Exhibit 10.1

[Kinross Gold Corporation Letterhead]

 

 

October 8, 2003

 

Board of Directors

Crown Resources Corporation

4251 Kipling Street, Suite 390

Wheat Ridge, CO 80033

LETTER OF INTENT

 

 

Gentlemen:

          Members of management of our respective companies have been discussing
the possibility of a strategic transaction in which Kinross Gold Corporation
("Kinross") would acquire the business and assets of Crown Resources Corporation
("Crown") other than Crown's interest in Solitario Resources Corporation (the
"Acquisition"). Crown has stated its belief that members of its board of
directors, executive management team and certain principal stockholders
(collectively, the "Stockholders") support, in principle, the transaction
proposed by this Letter of Intent (this "Letter") and that the Stockholders are
willing, as a part of a definitive agreement with respect to the Acquisition, to
enter into a Voting Agreement with respect to the approval of the proposed
transaction by the stockholders of Crown.

          As a result of these discussions, Kinross is interested in proceeding
with the acquisition of Crown. Except for the provisions of Section B, which are
intended to be binding on the parties, and the obligation to work in good faith
to pursue the transaction contemplated hereby, the terms of Kinross' proposal as
outlined below are preliminary and non-binding on either party. The complete
terms of the proposed transaction between the parties will be set forth in a
definitive agreement to be executed by the parties hereto.

Section A

          The following numbered paragraphs in this Section A express the
understanding of the undersigned parties with respect to the matters described
in them, but are expressly understood not to constitute a complete statement of,
or a legally binding agreement or commitment on the part of, either of the
parties with respect to the matters described in them.

1.      Acquisition of Crown. Subject to the terms and conditions set forth
below, Kinross will complete the Acquisition for a fixed exchange ratio of
0.2911 shares of Kinross common stock for each share of Crown common stock
outstanding immediately prior to the closing of the Acquisition (the "Exchange
Ratio"). If there are convertible notes or warrants or options to acquire Crown
common stock outstanding at the time of the Acquisition, Kinross shall acquire
such rights in connection with the Acquisition or agree that such rights shall
thereafter represent the right to convert to or to acquire, as the case may be,
shares of Kinross common stock, all based on the Exchange Ratio set forth above
and the existing terms of such rights; provided that, the holders of any
convertible notes agree to convert such notes into shares of Kinross common
stock immediately following the Acquisition. No fractional shares shall be
issued. The Exchange Ratio has been calculated based on there being no more than
45,059,048 shares of Crown outstanding on a fully diluted basis, assuming (i)
the conversion of all convertible notes and other convertible rights, (ii) the
exercise for cash of all outstanding options, and (iii) the cashless exercise of
all outstanding warrants based on a market price of Crown common stock of no
more than $2.25 per share, and it shall be a condition to the Acquisition that
such number is not exceeded (other than by exercises of warrants for cash or
based on a market price higher than $2.25 per share.)

2.     Spinout of Solitario. In connection with the consummation of the
Acquisition, Crown will dividend or otherwise distribute to its stockholders its
interest in Solitario Resources Corporation. The Exchange Ratio has been agreed
to based on the assumption that such distribution will occur.

3.     Form of Transaction. It is contemplated that the transaction will be
structured as a "tax-free" reorganization within the meaning of Section 368 of
the Internal Revenue Code of 1986, as amended, and the receipt of an appropriate
legal opinion with respect to the "tax free" nature of the transaction will be a
condition to Crown's obligation to consummated the Acquisition.

4.     Regulatory Filings. It is contemplated (i) that Kinross will be obligated
to file a registration statement with respect to the issuance of its common
stock to Crown stockholders, (ii) that Crown will be obligated to file a
proxy/information statement with respect to obtaining stockholder approval of
the Acquisition and (iii) that Solitario may be required to file documents with
the SEC in connection with the spinout described in Paragraph 2 of Section A.
Kinross and Crown agree to cooperate and work in good faith to complete and
obtain the effectiveness of such filings and other regulatory filings as may be
necessary in connection with the Acquisition as expeditiously as commercially
reasonable.

5.     Negotiation of Definitive Agreement. Kinross and Crown agree to proceed
promptly to negotiate in good faith a definitive agreement, and other documents
contemplated hereby (collectively the "Definitive Agreement"), which will
reflect more specifically the understandings outlined in this Letter as well as
other matters, issues, terms and/or conditions not contained herein. The
Definitive Agreement shall, among other terms:

     (a)     contain such terms, conditions, covenants, representations,
warranties, indemnifications, and other provisions as each of the parties
believes are necessary or appropriate to safeguard the respective interests of
the parties; and

     (b)     provide that the obligations of the parties to consummate the
transaction shall be subject to a number of conditions, including (i)
effectiveness of the registration statement of Kinross and the completion of the
SEC review of the proxy/information statement of Crown; (ii) approval of the
Definitive Agreement by the stockholders of Crown; (iii) conversion, to the
extent practicable, of all of Crown's outstanding convertible obligations,
warrants, options, and other purchase rights into shares of common stock of
Crown or shares of common stock of Kinross in connection with the completion of
the Acquisition; (iv) receipt of any required approvals from governmental and
regulatory agencies on terms reasonably acceptable to the parties; (v) receipt
of all necessary consents from third parties; and (vi) the lack of any material
adverse change with respect to the financial condition, business operations or
prospects of Crown or Kinross.

6.     Conditions to Kinross' Obligations. The obligations of Kinross are
subject to satisfaction of the following:

     (a)     confirmation of the ownership by Crown of the Buckhorn Mountain
Project;

     (b)     confirmation that the status of the Buckhorn Mountain Project is
not materially different than the disclosure contained in the periodic reports
of Crown filed with the SEC or the information provided to Kinross to date;

     (c)     confirmation that the fully diluted capital stock of Crown,
calculated as set forth in Paragraph 1 of this Letter, which assumes the
cashless exercise of outstanding warrants, does not exceed 45,059,048 shares
based on a market price of Crown common stock of no more than $2.25 per share;

     (d)     confirmation that the liabilities of Crown, contingent or
otherwise, do not exceed those set forth on the June 30, 2003 balance sheet of
Crown included in its periodic reports filed with the SEC, plus liabilities
incurred since such date in the ordinary course of Crown's business, consistent
with past practices, and "change of control," "golden parachute," or other
termination payments in accordance with the policies of Crown that may be
triggered by the Acquisition or the termination of employees in connection
therewith (all such change in control or termination payments not to exceed, in
the aggregate, $1.1 million);

     (e)     confirmation that all aspects of the reorganization in connection
with the bankruptcy proceeding filed by Crown on or about March 8, 2002, have
been complied with and completed and that all of Crown's liabilities or
obligations that predated such proceeding (except for those expressly assumed by
Crown and reflected on Crown's June 30, 2003, balance sheet) have been satisfied
or discharged in full in such proceeding; and

     (f)     the execution of Voting Agreements acceptable to Kinross by
Solitario Resources Corporation, Zoloto Investors, LP, and the members of the
Board of Directors of Crown.

7.     No Conversion of Derivatives Owned by Crown Senior Lenders. Crown and
Kinross acknowledge that in addition to the Crown voting common stock owned by
the Crown Senior Lenders, the Senior Lenders own Crown 10% Secured Convertible
Promissory Notes and Crown Warrants (collectively the "Derivative Securities").
Notwithstanding any provision of this Letter, the Definitive Agreement and the
Stockholder and Voting Agreement contemplated by this Letter or any related
agreement to the contrary, in no event shall the Senior Lenders be compelled to
convert Derivative Securities into Crown common stock as part of the
transactions contemplated by this Letter. Kinross and Crown agree to cooperate
and work in good faith to provide for a structure that provides advantageous tax
and economic consequences for Kinross, Crown and the other stockholders and
rights holders of Crown.

Section B

          Upon execution of this Letter by Crown, the following numbered
paragraphs under this Section B will constitute the legally binding and
enforceable agreement of Kinross and Crown, in recognition of the costs to be
borne by each party in pursuing this transaction and further in consideration of
their mutual undertakings as to the matters described therein.

1.     Stockholder and Voting Agreement. Crown agrees to submit to the board of
directors of Solitario Resources Corporation and to Zoloto Investors LP the form
of Voting Agreement attached hereto as Exhibit A and to use reasonable
commercial efforts, subject to applicable legal and fiduciary considerations, to
cause such entities to execute such Voting Agreement.

2.     Access to Information and Confidentiality. Crown will give to Kinross,
and to its employees, counsel, accountants, and other representatives, access to
all properties, books, contracts, documents and records with respect to their
affairs as Kinross may reasonably request in connection with the proposed
transaction. The parties to this Letter agree that all confidential information
that such party or any of their respective officers, directors, employees,
counsel, accountants, or other representatives may now possess or may hereafter
obtain relating to the other party shall be held in confidence under the
provisions of the Mutual Nondisclosure Agreement of even date herewith.

3.     Conduct of Business. Crown agrees that from and after the date of this
Letter and until the earlier to occur of the Closing or the termination of this
Letter, Crown shall conduct its business in the ordinary course consistent with
its normal operations, will use reasonable efforts to preserve the assets and
goodwill and value of its business and will not:

     (a)     sell or contract to sell any interest in its assets outside the
ordinary course of business;

     (b)     lease, license, transfer, pledge, mortgage, hypothecate or
otherwise dispose of any of its assets, except in the ordinary course of
business and the dividend or distribution of its interest in Solitario Resources
Corporation to its stockholders;

     (c)     issue any capital stock or the right to acquire any capital stock
except for the issuance of capital stock pursuant to the exercise of presently
exercisable options, warrants or convertible obligations; or

     (d)     enter into any transaction outside the ordinary course of business.

4.     Negotiation with Others.

     (a)     Crown agrees that from and after the date of this Letter until the
termination hereof, or the earlier termination of the understandings and
agreements contained in this Letter, neither Crown nor any of its officers,
directors, stockholders or agents, will directly or indirectly:

          (i)     enter into any transaction with any party other than Kinross
relative to a merger or consolidation or any disposition of the assets of Crown
or any interest in its business, its capital stock or any part thereof; or

          (ii)     solicit or encourage submission of inquiries, proposals or
offers from any other party relative to a merger or consolidation or any
potential disposition of Crown's business or its assets or capital stock or any
part thereof.

     (b)     Notwithstanding anything to the contrary contained in this Letter,
in response to an unsolicited offer, inquiry or proposal, Crown and any of
Crown's officers and directors (i) may participate in discussions or
negotiations with, review information from, and, subject to compliance with the
last sentence of this Subsection (b), furnish non-public information to any
third party (a "Potential Acquiror") that has made such offer, inquiry or
proposal relative to a merger or consolidation or any disposition of the assets
of Crown or any interest in its business, its capital stock or any part thereof
(collectively an "Alternative Acquisition") and/or (ii) may approve or accept an
unsolicited Alternative Acquisition and may make or authorize any statement,
recommendation or solicitation in support of an unsolicited Alternative
Acquisition, in each case only if the Crown board of directors determines in
good faith (A) that, in the case of subclause (i), such Alternative Acquisition
proposal is or is reasonably likely to be or become, or, in the case of
subclause (ii) such Alternative Acquisition proposal is, more favorable to Crown
and its shareholders than the proposal from Kinross described in this Letter and
(B) following consultation with outside legal counsel, that the failure to
participate in such discussions or negotiations, review such information or
furnish such information regarding, or approve or accept, the Alternative
Acquisition would violate the Crown Board's fiduciary duties under applicable
law. In such event, Crown shall promptly advise Kinross in writing of any bona
fide discussions regarding a possible Alternative Acquisition, the material
terms and conditions of any such Alternative Acquisition and the identity of the
Potential Acquiror. Crown shall (i) keep Kinross informed of the status and
terms of any such inquiry and Alternative Acquisition proposal and (ii) provide
to Kinross as soon as practicable after receipt of delivery thereof with copies
of all correspondence and other written material sent or provided to Crown from
the Potential Acquiror that describes any of the terms or conditions of a
proposed Alternative Acquisition. If Crown proposes to enter into an agreement
in connection with an Alternative Transaction, it shall first provide Kinross
with the written material described in the preceding sentence and a reasonable
period of time (which shall not be less than two (2) business days) during which
Kinross may propose changes to the Acquisition proposed by this Letter for
consideration by the Crown Board of Directors. Crown may not furnish any of its
non-public information to a Potential Acquiror unless it has previously
furnished or provided access to, or promptly thereafter furnishes or provides
access to, such information to Kinross.

5.     Break-up Fees.

     (a)     In the event that Crown does not complete the Acquisition with
Kinross as a result of entering into any agreement with any other party (or
group as that term is defined in 13(d) of the Securities Exchange Act of 1934,
as amended) within six months of the date of this Letter relating to the
possible acquisition of Crown or Crown's business, or 25% or more of its assets
or its stock, Crown agrees to pay a break-up fee to Kinross of $2,000,000, plus
the documented, reasonable, third party expenses of Kinross incurred in
connection with the transaction contemplated by this Letter to that date.

     (b)     In anticipation of the transaction contemplated hereby, Crown
intends, at Kinross' request, to make a regularly scheduled payment of interest
in cash rather than in its common stock. If a definitive agreement with respect
to the transaction contemplated hereby is not executed on or before November 15,
2003, for any reason other than the failure of one or more of the conditions set
forth in Paragraph 6 of Section A, the decision of Crown not to proceed with the
Acquisition contemplated by this Letter, or a breach of the obligations of Crown
hereunder, Kinross will purchase Crown common stock for $2.25 per share in an
aggregate amount of $407,000, the approximate amount of the interest payment.

6.     Costs. The parties agree that each will be solely responsible for and
bear all of its own respective expenses incurred at any time in connection with
pursuing or consummating this Letter and the transactions contemplated by this
Letter, including but not limited to fees and expenses of business brokers,
legal counsel, accountants and other facilitators and advisors, except as
otherwise specifically set forth herein. Each of the parties represent and
warrant that they are not a party to or subject to any agreement for the payment
of finder or similar fees in connection with the execution of this Letter, the
execution of the Definitive Agreement , or the consummation of the transactions
contemplated thereby.

7.     Effectiveness and Termination. This Letter is subject to, and shall not
be effective or binding prior to, the approval of this Letter by the board of
directors of Kinross and Crown, provided however, that, if either board of
directors has not approved this Letter on or before the close of business on
Tuesday, October 14, 2003, this Letter shall be terminated. In the event that a
Definitive Agreement has not been executed by November 15, 2003, either Kinross
or Crown may terminate this Letter. Upon termination, this Letter shall have no
force and effect and the parties shall have no further obligations under this
Letter, except for the obligations set forth in paragraphs 2 (as to
confidentiality), 5 and 6 of Section B, which shall survive the termination of
this Letter.

8.     Governing Law. This Letter shall be governed by and construed in
accordance with the laws of the State of Washington applicable to contracts made
and to be performed wholly therein.

9.     Press Release. Kinross and Crown shall issue a joint press release
concerning this Letter (which press release shall have been approved by the
parties and their respective legal counsel) no later than 8:00 a.m. Eastern
Standard Time on the day following the execution of this Letter by both parties.

 

          If you agree with the foregoing general terms as the basis of
negotiation, please sign below. The targeted date for the execution of a
definitive agreement is October 31, 2003. This proposal is effective from the
date of this letter to 5:00 P.M. EST, October 8, 2003, at which time and date
the terms of this proposal expire.

          We look forward to working together towards completion of a
Acquisition. If you have any questions or would like to discuss the contents of
this letter further, please feel free to contact me at (416) 365-5123.

 

 

 

KINROSS GOLD CORPORATION

/s/ John W. Ivany

John W. Ivany

AGREED TO AND ACCEPTED AS OF THE DATE OF THIS LETTER:

Crown:

CROWN RESOURCES CORPORATION

By: /s/ Christopher E. Herald

Christopher E. Herald

Duly Authorized Officer