Kinam Gold, Inc.
On September 19, 2008, Berger Montague reached a $29.25 million cash settlement with Kinross Gold Corporation (“Kinross”), Kinross Gold U.S.A. (“Kinross USA”), Inc., and Kinam Gold Inc. (“Kinam”) (the “Kinross Defendants”) on behalf of current and certain former shareholders of the $3.75 Series B Preferred Stock of Kinam (the “Preferred”).
As a result of the litigation, in addition to the $29.25 million, dividends of at least $31.875 per Preferred share were paid by Kinam for a total of $6,528,371, through and including November 2008. The cash settlement and dividends paid together represent a gross value of $35,778,371 that will have been realized by the Class as a result of the litigation.
As part of the Settlement and pursuant to the Charter authorizing redemption and cancellation of the Preferred, all outstanding, publicly held shares of the Preferred will be redeemed and cancelled and will no longer be valid outstanding shares of Kinam Gold Inc.
The settlement resolves a certified federal class action lawsuit over whether: (1) the Kinross Defendants are liable for breach of contract for alleged violations of the express terms of the Preferred and (2) Defendants Kinross and/or Kinross USA are liable for alleged breaches of their fiduciary duties to the shareholders of the Preferred in connection with their February 20, 2002, Offer to Purchase all Publicly Held Shares of the $3.75 Series B Convertible Preferred Stock of Kinam Gold Inc. at $16.00 Per Share (as amended March 21, 2002) (the “Tender Offer”).
In addition to the dividends already paid, the settlement of the lawsuit provided $29,250,000.00 in cash, plus interest, to pay claims from investors who fall into one or more of the following three subclasses of the certified Class of plaintiffs known as the Tenderor Subclass, Late-Tenderor Subclass and the Holder Subclass. The Class and Subclasses consist of all persons or entities who: (1) tendered shares of the Preferred to Kinross or Kinross USA, pursuant to the Tender Offer made by Kinross and Kinross USA (“Tenderor Subclass”); (2) continue to hold shares of the Preferred as of the date of the Court’s final approval of the Settlement (“Holder Subclass”); and/or (3) did not tender shares of the Preferred to Kinross or Kinross USA pursuant to the Tender Offer made by Kinross and Kinross USA, but have since sold such shares directly to Kinross, Kinross USA or Kinam (“Late-Tenderor Subclass”).
Berger Montague filed suit on April 26, 2002, against the Kinross Defendants and Robert M. Buchan, the former Chairman and CEO of Kinross, on behalf of a class of all persons who tendered shares of the Preferred in response to the Tender Offer and all persons who continued to hold shares of the Preferred.
At the time of settlement, the litigation was a certified class action for damages and equitable and declaratory relief, in which the Lead Plaintiffs sought redress for alleged breach of the contractual terms of the Preferred as set forth in Kinam’s Articles of Incorporation (the “Charter”), i.e., a breach of contract by the Kinross Defendants, and for alleged breaches of fiduciary duties by Defendants Kinross and Kinross USA to the Class for failing to pay at least fair value for the Preferred in the Tender Offer. Count I of the Amended Complaint alleged a breach of contract on the basis that the Kinross Defendants violated the Charter. In Count I, Plaintiffs alleged, among other things, that the terms of the Preferred mandate equal or pro rata treatment of all holders with respect to payment of dividends, conversion into shares of common stock of Kinross, and redemption, as well as certain other provisions relating to additional board representation for the Preferred in the event of continued non-payment of dividends. Plaintiffs further alleged that by engaging in a June 12, 2001 transaction with Franklin Income Series and Franklin Income Securities in which Kinross USA purchased shares of the Preferred, which included an alleged partial payment of then suspended dividends, without making the same terms available to all holders of the Preferred, constituted a breach of contract if Plaintiffs could prove that Kinross and Kinross USA, were the alter egos of Kinam under Nevada law. In Count II the Lead Plaintiffs alleged that Defendants Kinross and Kinross USA breached the fiduciary duties they owed, as majority shareholders of Kinam, to the Class as minority shareholders (i.e., holders of the Preferred) by making an actionably coercive cash tender offer for the Preferred for $16.00 which the Plaintiffs alleged was an amount less than the fair value of the Preferred at the time of the Tender Offer.
SPECIAL NOTICE TO CURRENT HOLDERS OF THE $3.75 SERIES B CONVERTIBLE PREFERRED STOCK OF KINAM GOLD INC.
IF YOU CURRENTLY OWN SHARES OF THE PREFERRED, YOU ARE MEMBER OF THE HOLDER SUBCLASS THAT IS A PART OF THE SETTLEMENT. HOWEVER, AS A MEMBER OF THE HOLDER SUBCLASS, IN ORDER TO PARTICIPATE IN THE SETTLEMENT AND TO SUBMIT A VALID CLAIM FORM, YOU MUST CONTINUE TO OWN YOUR SHARES OF THE PREFERRED AT THE TIME OF THE ENTRY OF THE COURT’S FINAL ORDER APPROVING THE SETTLEMENT. IT IS ANTICIPATED THAT IF THE COURT GRANTS FINAL APPROVAL OF THE SETTLEMENT IT WILL DO SO ON OR AFTER JANUARY 29, 2009. IF YOU SELL OR OTHERWISE TRANSFER OWNERSHIP OF ANY OF YOUR SHARES BEFORE THE COURT ENTERS THE FINAL ORDER FINALLY APPROVING THE SETTLEMENT, YOU WILL NO LONGER BE A MEMBER OF THE HOLDER SUBCLASS AS TO ANY SUCH SHARES, WILL BE EXCLUDED FROM PARTICIPATING IN THE SETTLEMENT AS TO THOSE SHARES, AND WILL NOT RECEIVE ANY MONEY FROM THE SETTLEMENT AS TO THOSE SHARES.