P. Styles
PERFORMANCE GRAPH
The graph below, expressed in U.S. dollars, compares over five years the
percentage change in the cumulative return to a holder of common shares in the
Corporation with the cumulative performance of the S & P 500 Index, The Toronto
Stock Exchange Gold Index and the price of gold. The graph assumes an investment
of U.S.$100 on December 31, 1993 and the reinvestment of dividends paid during
the five year period.
[GRAPH]
ECHO BAY MINES LTD.
COMPARISON OF CUMULATIVE RETURN
1998
CUMULATIVE RETURNS
<TABLE>
<CAPTION>
ECHO BAY LONDON PM TSE S&P
YEAR COMMON FIX AU/AG 500
<S> <C> <C> <C> <C>
1993 100.0 100.0 100.0 100.0
1994 83.1 97.7 90.2 101.3
1995 80.8 98.6 98.7 139.4
1996 52.7 94.1 75.7 171.4
1997 19.4 74.6 42.8 228.6
1998 13.9 72.9 39.7 293.9
<CAPTION>
LONDON BASE YEAR
YEAR PM FIX COMPARISON
<S> <C> <C>
1993 392 100.0
1994 383 97.7
1995 387 98.6
1996 369 94.1
1997 293 74.6
1998 286 72.9
<CAPTION>
C$ BASE
TSE YEAR
YEAR GOLD COMPARISON
<S> <C> <C>
1993 14,921 100.0
1994 13,463 90.2
1995 14,732 98.7
1996 11,303 75.7
1997 6,379 42.8
1998 5,921 39.7
</TABLE>
15
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
GENERAL
John F. McOuat is a director, officer and shareholder of Watts, Griffis and
McOuat Limited ("WGM") which, from time to time, performs professional
consulting services for the Corporation and affiliates. In 1991 certain
affiliates of WGM sold their working interest in the Alaska-Juneau property to
the Corporation for cash and other consideration. Notwithstanding the
Corporation's decision to proceed no further with development of the
Alaska-Juneau property and write it off, the Corporation is obligated to make
one more annual payment of Can.$500,000 to the WGM affiliates. The interest of
Mr. McOuat and members of his immediate family in this transaction, whether
direct or indirect, is approximately 30 percent.
INDEBTEDNESS OF MANAGEMENT
The Corporation has made loans available to certain persons employed by the
Corporation or an affiliate to assist with employee relocation. The loans are
for five years with an interest rate of nine percent per annum but for the first
three years the interest is rebated to the employee. At the end of three years,
interest at the lower of nine percent or the applicable federal rate for
short-term loans determined pursuant to the U.S. Internal Revenue Code will be
payable monthly until maturity. At maturity the loans may be renegotiated for a
further five-year period.
The following table shows, in United States dollars, the particulars of
indebtedness by officers in excess of U.S.$60,000 for the period January 1, 1998
to April 9, 1999:
<TABLE>
<CAPTION>
Balance
Nature Maximum outstanding
of balance at April Interest
Name Capacity loan in period 9, 1999 rate
- ------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
R. L. Leclerc Chairman Housing $150,000 $140,134 9.00%
</TABLE>
APPOINTMENT OF AUDITORS
The persons named in the enclosed form of proxy intend to vote for the
appointment of Ernst & Young as the auditors of the Corporation to hold office
until the next annual meeting of shareholders. Ernst & Young have been the
auditors of the Corporation since 1985. One or more members of the auditors will
attend the meeting, have an opportunity to make a statement, and be available to
respond to appropriate questions.
16
<PAGE>
1998 ANNUAL REPORT
The annual report for the year 1998, including financial statements and
other information with respect to the Corporation, has been mailed to each
shareholder. Additional copies of the annual report may be obtained by writing
to the Corporation.
2000 ANNUAL MEETING
Proposals of shareholders intended to be presented at the next annual
meeting must be received by the Corporation for inclusion in its Management
Proxy Circular on or before March 6, 2000.
The contents and the sending of this Management Proxy Circular have been
approved by the directors of the Corporation.
Dated at Edmonton, Alberta, Canada this 26th day of April 1999.
Lois-Ann L. Brodrick
Vice President and Secretary
17
<PAGE>
ECHO BAY MINES LTD.
1210 Manulife Place
10180 - 101 Street
Edmonton, Alberta, Canada
T5J 3S4
<PAGE>
ECHO BAY MINES LTD.
PROXY
ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON THE 3RD DAY OF JUNE 1999
The undersigned shareholder of ECHO BAY MINES LTD. appoints ROBERT LEIGH
LECLERC, Q.C. or failing him LOIS-ANN L. BRODRICK or instead of them or either
of them __________________________ as proxy of the undersigned with full power
of substitution, to attend, vote and otherwise act for and on behalf of the
undersigned in respect of all matters that may come before the Annual General
Meeting of Shareholders to be held on the 3rd day of June 1999, and at any
adjournment of the meeting, with the same power the undersigned would have if
the undersigned were present at the meeting, or any adjournment of the meeting,
and without limiting the generality of the foregoing, the proxy is directed to
vote or refrain from voting as specified below:
1. to vote FOR / / or WITHHOLD vote on / / the election of the following
persons as directors: John Norman Abell, Latham Cawthra Burns, Pierre
Choquette, John Gilray Christy, Peter Clarke, Robert Leigh Leclerc, Q.C.,
John Frederick McOuat, Monica Elizabeth Sloan and Richard Geoffrey Pentland
Styles; and
2. to vote FOR / / or WITHHOLD vote on / / the appointment of Ernst & Young as
auditors.
DATED , 1999
---------------------- ----------------------------------
Signature of Shareholder
(1) If a shareholder specifies a choice with respect to any of the matters
indicated above, the shares represented by the proxy will be voted for or
withheld from voting in respect of the matter on any ballot that may be
called for. WITH RESPECT TO THE ELECTION OF DIRECTORS, A SHAREHOLDER MAY
WITHHOLD AUTHORITY TO VOTE FOR A PARTICULAR NOMINEE BUT VOTE FOR THE
ELECTION OF THE OTHER NOMINEES BY LINING THROUGH OR OTHERWISE STRIKING OUT
THE NAME OF ANY PARTICULAR NOMINEE AND CHECKING THE "VOTE FOR" BOX.
(2) If this proxy is not dated in the above space, it is deemed to bear the
date on which it is mailed by the person making the solicitation.
<PAGE>
INSTRUCTIONS
If you are unable to attend the Annual General Meeting of Shareholders in
person, please fill in and sign this form of proxy and return it in the envelope
provided for that purpose.
1. THIS PROXY IS SOLICITED BY THE
BOARD OF DIRECTORS AND THE
MANAGEMENT OF THE CORPORATION.
2. If a shareholder wishes to be
represented at the meeting by
proxy, the proxy must be dated and
executed by the shareholder or the
shareholder's attorney authorized
in writing or, if the shareholder
is a corporation, under its
corporate seal or by an officer or
attorney of the corporation duly
authorized.
3. UNLESS OTHERWISE INDICATED, THIS
PROXY WILL BE VOTED FOR THE
ELECTION OF DIRECTORS AND FOR THE
APPOINTMENT OF AUDITORS. This form
of proxy confers discretionary
authority with respect to any
amendments to matters identified in
the notice of meeting or other
matters that may properly come
before the meeting.
4. A SHAREHOLDER HAS THE RIGHT TO
APPOINT A PERSON OTHER THAN THE
PERSONS DESIGNATED IN THIS FORM OF
PROXY TO ATTEND AND ACT ON BEHALF
OF THE SHAREHOLDER AT THE MEETING.
THE PERSON NEED NOT BE A
SHAREHOLDER. This right may be
exercised either by inserting in
the space provided the name of the
person or by completing another
proper form of proxy.
<PAGE>
NOTICE TO SHAREHOLDERS OF ECHO BAY MINES LTD.
Within a month of each quarter end Echo Bay issues a detailed news release on
the operating results. Shareholders may access highlights of this news release
within minutes of its release through services such as Dow Jones and Reuters or
Echo Bay (www.echobay.com). A copy of the press release will be available on the
Echo Bay Internet site within 24 hours of release.
If you wish to receive the quarterly financial statements of Echo Bay Mines
Ltd., please complete and return this card to Echo Bay Mines Ltd., c/o of
Montreal Trust Company of Canada, 8th Floor, 151 Front Street West, Toronto,
Ontario M5J 2N1. IF THE CARD IS NOT RETURNED, YOU WILL NOT RECEIVE QUARTERLY
FINANCIAL STATEMENTS.
................................................................................
ECHO BAY MINES LTD.
Please put my name on the Echo Bay supplemental mailing list.
- --------------------------------------------------------------------------------
Name
- --------------------------------------------------------------------------------
Street Suite or Apt. No.
- --------------------------------------------------------------------------------
City Province/State Postal/Zip Code
