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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14c INFORMATION
STATEMENT
PURSUANT
TO SECTION 14c OF THE SECURITIES
EXCHANGE ACT OF 1934
Check the appropriate box:
[ ] Preliminary Information Statement
[ ] Confidential, Use of the Commission Only (as permitted by Rule 14c-5(d)
(2)) Statement
[X] Definitive Information Statement
[ ] Definitive Additional Materials
KINAM GOLD INC.
-------------------------------------------------------
(Name of Registrant as Specified in its Charter)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
Fee computed on table below per Exchange Act Rules 14c-5(g) (4) and
0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction: 5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
JUNE 10, 1999
KINAM GOLD INC.
TO THE SHAREHOLDERS:
You are cordially invited to attend a Meeting of Shareholders of Kinam Gold Inc.
(the "Company"), which will be held on June 10, 1999 at 9:30 a.m., at the Main
Boardroom, Smith Lyons, 62nd Floor, 40 King Street West, Toronto, Ontario, M5H
3Y2 (the "Annual Meeting"), for the following purposes, which are more fully
described in the Information Statement accompanying this Notice:
(i) To elect five directors of the Company, each to serve until the
next annual meeting of shareholders and until their respective
successors have been duly elected and qualified;
(ii) To ratify the appointment of Deloitte & Touche LLP as
independent auditor of the Company for the fiscal year ending
December 31, 1999; and
(iii) To transact such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on May 10, 1999 as the
record date for the determination of shareholders entitled to receive notice of
and to vote at the Annual Meeting and at any adjournment or postponement
thereof.
All shareholders are cordially invited to attend the Annual Meeting in person.
By Order of the Board of Directors
/s/ Shelley M. Riley
----------------------------------------
Shelley M. Riley
Secretary
May 10, 1999
<PAGE> 3
KINAM GOLD INC.
185 SOUTH STATE STREET
SUITE 820
SALT LAKE CITY, UTAH
84111
INFORMATION STATEMENT
Annual Meeting of Shareholders
June 10, 1999
This Information Statement is being furnished by Kinam Gold Inc., a Delaware
corporation (the "Company"), to the holders of the Company's common stock, $0.01
par value (the "Common Stock") and $3.75 Series B Convertible Preferred Stock
(the "Preferred Stock"), in connection with the 1999 Annual Meeting of
Shareholders of the Company (the "Annual Meeting"). At the Annual Meeting,
shareholders will consider and vote upon the following matters:
a) the election of directors;
b) the ratification of the appointment of Deloitte & Touche LLP as
independent auditors of the Company for the fiscal year ending December
31, 1999; and
c) the transaction of such other business as may properly come before the
Annual Meeting or any adjournment or postponement thereof.
This Information Statement and the Notice of Annual Meeting of Shareholders are
first being mailed to shareholders of the Company on or about May 10, 1999.
WE ARE NOT ASKING YOU FOR A PROXY AND
YOU ARE REQUESTED NOT TO SEND US A PROXY
The Company will bear all costs and expenses relating to preparing, printing and
mailing to shareholders this Information Statement and accompanying materials.
Arrangements will be made with brokerage firms and other custodians, nominees
and fiduciaries representing beneficial owners and the Company will reimburse
such brokerage firms, custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred by them in doing so.
Record Date
The Board of Directors of the Company (the "Board") has fixed the close of
business on May 10, 1999 as the record date for determination of shareholders
entitled to notice of and to vote at the Annual Meeting (the "Record Date"). As
of the Record Date, there were issued and outstanding 92,213,988 shares of
Common Stock and 1,840,000 shares of Preferred Stock. The holders of record of
the shares of Common Stock on the Record Date entitled to be voted at the Annual
Meeting are entitled to cast one vote per share on each matter submitted to a
vote at the Annual Meeting. The holders of record of the shares of Preferred
Stock on the Record Date entitled to vote at the Annual Meeting are entitled to
cast 1.4 votes per share on each matter submitted to a vote at the Annual
Meeting. Accordingly, 92,213,988 attached Common Stock votes and 2,576,000
Preferred Stock votes are entitled to be cast on each matter submitted to a vote
at the Annual Meeting.
Required Vote
A majority of the outstanding shares of voting stock entitled to vote,
represented in person or by properly executed proxy, is required for a quorum at
the Annual Meeting. Abstentions and broker non-votes, which
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are indications by a broker that it does not have discretionary authority to
vote on a particular matter, will be counted as "represented" for the purpose of
determining the presence or absence of a quorum. Under Delaware corporate law
and the Articles of Incorporation and Bylaws of the Company (the "Bylaws"), once
a quorum is established, shareholder approval with respect to a particular
proposal is generally obtained when the votes cast in favor of the proposal
exceed the votes cast against such proposal.
In the election of directors, the five nominees receiving the highest number of
votes will be elected. For ratification of the appointment of the independent
auditor, the votes cast in favor of such proposal must exceed the votes cast
against the proposal. Accordingly, abstentions and broker non-votes will not
have the effect of being considered as votes cast against any matter considered
at the Annual Meeting.
The Preferred Stock is traded on The New York Stock Exchange (the "NSYE") under
the symbol "KGCPrB".
OTHER THAN DULY AUTHORIZED OFFICERS OF THE COMPANY, NO PERSON IS AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE HEREIN AND, IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THE DELIVERY OF THIS INFORMATION STATEMENT SHALL NOT UNDER ANY
CIRCUMSTANCE CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF THE COMPANY SINCE THE DATE HEREOF, OR THAT THE INFORMATION CONTAINED OR
INCORPORATED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
-----------------------------------
THIS INFORMATION STATEMENT DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OF THE COMPANY.
-----------------------------------
The date of this Information Statement is April 30, 1999.
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CHANGE OF CONTROL
On June 1, 1998, the Company, Kinross Gold Corporation ("Kinross") and Kinross
Merger Corporation, a newly-formed, wholly-owned subsidiary of Kinross ("Merger
Corp."), effected a business combination whereby Merger Corp. was merged with
and into the Company and the Company became a subsidiary of Kinross (the
"Kinross Merger"). Subsequent to the consummation of the Kinross Merger, Kinross
transferred to Kinross Gold, U.S.A., Inc., a wholly-owned subsidiary of Kinross
("Kinross U.S.A."), all of the shares of the Company's Common Stock, par value
$0.01 (the "Common Stock") and the Company became a subsidiary of Kinross,
U.S.A. The consideration paid by Kinross in consideration of all of the issued
and outstanding shares of Common Stock consisted of 92,213,988 common shares of
Kinross, together with the assumption or retirement of certain liabilities of
the Company. As a result of the Kinross Merger and subsequent transfer of Common
Stock to Kinross USA, Kinross USA owns 92,213,988 shares of Common Stock,
representing 100% of the issued and outstanding shares of Common Stock and
approximately 97.3% of the total voting rights of the Company.
ELECTION OF DIRECTORS
Nominees for Election as Directors
At the Annual Meeting, five directors of the Company (constituting the entire
Board) are to be elected to serve until the next annual meeting of shareholders
and until their successors shall be duly elected and qualified. Each of the
nominees for director identified below is currently a director of the Company.
In the election of directors, each shareholder shall have the right to vote the
number of shares owned by the shareholder for as many nominees as there are
directors to be elected, but may not cumulate votes in such election.
The table below sets forth the name, age, positions and term of office of each
director of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
- ---- --- -------- --------------
<S> <C> <C> <C>
JOHN A. BROUGH 52 DIRECTOR 1998
ARTHUR H. DITTO 58 DIRECTOR, PRESIDENT 1998
JOHN M.H. HUXLEY 54 DIRECTOR 1998
JOHN W. IVANY 55 DIRECTOR 1998
BRIAN W. PENNY 36 DIRECTOR, TREASURER 1998
</TABLE>
COMMITTEES AND MEETINGS
The Board has formed a standing Audit Committee, the members of which are John
F. Brough, John W. Ivany, and John M.H. Huxley. The Audit Committee held one
meeting during the year ending December 31, 1998. The Audit Committee's
functions include the recommendation of the Company's independent auditor, and
the review of the Company's internal accounting and financial practices and
controls and all services performed by the Company's independent auditor.
The Board has also formed a standing Compensation Committee, the current
members of which are Arthur H. Ditto, John W. Ivany and Brian W. Penny. Prior
to the completion of the Kinross Merger, the members of the Compensation
Committee consisted of Richard Block and Vernon Taylor. The Compensation
Committee held one meeting during the year ended December 31, 1998. The
Compensation Committee's functions include the determination of compensation
polices of the Company, including the determination of compensation payable
to the Chief Executive Officer and the other executive officers of the Company.
Additionally, the Board has formed a standing Benefits Committee comprised
solely of directors, the members of which are Arthur H. Ditto, John W. Ivany and
Brian W. Penny. The Benefits Committee did not meet during the year ended
December 31, 1998. The Benefits Committee's functions include direction and
oversight of the Company's tax qualified and welfare benefit plans.
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During the fiscal year ending December 31, 1998, there were four meetings held
by the Board. All of the directors attended at least 75% of the meetings of the
Board and committee meetings on which they served.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
John A. Brough has served as a director of the Company since June 1998. Mr.
Brough has been Executive Vice-President of Wittington Investments Limited and
President of Torwest Inc. since February 1998, prior to which he was Executive
Vice-President and Chief Financial Officer of iStar Internet Inc. From February
1996 to February 1998, Mr. Brough was Senior Vice-President and Chief Financial
Officer of Markborough Properties Inc. Mr. Brough has been a director of Kinross
since January 1994. Mr. Brough is a director of Torwest Inc. and Windsor
Properties Inc. Mr. Brough resides in Toronto, Ontario.
Arthur H. Ditto has served as a director of the Company since June 1998. Mr.
Ditto, has been the President and Chief Operating Officer of Kinross since May
1993. Mr. Ditto is also a director of E-Crete Products, Inc., a building
materials company, and Montana Tech Foundation, an educational funding
foundation. Mr. Ditto resides in North York, Ontario.
John M.H. Huxley has served as a director of the Company since June 1998. Mr.
Huxley has been the President and Chief Executive Officer of Algonquin Power
Corporation Inc. since January 1990. Mr. Huxley has been a director of Kinross
since May 1993. Mr. Huxley resides in Toronto, Ontario.
John W. Ivany has served as a director of the Company since June 1998. Mr. Ivany
has been Executive Vice-President of Kinross since July 1995. From January, 1994
until July 1995 he was President of St. Philips Resources Inc., a resource
company. Prior to 1994 he was Vice-President of Consolidated Ramrod Resources
Corporation, a resource company. Mr. Ivany resides in Toronto, Ontario.
Brian W. Penny has served as a director of the Company since June 1998. Mr.
Penny has been the Vice-President, Finance, and Chief Financial Officer of
Kinross since May 1993. Mr. Penny resides in Markham, Ontario.
EXECUTIVE OFFICERS
Subsequent to the Kinross Merger, the following individuals were appointed to
serve as the officers of the Company. The names, ages and office of all
executive officers of the Company are as follows:
<TABLE>
<CAPTION>
NAME AGE OFFICE
---- --- ------
<S> <C> <C>
Arthur H. Ditto 58 President
Robert W. Schafer 45 Vice President
Brian W. Penny 36 Treasurer
Shelley M. Riley 42 Secretary
</TABLE>
Arthur H. Ditto has been the President of the Company since June 1998. Since May
1993, Mr. Ditto has been the President and Chief Operating Officer of Kinross.
Prior to joining Kinross, Mr. Ditto was the President and Chief Executive
Officer of Plexus Resources Corporation. Mr. Ditto is also a director of E-Crete
Products, Inc. , a building materials company, and Montana Tech Foundation, an
educational funding foundation.
Robert W. Schafer has been the Vice President of the Company since June 1998.
Since July 1996, Mr. Schafer has been the Vice-President, Exploration of
Kinross. Prior to joining Kinross he was the Regional Manager, Western U.S.
Exploration of BHP Minerals International Exploration Inc., a resource company.
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Brian W. Penny has been the Treasurer of the Company since June 1998. Since May
1993, Mr. Penny has been the Vice-President, Finance and Chief Financial Officer
of Kinross.
Shelley M. Riley has been the Secretary of the Company since June 1998. Since
June 1993, Ms. Riley has been the Corporate Secretary of Kinross.
COMPENSATION OF DIRECTORS
The directors of the Company appointed subsequent to the Kinross Merger receive
no separate compensation for acting as directors. Prior to the Kinross Merger,
all non-employee directors received an annual retainer of $15,000, and a $1,000
fee for attendance at each meeting of the Board of Directors. Non-employee
members of committees of the Board of Directors were compensated at the rate of
$600 per committee meeting attended, while committee chairmen received $1,000
per meeting attended.
Prior to the completion of the Kinross Merger, under the stock grant plan
maintained by the Company for non-employee directors, on the day following the
annual meeting of stockholders in each year, each director who was not then an
officer or employee of the Company or any of its subsidiaries was granted 1,500
shares of Common Stock, until a maximum of 100,000 shares in the aggregate had
been granted. As of January 30, 1998, a total of 30,000 shares had been granted
to five directors. No shares were issued in 1998. The plan was terminated at the
time of the Kinross Merger.
Prior to the completion of the Kinross Merger, the Company had a Deferred
Compensation Plan for Directors (the "Deferred Compensation Plan"), under which
any director who was not an employee of the Company could elect to defer all or
a portion of his director's fees. Subsequent to the Kinross Merger, all amounts
were settled with equivalent common shares of Kinross. The Deferred Compensation
Plan was terminated at the time of the Kinross Merger.
EXECUTIVE COMPENSATION
The following table sets forth, for the three fiscal years ended December 31,
1998, the compensation paid to the Company's Chief Executive Officer, the former
Chief Executive Officer and the two executive officers of the Company who
received salary and bonus compensation in excess of $100,000 during the fiscal
year ended December 31, 1998. (collectively, the "Named Executive Officers").
The current executive officers of the Company receive no compensation as
officers of Kinam Gold Inc.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION AWARDS
--------------------- ------------------------------------------
OTHER RESTRICTED SECURITIES
NAME AND PRINCIPAL ANNUAL STOCK UNDERLYING ALL OTHER
- ------------------- FISCAL SALARY BONUS COMP. AWARDS OPTIONS/ COMPENSATION
POSITION YEAR ($) ($) ($) ($)(A) SARS(#)(B) ($)(C)
- -------- ------ ------ ----- ------- --------- ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Arthur H. Ditto(D) 1998 NIL NIL NIL NIL NIL NIL
President 1997 N/A N/A N/A N/A N/A N/A
1996 N/A N/A N/A N/A N/A N/A
Milton H. Ward(E)(H) 1998 166,476 -- -- -- 150,000 --
Chairman and 1997 309,590 -- -- -- 100,000 --
Chief Executive Officer 1996 267,707 -- -- -- -- --
S. Scott Shellhaas (F)(H) 1998 139,287 100,000 -- 25,160 60,000 1,949,943
President and Chief 1997 255,000 100,000 153,125 38,000 7,680
Operating Officer 1996 165,000 100,000 50,565(G) 50,000 6,187
</TABLE>
(A) Awards of restricted stock under the long-term incentive plan for fiscal
year 1997 were made in fiscal year 1998. Awards for fiscal year 1996
were made in January 1997. Amounts shown in the table reflect the fair
market value of stock on the date of the award. Pursuant to the Kinross
Merger 49,660 shares of restricted stock issued to Mr. Shellhaas were
redeemed in exchange for a payment of $139,670.
(B) These amounts represent options to purchase shares of Common Stock
awarded under the Company's Stock Option Plan.
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(C) The fiscal year 1998 amounts shown include employer contributions to the
Thrift Plan for Employees of Amax Gold Inc. (the "Thrift Plan") In
addition, payments under the Key Employees Separation Plan included
$1,260,000 for Mr. Shellhaas. Mr. Shellhaas was also accorded a tax
gross-up of $684,291.
(D) Mr. Ditto was appointed President of the Company pursuant to the Kinross
Merger. He receives no compensation from the Company.
(E) Amounts shown represent payments made by the Company to Cyprus Amax
Minerals Company, a former affiliate of the Company, in respect of a
portion of Mr. Ward's base salary and benefits attributable to his
service as an officer of the Company.
(F) Mr. Shellhaas was elected an executive officer of the Company in April
1996. The 1996 amounts represent compensation for April through December
1996.
(G) This amount represents moving expenses paid in 1996.
(H) Effective June 1, 1998 pursuant to the terms of the Kinross Merger,
Messrs. Ward and Shellhaas resigned their respective positions with the
Company and were replaced by the current officers of the Company.
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
The following table sets forth certain information concerning stock options
granted to the Named Executives during 1998. THE POTENTIAL REALIZABLE VALUES AT
ASSUMED ANNUAL RATES OF STOCK PRICE APPRECIATION FOR THE TERM OF THE OPTIONS
SHOWN BELOW ARE PRESENTED PURSUANT TO RULES OF THE SECURITIES AND EXCHANGE
COMMISSION. THE COMPANY IS NOT AWARE OF ANY MODEL OR FORMULA WHICH WILL
DETERMINE WITH REASONABLE ACCURACY A PRESENT VALUE FOR STOCK OPTIONS BASED ON
FUTURE UNKNOWN FACTORS. THE ACTUAL AMOUNT, IF ANY, REALIZED UPON THE EXERCISE OF
STOCK OPTIONS WILL DEPEND UPON THE MARKET PRICE OF THE COMMON STOCK RELATIVE TO
THE EXERCISE PRICE PER SHARE OF COMMON STOCK OF THE STOCK OPTION AT THE TIME THE
STOCK OPTION IS EXERCISED. THERE IS NO ASSURANCE THAT THE POTENTIAL REALIZABLE
VALUES OF STOCK OPTIONS REFLECTED IN THIS TABLE ACTUALLY WILL BE REALIZED.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------- POTENTIAL REALIZABLE
NUMBER OF % OF TOTAL VALUE AT ASSUMED
SECURITIES OPTIONS/SARs ANNUAL RATES OF
UNDERLYING GRANTED TO STOCK PRICE
OPTIONS/SARS EMPLOYEES EXERCISE OR APPRECIATION FOR
GRANTED IN FISCAL BASE PRICE EXPIRATION OPTION TERM
NAME (#)(A) YEAR(B) ($/SHARE)(C) DATE 5%($) 10%($)
- ---- ------------ ----------- ------------ ---------- --------------------- -------
<S> <C> <C> <C> <C> <C> <C>
Milton H. Ward 150,000 27.8 2.4375 1/2/08 552,661 840,019
S. Scott Shellhaas 60,000 11.1 2.4375 1/2/08 226,064 336,008
</TABLE>
- ------------
(A) All options were granted with an alternative settlement method under
which, in the Company's discretion, the option holder could exercise the
option as if it were a stock appreciation right.
(B) The percentage calculation is based on a total of 539,679 options
granted in fiscal year 1998. Stock options for 1996 and 1997 were
granted in January 1997 and 1998, respectively.
(C) The exercise price for each grant is equal to 100% of the fair market
value of Common Stock on the grant date. All options vest two years
after the date of grant and have a term of ten years, subject to earlier
termination in certain events related to termination of employment.
(D) Pursuant to the Kinross Merger, all options reflected in the foregoing
table were converted into options to purchase common shares of Kinross
at the rate of .8004 Kinross common share for each share of Common Stock
subject to the option. Therefore, at the time of the Kinross Merger, the
options granted by the Company to Messrs. Ward and Shellhaas were
converted to options to acquire 120,060 and 48,024 common shares of
Kinross respectively at an exercise price of $3.04 per share.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
The following table sets forth information concerning exercises of stock options
by the Chief Executive Officer of the Company and the Named Executive Officers
and stock options which remained unexercised at December 31, 1998. THE ACTUAL
AMOUNT, IF ANY, REALIZED UPON EXERCISE OF A STOCK OPTION WILL DEPEND
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UPON THE MARKET PRICE OF THE UNDERLYING SHARES OF STOCK RELATIVE TO THE EXERCISE
PRICE OF THE STOCK OPTION AT THE TIME THE STOCK OPTION IS EXERCISED.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END
(#)(A) ($)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) REALIZED($) UNEXERCISABLE UNEXERCISABLE
- ---- --------------- ----------- ------------- -------------
<S> <C> <C> <C> <C>
Milton H. Ward 0 0 365,000/NIL NIL
S. Scott Shellhaas 30,000 $10,917 118,000/NIL NIL
</TABLE>
(A) Pursuant to the Kinross Merger, all options to acquire shares of Common
Stock were converted into options to acquire common shares of Kinross at
the rate of .8004 Kinross common share for each share of Common Stock
subject to the option. Therefore, at the time of the Kinross Merger, the
options granted by the Company to Messrs. Ward and Shellhaas were
converted to options to acquire 292,146 and 94,447 common shares of
Kinross, respectively.
PENSION AND BENEFITS
In connection with the Kinross Merger, the Retirement Plan for Exempt Employees
of Amax Gold Inc. (the "Retirement Plan") was frozen as of June 30, 1998 and no
further pension benefits have been accrued since that date. Prior to June 30,
1998 the Plan covered executive officers (except for Mr. Ward, who participates
in the Cyprus Amax Retirement Plan for Salaried Employees.
The amount of annuity a retiring employee will receive on a single-life basis is
determined under a formula set forth below. Upon retirement, a married employee
receives a reduced annuity payment that continues after death to cover the
surviving spouse, unless the employee and the spouse elect one of the
alternative options of equivalent actuarial value. The benefit payable on the
employee's normal retirement date is equal to: (i) 1.7% of annual earnings (base
salary plus bonus) received by the employee during 1998 but prior to the freeze
date of June 30, plus (ii) 1.7% of the employee's average annual earnings for
the years 1993 through 1997 multiplied by the employee's service through 1997,
minus (iii) 1.1 percent of the employee's Social Security offset multiplied by
the employee's service through 1997, not to exceed 35 years. In addition, this
benefit will be at least as great as the benefit under the Retirement Plan for
Employees of the Company as of June 30, 1994, plus the benefit determined under
the preceding sentence for service beginning July 1, 1994.
Under the Retirement Plan, the annual benefit for S. Scott Shellhaas payable at
normal retirement age is $6,397. This amounts can be received as early as age 55
with reductions as provided for in the Retirement Plan.
CONSULTING AGREEMENT
Pursuant to the terms of an Agreement, entered into as of March 24, 1997 (the
"Consulting Agreement"), between the Company and Lee Erdahl, Mr. Erdahl agreed
to serve as the Company's Vice President and Chief Financial Officer. Mr. Erdahl
received fees prorated at the rate of $25,000 per month for the periods for
which services were performed and was reimbursed for travel and related
expenses. If the Company was actively engaged in negotiations with another party
relating to a business combination during the term of the Consulting Agreement
and such discussions concluded in the closing of a business combination during
the term of the Consulting Agreement or six months thereafter, Mr. Erdahl would
receive (i) a cash bonus of $125,000 payable upon closing of such business
combination and (ii) an additional cash bonus payable upon closing equal to the
excess, if any, of (a) the closing price of Common Stock on the closing date and
(b) $6.875, the closing price of Common Stock on March 24, 1997, times 20,000.
The Consulting Agreement was terminated pursuant to the Kinross Merger.
<PAGE> 10
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KEY EMPLOYEE SEPARATION PLAN
The Kinam Gold Inc. and Subsidiaries Key Employee Separation Plan, effective
March 1997 (the "Separation Plan"), provided all executive officers (except
Messrs. Ward and Erdahl) and certain other salaried employees of the Company
with benefits in the event of a Change of Control (as defined in the Separation
Plan). The Separation Plan provided benefits, based on salary grade level, equal
to between 52 weeks and 104 weeks of the employee's annual salary and bonus
(with the president of the Company receiving 156 weeks of pay). In connection
with the completion of the Kinross Merger, the Company paid to S. Scott
Shellhaas the sum of $1,944,291 under the terms of the Separation Plan.
KINROSS COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the Merger, the Compensation Committee consisted of Richard Block and
Vernon Taylor, the directors of the Company, respectively with Mr. Taylor
serving as Chairman. Mr. Ward is Chairman, President and Chief Executive Officer
of Cyprus Amax Minerals Company, a former affiliate of the Company ("Cyprus
Amax"). Mr. Ward was compensated by Cyprus Amax, and the Company reimbursed
Cyprus Amax for a portion of his base salary and benefits attributable to his
services as an officer of the Company. None of the present or former members of
the Company's Compensation Committee served on the Cyprus Amax Compensation
Committee, and no executive officers of the Company served on the Cyprus Amax
Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Securities and Exchange Commission's rules addressing disclosure of
executive compensation in Annual Reports on Form 10-K require the Compensation
Committee of the Board to include in this Annual Report on Form 10-K a report
from such committee addressing, with respect to the most recently completed
fiscal year, (a) the Company's policies regarding executive compensation
generally, (b) the factors and criteria considered in setting the compensation
of each of the Company's Chief Executive Officers during such fiscal year, and
(c) any relationship between such compensation and the Company's performance.
Prior to June 1, 1998, the Company's executive compensation program was
administered by the compensation committee of the Board, which consisted of
Richard Block and Vernon Taylor, two former directors of the Company. The
compensation committee was responsible for establishing the policies governing
the Company's compensation program and the amount of compensation for each of
the Company's independent directors and had oversight responsibility for all
executive compensation and executive benefit programs of the Company. In
connection with the closing of the Kinross Merger, the Board resigned whereupon
a new Board was elected, which new Board appointed a new compensation committee
consisting of Arthur H. Ditto, John W. Ivany and Brian W. Penny.
PRIOR POLICY
It is the Board's understanding, based on a review of the report of the
Compensation Committee for the year ended December 31, 1997 and financial
records of the Company relating to executive compensation through June 1, 1998,
that the Compensation Committee's policy regarding executive compensation from
January 1, 1998 through June 1, 1998 was as follows:
COMPENSATION PROGRAM. The Company's compensation program for executive
officers consisted of base salary, annual incentives, long term incentives and a
severance package that were tied to a review of the individual performance of
and the Company's prior agreements with each executive officer, the Company's
performance, overall business and economic conditions, and compensation data for
companies competing for the same executive talent.
<PAGE> 11
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Base Salary. The base salary for each executive officer, excluding the
Chief Executive Officer, was established to be near the median base salary in
the competitive marketplace and was adjusted based on the Compensation
Committee's assessment of the executive officer's performance, the length of
time in a certain position and the overall financial condition of the Company.
Annual Incentive Program. Annual incentive awards were contingent on the
Compensation Committee's year-end assessment of the performance of both the
Company and the executive officer. Achievement of the Company's performance
goals was not applied as part of a strict formula to determine the level of
incentive awards, but, instead, was used by the Compensation Committee as a
guideline in determining the awards. Awards were determined as a percentage of
target amounts, with adjustments based on the Compensation Committee's
subjective view of individual performance after consultation with the Company's
executive management.
Long Term Equity Compensation. Equity participation was intended to
create a focus by executive management on key performance measures that drive
stockholder values. Therefore, the Compensation Committee gave added
significance to long term equity compensation in the form of stock options and
long term performance based restricted stock awards. Awards reflected the
Compensation Committee's view of the relative importance of the individual's
position, his or her current performance and continuing contribution, and
prospective impact on the Company's future success, as well as the creation of
stockholder value. Stock options were granted under the 1992 Stock Option Plan
with an exercise price equal to the fair market value of the Common Stock on the
date of grant and vested on an accelerated basis in connection with the Kinross
Merger. Restricted stock awards respecting the Common Stock were granted under
the Key Executive Long-Term Incentive Plan (previously referred to as the
Performance Share Plan), the restrictions on which lapsed on an accelerated
basis in connection with the Kinross Merger.
Severance Package. Pursuant to the Company's agreements with each of its
executive officers and in connection with the Kinross Merger, an aggregate of
$2,498,900 was paid to the executive officers.
COMPENSATION OF THE CHIEF EXECUTIVE OFFICER
Mr. Ward, Chairman and Chief Executive Officer of the Company, was
compensated by Cyprus Amax and the Company reimbursed Cyprus Amax for the
portion of his base salary and benefits attributable to his services as an
officer of the Company. In determining the compensation to be awarded to Mr.
Ward for his services to the Company, the Compensation Committee considered the
salaries paid to chief executive officers at competitive companies and the base
salary payable to Mr. Ward under an employment agreement between Cyprus Amax and
Mr. Ward. Mr. Ward's employment agreement with Cyprus Amax established a base
salary and a bonus targeted at 100% of base salary but did not address
reimbursement of Mr. Ward's salary and benefits by the Company. Approximately
7.3% of Mr. Ward's salary and benefits paid by Cyprus Amax were reimbursed by
the Company.
Mr. Ward was eligible to participate in the Company's Stock Option Plan
and Key Executive Long-Term Incentive Plan. The Compensation Committee awarded
to Mr. Ward 150,000 stock options effective January, 1998.
SECTION 162(m) COMPLIANCE. Under Section 162(m) of the Internal Revenue
Code of 1986, as amended, federal income tax deductions of publicly-traded
companies may be limited to the extent total compensation (including base
salary, annual bonus, restricted stock awards, stock option exercises and non
qualified benefits) for certain executive officers exceeds $1 million in any one
year. The Compensation Committee intended to design the Company's compensation
programs so that the total compensation paid to any employee would not exceed $1
million in any one year.
<PAGE> 12
10
CURRENT POLICY
In connection with the Kinross Merger, all options that had been granted
respecting the Common Stock (including those granted to executive officers of
the Company) were converted into options respecting common shares of Kinross,
which converted options are exercisable subject to the applicable conversion
ratio. All persons who held awards of restricted stock pursuant to the Company's
Key Executive Long-Term Incentive Plan at the time of the Merger had the right
to receive the cash value of such awards. As of June 1, 1998, the Company ceased
paying all forms of compensation and reimbursement of compensation paid by third
parties, including the accrual of benefits and the granting of awards under
employee benefit plans maintained by the Company, to its executive officers,
including the Company's Chief Executive Officer. The current compensation
committee of the Board reports that such has been the policy of the Company
since June 1, 1998.
Since the date of the Kinross Merger, the Company has not paid
compensation or other remuneration to its Chief Executive Officer or other
executive officers. The Board does not anticipate any change to this policy
during the foreseeable future.
Respectfully submitted,
ARTHUR H. DITTO
JOHN W. IVANY
BRIAN W. PENNY
PERFORMANCE GRAPH
The following graph shows a comparison of cumulative total shareholder
return on the Common Stock, calculated on a dividend reinvested basis, from
December 31, 1994 through May 31, 1998, compared with the S&P 500 Index and the
U.S. Gold and Silver Index (XAU). As a result of the consumption of the Kinross
Merger, after May 31, 1998 there was no public market for the Common Stock.
[PERFORMANCE GRAPH]
CUMULATIVE TOTAL RETURN
BASED ON INVESTMENT OF $1.00
FROM DECEMBER 31, 1994 TO MAY 31, 1998
<TABLE>
<CAPTION>
Kinam XAU S&P500
----- ---- ------
<S> <C> <C> <C>
31-Dec-94 1.00 1.00 1.00
31-Dec-95 1.21 1.10 1.34
31-Dec-96 1.06 1.07 1.61
31-Dec-97 0.39 0.68 2.11
31-May-98 0.53 0.68 2.38
</TABLE>
<PAGE> 13
11
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
As of March 31, 1999, the following table sets forth the amount of all equity
securities of the Company that are beneficially owned by each director of the
Company, each of the Named Executive Officers and all directors and executive
officers of the Company as a group. The table segregates shares held from those
beneficially owned through ownership of options to purchase shares of Common
Stock. A person is considered to "beneficially own" any shares (i) over which
such person exercises sole or shared voting or investment power or (ii) of which
such person has the right to acquire beneficial ownership at any time within 60
days (e.g., through the exercise of stock options). Unless otherwise indicated,
each person has sole voting and investment power with respect to the shares set
forth opposite his or her name.
<TABLE>
<CAPTION>
NUMBER OF SHARES NUMBER OF SHARES
OF THE OF THE
COMPANY COMMON COMPANY SERIES B
DIRECTORS STOCK(1)(2) PREFERRED STOCK
- --------- ---------------- ----------------
<S> <C> <C>
Arthur H. Ditto NIL NIL
Brian W. Penny NIL NIL
John M.H. Huxley NIL NIL
John W. Ivany NIL NIL
John A. Brough NIL NIL
NAMED EXECUTIVE OFFICERS
- ------------------------
Arthur H. Ditto NIL NIL
Deborah Friedman(3) NIL NIL
Scott Shellhaas(3) NIL NIL
Milton H. Ward(3) NIL NIL
All directors and executive officers and
as a group (7 persons) NIL NIL
</TABLE>
(1) All amounts shown are less than one percent of the class.
<PAGE> 14
(2) Each share of $3.75 Series B Preferred Stock is convertible into 4.8512
shares of Common Stock of Kinross.
(3) Ceased to be an officer of the Company pursuant to the Kinross Merger.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
As of March 31, 1999, the following is, to the knowledge of the Company, the
only person (including any "group" as that term is used in Section 13(d)(3) of
the Securities Exchange Act of 1934) who is a beneficial owner of more than five
percent of the Common Stock:
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OF BENEFICIAL OWNERSHIP OF CLASS
- -------------- ------------------- ----------------------- --------
<S> <C> <C> <C>
Common Kinross Gold U.S.A., Inc. 92,213,988 100.00%
185 South State Street, Suite 820
Salt Lake City, Utah 84111
</TABLE>
The Company is not aware of any beneficial owners of more than 5% of the
Preferred Stock.
APPOINTMENT OF AUDITOR
The Audit Committee has recommended, and the Board has selected, the firm of
Deloitte & Touche LLP of Toronto, Ontario, independent certified public
accountants, to audit the financial statements of the Company for the fiscal
year ending December 31, 1999, subject to ratification by the Company's
shareholders. Deloitte & Touche LLP was appointed as auditors of the Company on
June 1, 1998 in connection with to the Kinross Merger. Prior to such date, Price
Waterhouse LLP were the auditors to the Company. Price Waterhouse LLP resigned
as auditors to Company upon completion of the Kinross Merger. The reports of
Price Waterhouse LLP on the Company's financial statements for the past two
years did not contain an adverse opinion or a disclaimer of opinion, nor were
they qualified as to uncertainty, scope or principle. Management is unaware of
any disagreement between the Company and Price Waterhouse LLP with respect to
accounting principles for periods prior to the resignation of Price Waterhouse
LLP. The Board of Directors recommends that shareholders vote for the
ratification of the appointment of Deloitte & Touche LLP as the Company's
independent auditor. Representatives of Deloitte & Touche LLP may be present at
the Annual Meeting and, if present, will have an opportunity to make a
statement if they so desire and respond to appropriate questions. The Company
does not anticipate that representatives of Price Waterhouse LLP will attend
the Annual Meeting.
OTHER MATTERS
As of the date of this Information Statement, the Board knows of no other
matters to be presented for action at the Annual Meeting.
Proposals by shareholders to be presented at the next annual meeting of
shareholders of the Company must be received by the Company at least 60 days
prior to the anniversary date of the last annual meeting in order to be included
in the Company's information or proxy, statement related to that meeting. The
proponent must be a shareholder entitled to vote at the next annual meeting. The
Company may refuse to include any shareholder proposal in the information or
proxy statement related to the meeting in the event that: (i) the proposal is
not submitted to the Company within the requisite time specified herein; (ii)
the proposal is submitted primarily for the purpose of enforcing a personal
claim or redressing a personal grievance against the Company or any of its
officers, directors or security holders, or for a purpose not related in any
significant way to the business or affairs of the Company; (iii) the Company, at
the shareholders' request, included a proposal in a management information
circular relating to a meeting of shareholders held within two years preceding
receipt of the request, and the shareholder failed to present the proposal at
the meeting; or (iv) substantially the same proposal was submitted to
shareholders with respect to a meeting of shareholders held within two years
preceding receipt of the shareholders' request and the proposal was defeated.
<PAGE> 15
13
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 and related rules require
the Company's directors and executive officers to file reports of beneficial
ownership and changes of beneficial ownership with the Securities and Exchange
Commission and with the Company. After reviewing the reports filed by the
directors and executive officers of the Company, the Company believes that the
directors and executive officers filed all of the reports they were required to
file in 1998: however, John A. Brough, Arthur H. Ditto, John M.H. Huxley, John
W. Ivany, Brian W. Penny, Shelley M. Riley and Robert H. Schafer failed to
timely file Forms 3 in connection with their appointments as directors and
executive officers of the Company following the Kinross Merger, which Forms 3
were filed on December 18, 1998.
ADDITIONAL INFORMATION
The Company will provide without charge to any person from whom an information
statement is provided by the Board, upon the written request of such person, a
copy of the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998, including the financial statements and schedules thereto (as
well as exhibits thereto, if specifically requested), required to be filed with
the Securities and Exchange Commission. Written requests for such information
should be directed to Shelley M. Riley, Secretary of the Company, at 57th Floor,
40 King Street West, Toronto, Ontario M5H 3Y2.
BY ORDER TO THE BOARD OF DIRECTORS
/s/ Shelley M. Riley
----------------------------------------
Shelley M. Riley
Corporate Secretary
TORONTO, ONTARIO
APRIL 30, 1999
