<PAGE> 1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of Commission Only (as permitted by Rule
14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
AZCO MINING INC..
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(Name of Registrant as Specified in Its Charter)
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(Name of Person(s) Filing Proxy Statement if other than Registrant
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11,
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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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 filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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<PAGE> 2
5) Total fee paid:
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[ ] 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:
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2) Form, Schedule or Registration Statement No.:
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4) Date Filed:
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2
<PAGE> 3
AZCO MINING INC.
999 West Hastings, Suite 1250
Vancouver, British Columbia
Canada V6C 2W2
(604) 682-7286
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD APRIL 30, 1997
To Our Shareholders:
An Annual Meeting (the "Meeting") of Shareholders of Azco Mining Inc.
(the "Company"), a Delaware corporation, will be held at 10:00 a.m. (local
time) on Wednesday, April 30, 1997 at the Company's offices at 999 West
Hastings, Suite 1250, Vancouver, British Columbia, Canada, for the following
purposes:
1. To elect five directors of the Company.
2. To ratify the appointment of Coopers & Lybrand as the Company's
independent public accountants for the fiscal year ending June
30, 1997, and to authorize the directors of the Company to fix
and approve their remuneration.
3. To consider and vote upon a proposal to amend the Company's Stock
Option Plan.
4. To consider and vote upon such other matters as may properly come
before the Meeting or any adjournment thereof.
Shareholders of record at the close of business on March 3, 1997 are entitled
to notice of and to vote at the Meeting.
The Board of Directors of the Company extends a cordial invitation to
all shareholders to attend the Meeting in person. Whether or not you plan to
attend the Meeting, please fill in, date, sign, and mail the enclosed proxy in
the return envelope as promptly as possible. Your proxy may be revoked at any
time prior to the Meeting. The prompt return of your completed proxy will
assist the Company in obtaining a quorum of shareholders for the Meeting, but
will not affect your ability to change your vote by subsequent proxy or by
attending the Meeting and voting in person. If you are unable to attend, your
written proxy will assure that your vote is counted.
By Order of the Board of Directors
Alan P. Lindsay
Chairman of the Board
Vancouver, British Columbia
March 4, 1997
<PAGE> 4
AZCO MINING INC.
999 West Hastings, Suite 1250
Vancouver, British Columbia
Canada V6C 2W2
(604) 682-7286
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
APRIL 30, 1997
This Proxy Statement is furnished to the shareholders of Azco Mining
Inc. (the "Company"), a Delaware corporation, in connection with the
solicitation by and on behalf of the Company's Board of Directors
(collectively, the "Board") of proxies to be voted at the Annual Meeting (the
"Meeting") of shareholders (each a "Shareholder") of the Company. The Meeting
will be held on April 30, 1997 at 10:00 a.m. (local time) at the Company's
offices at 999 West Hastings, Suite 1250, Vancouver, British Columbia, Canada,
for the purposes set forth in the accompanying Notice of Annual Meeting of
Shareholders.
Solicitation expenses will be paid by the Company. In addition to
solicitation by mail, directors, officers and other employees of the Company
may, without additional compensation, solicit proxies by mail, in person or by
telecommunication.
The Company has retained Morrow & Co., professional proxy solicitors, at
an estimated fee of $5,500 plus reasonable out-of-pocket expenses, to assist in
the solicitation process. Approximately 35 persons will be utilized by such
firm in its solicitation efforts. The Company will reimburse brokerage houses,
banks, custodians and other nominees and fiduciaries for out-of-pocket expenses
incurred in forwarding the Company's proxy materials to, and obtaining
instructions relating to such materials from, beneficial owners of shares of
the Company's common stock.
All proxies that are properly executed and received prior to the Meeting
will be voted at the Meeting. If a Shareholder specifies how the proxy is to
be voted on any business to come before the Meeting, it will be voted in
accordance with such specification. IF A SHAREHOLDER DOES NOT SPECIFY HOW TO
VOTE THE PROXY, IT WILL BE VOTED FOR EACH MATTER SCHEDULED TO COME BEFORE THE
MEETING AND IN THE PROXY HOLDERS' DISCRETION ON SUCH OTHER BUSINESS AS MAY
PROPERLY COME BEFORE THE MEETING. Any proxy may be revoked by a Shareholder at
any time before it is actually voted at the Meeting by delivering written
notification to the Secretary of the Company, by delivering another valid proxy
bearing a later date or by attending the Meeting and voting in person.
This Proxy Statement and the accompanying proxy are first being sent to
Shareholders on or about March 5, 1997. The Company will bear the cost of
preparing, assembling and mailing the notice, Proxy Statement and form of proxy
for the Meeting.
Unless otherwise indicated, all monetary amounts set forth herein are in
United States dollars.
VOTING SECURITIES
All voting rights are vested exclusively in the holders of the Company's
common stock, $.002 par value (collectively, the "Common Stock"), with each
share entitled to one vote. Only Shareholders of record at the close of
business on March 3, 1997 are entitled to notice of and to vote at the Meeting
or any adjournment. At the close of business on March 3, 1997, there were
25,512,938 shares of Common Stock issued and outstanding. A minimum of one-
third of the shares of Common Stock issued and outstanding must be represented
at the Meeting, in person or by proxy, in order to constitute a quorum.
Cumulative voting is not allowed for any purpose. The affirmative vote of the
holders
<PAGE> 5
of the majority of the shares of Common Stock represented at the Meeting in
person or by proxy and entitled to vote on the subject matter will be necessary
to elect the slate of directors nominated by the Company, to amend the
Company's Stock Option Plan and to ratify the appointment of the auditors.
An abstention or withholding authority to vote will be counted as
present for determining whether the quorum requirement is satisfied. With
respect to the vote on any particular proposal, abstentions will be treated as
shares present and entitled to vote and, for purposes of determining the
outcome of the vote on any such proposal, shall have the same effect as a vote
against the proposal. A broker "non-vote" occurs when a nominee holding shares
for a beneficial holder does not have discretionary voting power and does not
receive voting instructions from the beneficial owner. Broker "non-votes" on a
particular proposal will not be treated as shares present and entitled to vote
on the proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information, as of February 15, 1997, with
respect to beneficial ownership of the Company's Common Stock by each person
known by the Company to be the beneficial owner of more than 5% of its
outstanding Common Stock, by each director of the Company, by each Named
Executive Officer (as defined below under "EXECUTIVE COMPENSATION") and by all
officers and directors of the Company as a group. Unless otherwise noted, each
Shareholder has sole investment and voting power over the shares owned.
<TABLE>
<CAPTION>
==============================================================================================================
NAME AND ADDRESS TYPE OF NUMBER OF PERCENT
OF BENEFICIAL OWNER OWNERSHIP SHARES OF CLASS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alan P. Lindsay Record and 978,569(1) 3.79%
(Director and Chief Executive Beneficial
Officer)
999 W. Hastings, Suite 1250
Vancouver, BC V6C 2W2
CANADA
- --------------------------------------------------------------------------------------------------------------
David C. Beling Record and 423,000(2) 1.63%
(Director, President and Chief Beneficial
Operating Officer)
P.O. Box 747
Safford, AZ 85548
- --------------------------------------------------------------------------------------------------------------
Anthony R. Harvey Record and 453,252(3) 1.75%
(Director, Executive Vice-President Beneficial
and Secretary)
999 W. Hastings, Suite 1250
Vancouver, BC V6C 2W2
CANADA
- --------------------------------------------------------------------------------------------------------------
Andrew F. de P. Malim Record and 171,541(4) *
(Director) Beneficial
7-8 Kendrick Mews
London, England SW7 3HG
- --------------------------------------------------------------------------------------------------------------
Paul A. Hodges Record and 116,524(5) *
(Director) Beneficial
4536 N. Via Bellas Catali
Tucson, AZ 85718
- --------------------------------------------------------------------------------------------------------------
</TABLE>
2
<PAGE> 6
<TABLE>
<CAPTION>
==============================================================================================================
NAME AND ADDRESS TYPE OF NUMBER OF PERCENT
OF BENEFICIAL OWNER OWNERSHIP SHARES OF CLASS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Ian M. Gray Record and 100,000(6) *
(Director) Beneficial
Copper Hill House
Buller Hill, Redruth
Cornwall, England TR166SR
- --------------------------------------------------------------------------------------------------------------
All Officers & Directors Record and 2,279,886(7) 8.47%
as a Group (7 persons) Beneficial
==============================================================================================================
</TABLE>
* Less than 1%.
(1) Includes (i) 605,308 shares owned by a corporation which is controlled
by Mr. Lindsay and (ii) options to acquire 300,000 shares at an exercise
price of CDN $1.80 per share.
(2) Consists of options to acquire (i) 100,000 shares at an exercise price
of $2.00 per share, (ii) 50,000 shares at an exercise price of $.40 per
share, (iii) 118,000 shares at an exercise price of CDN $2.89 per share,
and (iv) 155,000 shares at an exercise price of CDN $1.80 per share.
Mr. Beling has resigned as a director of the Company effective April 30,
1997.
(3) Includes (i) 122,224 shares owned by Mr. Harvey's wife and (ii) options
to acquire 300,000 shares at an exercise price of CDN $1.80 per share.
(4) Includes options to acquire 125,000 shares at an exercise price of CDN
$1.80 per share.
(5) Includes options to acquire (i) 50,000 shares at an exercise price of
$2.00 per share and (ii) 50,000 shares at an exercise price of CDN $1.80
per share.
(6) Consists of options to acquire 100,000 shares at an exercise price of
CDN $1.90 per share.
(7) Includes options to acquire an aggregate of 1,385,000 shares.
Management anticipates that insiders and their affiliates owning an
aggregate of approximately 3.5% of the outstanding shares of Common Stock will
vote in favor of each of the proposals to be submitted at the Meeting,
including votes for all the nominees for directors.
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of members of the Board
shall not exceed seven and, upon the resignation of David C. Beling, effective
as of April 30, 1997, the Board will consist of five members. Cumulative voting
in the election of directors is not permitted. Directors are elected by
majority vote of the shares represented at the Meeting and entitled to vote on
the matter.
With the exception of Mr. Beling, the directors listed below have been
nominated for re-election at the Meeting. Unless authority is withheld, it is
intended that the shares represented by the proxies will be voted "FOR" these
directors, each to serve until the Company's next Annual Meeting of
Shareholders or until his respective successor is elected and qualified.
3
<PAGE> 7
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the names, ages and positions of the directors
and executive officers of the Company as of February 15, 1997. (As stated
above, Mr. Beling has tendered his resignation as an officer and director of
the Company to the Board, to be effective as of April 30, 1997.) Board
Directors are elected to serve until the next Annual Meeting of Shareholders.
All officers have been appointed to serve until their successors are elected
and qualified. Additional information regarding the business experience,
length of time served in each capacity and other matters relevant to each
individual is set forth below the table.
<TABLE>
<CAPTION>
===========================================================================================================
NAME POSITION HELD WITH THE COMPANY PRINCIPAL OCCUPATION
---- ------------------------------ --------------------
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ALAN PETER LINDSAY . . . . . . . . . . . Chairman of the Board, Chief Chief Executive Officer
Executive Officer and a Director of the Company
of the Company
- -----------------------------------------------------------------------------------------------------------
DAVID COATES BELING . . . . . . . . . . . President, Chief Operating Chief Operating Officer
Officer and a Director of the of the Company
Company
- -----------------------------------------------------------------------------------------------------------
ANTHONY RICHARD HARVEY . . . . . . . . . Vice-Chairman of the Board, Executive Vice-
Executive Vice-President, President of the
Secretary and a Director of the Company
Company
- -----------------------------------------------------------------------------------------------------------
ANDREW FREDERIC DE PAULA MALIM . . . . . Director of the Company Mining financier
- -----------------------------------------------------------------------------------------------------------
PAUL ARTHUR HODGES . . . . . . . . . . . Director of the Company Mining consultant
- -----------------------------------------------------------------------------------------------------------
IAN MCFARLANE GRAY . . . . . . . . . . . Director of the Company Mining consultant
- -----------------------------------------------------------------------------------------------------------
RYAN ANDREW MODESTO . . . . . . . . . . . Corporate Controller and Controller and
Principal Accounting Officer Principal Accounting
Officer
===========================================================================================================
</TABLE>
The following is a brief biography of each of the directors and
executive officers of the Company.
Alan Peter Lindsay -- Chairman of the Board, Chief Executive Officer and
a director
Mr. Lindsay, aged 46, one of the Company's founders, has been
responsible for arranging the financing, the corporate development and the
building of the organization of the Company. Mr. Lindsay has an extensive
background in business management and marketing. Mr. Lindsay has been involved
in the mining business for the past eight years and since 1989 has been engaged
full time on the Company's business. From 1982 to 1989 Mr. Lindsay was the
Manager of the Financial Services Division of the North American Life Assurance
Company in Vancouver.
David Coates Beling -- President, Chief Operating Officer and a director
Mr. Beling, aged 55, joined the Company in January 1992, became a
director and the Chief Operating Officer of the Company in March 1993 and
President of the Company in February 1994. Mr. Beling had primary
responsibility for all exploration, development and operating activities of the
Company. Mr. Beling has worked in the mining industry since 1964, and has been
involved in the exploration, development and production operations of copper,
gold, zinc, oil shale, talc, uranium and coal mines. From 1987 through January
1992 he was both the Senior Vice-President of Hycroft Resources and Development
Inc. and the Vice-President of Operations (U.S.A.) of Granges, Inc., where he
was responsible for start-up and management of a 40,000 ton per day open pit
gold mine and a 16,000 ton per day heap leach
4
<PAGE> 8
process. Mr. Beling has tendered his resignation as an officer and director of
the Company to the Company's Board to be effective on April 30, 1997.
Anthony Richard Harvey -- Vice-Chairman of the Board, Executive Vice-
President, Secretary and a director
Mr. Harvey, aged 62, one of the Company's founders, has been associated
with the Company since July 13, 1988. He has been a full-time employee since
May 18, 1989, prior to which he spent 30 years with Wright Engineers Limited,
where he gained extensive experience in the mining industry in various
management positions, including mine construction and ore extraction, bulk
handling and processing, project management and corporate marketing
development, in many countries including the U.S. As a senior project manager,
he was responsible for the overall management and direction of many mining
projects worldwide, including, among others, the Copper Flat Project, a 15,000
ton per day copper-molybdenum open pit mining and processing plant located in
New Mexico, for Quintana Minerals Corporation, and a 3,000 ton per day
underground copper mine rehabilitation expansion located in Ireland, for Avoca
Mines Limited.
Andrew Frederic de Paula Malim -- director
Mr. Malim, aged 53, became a director of the Company on July 16, 1991.
Mr. Malim has been associated with Lion Mining Group since 1981 and currently
is the managing director of that company. Mr. Malim also has majority
ownership of the Lion Mining Group. The Lion Mining Group has been associated
with the Company since March 1989 and has been responsible for the Company's
European representation and for raising a significant portion of the Company's
financing to date. Mr. Malim was one of the original members of the James
Capel & Company mining team, and for ten years was a member of the
International Stock Exchange, London.
Paul Arthur Hodges -- director
Mr. Hodges, aged 69, became a director of the Company on October 1,
1993. He has a degree in Mining Engineering from the Colorado School of Mines
and is a registered professional engineer in Arizona. Mr. Hodges has over 40
years experience in the mining industry, covering exploration, operations,
project startups, management and financing, and has worked for Anaconda,
Asarco, RTZ and St. Joe. Mr. Hodges was the chief engineer worldwide for open
pit mining for RTZ and the President of Anamax Mining Company at Twin Buttes.
Most recently Mr. Hodges was the President of Compania Minera El Indio. He was
a director of Lac Minerals Limited, a publicly traded company acquired by
American Barrick in late 1994.
Ian McFarlane Gray -- director
Dr. Gray, aged 61, became a director of the Company on September 4,
1996. Most recently Dr. Gray has been involved in the assessment, acquisition
and development of gold and copper properties in Indonesia, Peru and Brazil.
For much of his career Dr. Gray held senior operations and management
positions with INCO Ltd. and BP Minerals International Ltd., and has been
involved in mineral exploration, project development, mine production,
formation and general management of public companies in North America,
Australia, Central Southern Africa, Southeast Asia and South America. Dr. Gray
currently serves as a director of each of the following Canadian public
companies: Atapa Minerals Ltd., Black Swan Gold Mines Ltd., El Misti Gold
Ltd., International Albany Resources Ltd., Jersey Goldfields Corporation, Indo
Metals Ltd., and International Panorama Resource Corporation.
Ryan Andrew Modesto -- controller and principal accounting officer
Mr. Modesto, aged 41, joined the Company in June 1994 as the Controller
of the Sanchez Project and became the Company's Corporate Controller and
Principal Accounting Officer on January 1, 1996. Mr. Modesto earned a B.S. in
Accounting from the University of Utah in 1977 and has 18 years of accounting
and administrative experience in the mining industry. For the six years prior
to joining the Company, Mr. Modesto was the Controller for Corona Gold's Santa
Fe project in Nevada.
5
<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of
a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
(the "SEC"). Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by it,
or written representations from certain reporting persons, the Company believes
that, during the fiscal year ended June 30, 1996, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with except that each of Messrs. Lindsay, Harvey, Beling,
Malim, Hodges and Modesto had one late filing, each reporting one transaction.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Andrew F de P Malim, a non-officer director of the Company, is the
chairman, managing director and majority shareholder of Lion Mining Finance, a
United Kingdom registered company. During 1996, the Company entered into a
memorandum of agreement with Eagle River International Limited, West African
Gold and Exploration, Ltd. and Lion Mining Finance concerning the development
of mining concessions in Mali. Pursuant to that agreement, Lion Mining Finance
was paid $7,000 and it is anticipated that Lion Mining will receive an equity
interest of up to approximately 21 percent in the project on a fully diluted
basis upon completion of the transaction.
BOARD MEETINGS AND COMMITTEES
During the Company's fiscal year ended June 30, 1996, the Company's
Board met three times. Except for Mr. Hodges who missed one meeting, all of
the directors were present for 75% or more of the meetings of the Board and any
committees upon which they served that were held during their individual
incumbencies. Messrs. Harvey, Lindsay and Beling spend virtually all of their
business time on the Company's business. Messrs. Hodges and Malim and Dr. Gray
each spend approximately ten percent of their business time on the Company's
business.
The Company's Audit Committee is comprised of Messrs. Harvey, Hodges and
Malim. The Audit Committee recommends the selection and re-appointment of the
Company's independent certified public accountants to the Board and reviews the
proposed scope, content and results of the audit performed by the accountants,
and any reports and recommendations made by them. The Audit Committee held no
formal meetings during the most recent fiscal year, but met in the context of
regular Board meetings.
During the fiscal year ended June 30, 1996, the Company had no
nominating, compensation, stock option or executive committees.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following tables show compensation during the fiscal years ended
June 30, 1994, 1995, and 1996, of those persons who were, at June 30, 1996 (i)
the Chief Executive Officer and (ii) other executive officers of the Company
whose total compensation was not less than $100,000 (collectively, the "Named
Executive Officers").
6
<PAGE> 10
Summary Compensation Table
(As at year ended June 30)
<TABLE>
<CAPTION>
==============================================================================================================
Annual Compensation Long Term
Compensa-
tion
- --------------------------------------------------------------------------------------------------------------
Securities
Under
Options/
Other Annual SARs
Salary Bonus Compensation Granted
Name and Principal Position Year ($) ($) ($) (#)
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alan Peter Lindsay, Chairman of the 1996 99,482(1) -0- 6,000(2) 300,000
Board and Chief Executive Officer 1995 92,400(1) -0- 2,500(2) -0-
1994 92,400(1) -0- 1,000(3) -0-
- --------------------------------------------------------------------------------------------------------------
David Coates Beling, President and 1996 175,000 -0- -0- 155,000
Chief Operating Officer 1995 142,178 65,000 6,490(4) -0-
1994 135,000 7,000 1,000(3) 118,000
- --------------------------------------------------------------------------------------------------------------
Anthony Richard Harvey 1996 99,482(5) -0- 6,000(2) 300,000
Vice-Chairman, Vice President, 1995 92,400(5) -0- 2,500(2) -0-
Secretary 1994 92,400(5) -0- 1,000(3) -0-
==============================================================================================================
</TABLE>
(1) These amounts were actually paid to Alan Lindsay and Associates Ltd., a
management company under the control of Mr. Lindsay pursuant to a
Management Agreement dated May 1, 1989 with the Company.
(2) These amounts were paid as reimbursement of medical insurance premiums.
(3) These amounts were paid as director's fees.
(4) These amounts were paid as a premium on a life insurance policy.
(5) These amounts were actually paid to ARH Management Ltd., a management
company under the control of Mr. Harvey pursuant to a management
agreement dated May 1, 1989 with the Company.
7
<PAGE> 11
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Potential
% of Total Realized Value
Number of Options/ (Cdn $) at
Securities SARs Assumed Annual
Underlying Granted Rates
Options/ to Exercise of Stock Price
SARs Employees or Base Appreciation
Granted in Fiscal Price Expiration For Option Term
Name (#) Year (Cdn $/Sh) Date 5% 10%
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Alan P. Lindsay 300,000(1) 0.34% 1.80 March 8, 2001 27,000 54,000
- --------------------------------------------------------------------------------------------------------------
David C. Beling 155,000(1) 0.18% 1.80 March 8, 2001 13,950 27,900
- --------------------------------------------------------------------------------------------------------------
Anthony R. Harvey 300,000(1) 0.34% 1.80 March 8, 2001 27,000 54,000
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(1) These options became exercisable on the date of grant (March 8, 1996).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR END OPTION
VALUES
<TABLE>
<CAPTION>
=====================================================================================
Number of Securities Underlying Value of Unexercised
Name Unexercised Options at FY-End In-The-Money Options at FY-
End ($)(1)
---------------------------------------------------------------
Exercisable Unexercisable Exercisable Unexercisable
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alan P. Lindsay -0- 300,000 -0- 72,000
- -------------------------------------------------------------------------------------
David C. Beling 268,000 155,000 58,000 37,200
- -------------------------------------------------------------------------------------
Anthony R. Harvey -0- 300,000 -0- 72,000
=====================================================================================
</TABLE>
(1) Based on the closing price of $1.56 of the Company's Common Stock as
quoted on The American Stock Exchange on June 30, 1996.
COMPENSATION OF DIRECTORS
Effective September 30, 1994 the Company's Board authorized the payment
of directors' fees only to outside, or non-officer directors, at the rate of
$1,000 per month. Effective February 6, 1996 the Company's Board authorized an
increase in directors' fees to outside, non-officer directors, to $1,500 per
month. The Company also reimburses its directors for reasonable expenses
incurred by them in attending meetings of the Board. During fiscal 1996 Mr.
Malim and Mr. Hodges, both non-officer directors, were granted stock options of
125,000 and 50,000, respectively. On September 4, 1996 Dr. Gray was granted
options to acquire 100,000 shares of the Company's Common Stock.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS
Effective May 1, 1989, the Company entered into a management agreement
with Alan Lindsay and Associates Ltd. ("Associates"), a British Columbia
corporation owned and controlled by Mr. Lindsay, the Company's Chief Executive
Officer. This agreement requires all salary amounts otherwise payable by the
Company to Mr. Lindsay to be paid to Associates. This agreement is
automatically renewed for two year terms unless either party gives the other
party notice of non-renewal at least 30 days prior to the end of any term. The
agreement may be terminated by the Company without notice if Mr. Lindsay is no
longer a principal of Associates, or upon the occurrence of certain other
events such
8
<PAGE> 12
as Mr. Lindsay's bankruptcy or disability. The agreement may be terminated by
either party, without notice, upon breach of the material terms of the
agreement, commission of fraud or misconduct or declaration of bankruptcy by
either party.
Mr. Beling had an employment agreement with the Company providing for a
base salary of $135,000 per year. The agreement also provided that in the
event of termination of Mr. Beling's employment for reasons beyond his
reasonable control, Mr. Beling would receive severance pay equal to six months
of base salary plus any prorated bonuses and vacation accrued to the time of
termination. In addition, the agreement provided that in the event of merger,
consolidation, divestiture, takeover, sale or other similar circumstances which
result in conditions or terms unacceptable to Mr. Beling within the first year
after such event, Mr. Beling would be paid 12 months base salary plus any
prorated bonuses and vacation accrued to the time of termination. Mr. Beling
has resigned as a director and officer of the Company effective as of April 30,
1997. Mr. Beling's resignation triggered the provisions described above
requiring payment of 12 months base salary plus any prorated bonuses and
vacation accrued to the time of termination. The total amount which has been
paid to Mr. Beling pursuant to this provision is $175,000. An additional
amount of up to $20,192 may be paid to Mr. Beling after April 30, 1997 for
accrued vacation.
Effective May 1, 1989 the Company entered into a management agreement
with ARH Management Ltd. ("Management"), a British Columbia corporation owned
and controlled by Mr. Harvey, the Company's Vice-Chairman. This agreement
requires all salary amounts otherwise payable by the Company to Mr. Harvey to
be paid to Management. This agreement is automatically renewed for two year
terms unless either party gives the other party notice of non-renewal at least
30 days prior to the end of any term. The agreement may be terminated by the
Company without notice if Mr. Harvey is no longer a principal of Management, or
upon the occurrence of certain other events such as Mr. Harvey's bankruptcy or
disability. The agreement may be terminated by either party, without notice,
upon breach of the material terms of the agreement, commission of fraud or
misconduct or declaration of bankruptcy by either party.
Effective August 15, 1994 management agreements (collectively, the
"Management Agreements") were provided to each of Messrs. Beling, Harvey and
Lindsay that are effective in the event of a change in control of the Company.
The Management Agreements provide for a lump sum distribution in an amount
(taking into account all other applicable change in control payments by the
Company) not to exceed 299% of the base amount as defined in IRC Section
280G(b). Such "base amount" is generally equivalent to the applicable person's
average annual compensation from the Company includable in his gross income
over the preceding five years. Change of control is defined as any of the
following:
(i) the acquisition of (whether direct or indirect) shares in excess
of 20 percent of the outstanding shares of Common Stock of the
Company by a person or group of persons, other than through a
public equity offering by the Company; or
(ii) the occurrence of any transaction relating to the Company
required to be described pursuant to the requirements of item
6(e) of Schedule 14A of Regulation 14A of the Securities and
Exchange Commission under the Exchange Act; or
(iii) any change in the composition of the Board of the Company
resulting in a majority of the present directors not constituting
a majority, provided that in making such determination, directors
who were elected by, or on the recommendation of, such present
majority, shall be excluded.
Effective August 15, 1994 directors' agreements (collectively, the
"Directors' Agreements") were provided to each of Messrs. Malim and Hodges that
are effective in the event of a change in control of the Company. On November
19, 1996 a Directors' Agreement was provided to Dr. Gray. These Directors'
Agreements provide for a lump sum distribution in the amount of $100,000.
Change in control has the same definition as set forth above in connection with
the Management Agreements.
If all change in control payments to officers and directors (other than
Mr. Beling) were triggered, the aggregate amount payable by the company would
be approximately $1,405,000, provided, that such amount could vary depending
upon the value of outstanding stock options.
9
<PAGE> 13
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1996, the Company had no
compensation committee. Each of the Company's officers and directors
participated in deliberations of the Company's Board concerning officer
compensation.
REPORT OF THE BOARD ON EXECUTIVE COMPENSATION
OVERALL POLICY
Salary compensation of the Company's executive officers is determined by
the Board. The directors' consideration of and decisions regarding executive
compensation are guided by a number of factors described below. The objectives
of the Company's total executive compensation package are to attract and retain
the best possible executive talent, to provide an economic framework to
motivate the Company's executives to achieve goals consistent with the
Company's business strategy, to provide an identity between executive and
shareholder interests through stock option plans and to provide a compensation
package that recognizes an executive's individual results and contributions in
addition to the Company's overall business results.
In making recommendations concerning executive compensation, the
directors review individual executive compensation, corporate performance,
stock price appreciation and total return to Shareholders for the Company.
SALARIES
The key elements of the Company's executive compensation consist of
salary and stock options. The Board determines salary levels of officers and
employee stock option awards.
Salaries for executive officers are determined by evaluating the
responsibilities of the position held and the experience of the individual, and
by reference to the competitive marketplace for executive talent, including a
comparison of salaries for comparable positions at other mining companies.
The salary levels of the officers of the Company for the following
fiscal year are generally established by the Board at its year-end meetings.
Specific individual performance and overall corporate or business segment
performance are reviewed in determining the compensation level of each
individual officer. The Board, where appropriate, also considers other
performance measures, such as safety, environmental awareness and improvements
in relations with Shareholders, employees, the public and government
regulators.
Mr. Lindsay's salary as Chief Executive Officer was increased to
$110,000 by the Company's Board on February 6, 1996. The Board's basis for
this increase was that Mr. Lindsay had not received a salary increase since May
22, 1992 when his salary was set at $92,400.
Mr. Beling's base salary of $135,000 per year was negotiated in
September 1991 and was comparable to the salary he received from his previous
employer. On June 13, 1994, the Company's Board determined that Mr. Beling's
base salary would be increased to $175,000 per year when the Company secured
total financing for, or consummated an agreement with respect to the
disposition of, the Sanchez Project. Effective December 20, 1995 the Sanchez
Project was sold and Mr. Beling's salary was increased to $175,000
retroactively to April 27, 1995.
Mr. Harvey's salary as Executive Vice President and Secretary was
increased to $110,000 by the Company's Board on February 6, 1996. The Board's
basis for this increase was that Mr. Harvey had not received a salary increase
since May 22, 1992 when his salary was set at $92,400.
10
<PAGE> 14
STOCK OPTIONS
Under the Company's 1989 Stock Option Plan as amended ("the Plan"),
which was approved by Shareholders, stock options are granted to the Company's
officers, directors and key employees, including the individuals whose
compensation is detailed in this Proxy Statement. The Board determines the
size of the stock option grants based on certain factors, including competitive
compensation data similar to those used to determine salaries.
Stock options are intended to align the interests of the executives with
those of the Shareholders. All stock options granted from the Plan are granted
with an exercise price equal to the market price of the Common Stock on the
date of grant and are generally exercisable over a five-year period. This
approach is designed to provide executive incentive for the creation of
additional shareholder value over the long term since the benefit of the option
awards cannot be realized unless stock price appreciation occurs.
The Company currently proposes to amend its Plan as set forth below
under "PROPOSAL TO AMEND THE COMPANY'S STOCK OPTION PLAN".
CONCLUSION
The Company's executive compensation is linked to individual and
corporate performance. The Board intends to continue the policy of linking
executive compensation to corporate performance, recognizing that the ups and
downs of the business cycle, and in particular depressed mineral prices, from
time to time, may result in an imbalance for a particular period.
This Report has been provided by the Board.
Alan Peter Lindsay David Coates Beling
Anthony Richard Harvey Paul Arthur Hodges
Andrew Frederic de Paula Malim
SHAREHOLDER RETURN PERFORMANCE GRAPH
The following graph shows the cumulative total Shareholder return on the
Company's Common Stock compared to the cumulative total return of three other
stock market indices: (i) The Toronto Stock Exchange 300 Index (the "TSE 300
Index"), (ii) The American Stock Exchange Index (U.S.) (the "Amex Index
(U.S.)"), and (iii) the Peer Group Index of similar line-of-business companies
as industry code defined in the Media General Financial Database. The time
period graphed is the period from July 1, 1992 through June 30, 1996. (The
Company's Common Stock was registered under Section 12 of the Exchange Act in
July, 1992.)
The TSE 300 Index is the major Canadian index. The AMEX Index (U.S.) is
an index comprising all domestic common shares traded on The American Stock
Exchange. The Peer Group Index includes data from the following six companies;
Atlas Corporation, Benguet Corporation, Freeport McMoran Copper & Gold, Cyprus
Amax Minerals, O'Okiep Copper Co. Ltd. and RTZ Corp. PLC, all of which are
listed on AMEX or NYSE. Cyprus Amax Minerals was added as a new member of the
Peer Group to replace Magna Copper, whose shares are no longer traded.
11
<PAGE> 15
CUMULATIVE TOTAL SHAREHOLDER RETURN(1)(2)(3)
JULY 1, 1992 - JUNE 30 1996
SHAREHOLDER RETURN PERFORMANCE GRAPH
7-1-92 06-30-93 06-30-94 06-30-95 06-30-96
------- -------- -------- -------- --------
AZCO $100.00 $124.80 $103.31 $61.99 $64.57
TSE 300 $100.00 $112.81 $108.56 $125.93 $144.51
AMEX $100.00 $115.11 $113.97 $131.93 $150.31
PEER GRP $100.00 $89.92 $106.15 $88.20 $89.30
(1) Assumes $100 invested on July 1, 1992 in the Company's Common Stock, the
TSE 300 Index, the AMEX Index (U.S.) and the Peer Group Index of alike
line-of-business companies by industry code as defined in the Media
General Financial Database.
(2) Total Shareholder return assumes reinvestment of dividends.
(3) Where applicable, Canadian currency has been translated to U.S. dollars.
All pricing has been U.S. converted and index returns (TSE 300 Index)
are net of currency translation to assure consistency of comparison of
cumulative return of U.S. $100 invested in each alternative.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board has appointed Coopers & Lybrand to audit the Company's
financial statements prepared in connection with the submittal of the Company's
Report on Form 10-K for the fiscal year ended June 30, 1997. The Board
recommends that the Shareholders ratify that appointment and authorize the
directors of the Company to fix and approve their remuneration. Coopers &
Lybrand has audited the Company's financial statements since 1991.
The shares of Common Stock represented by the Proxies in the
accompanying form will be voted "FOR" the ratification of the appointment of
independent public accountants unless a contrary direction is indicated.
The Company has requested representatives of Coopers & Lybrand to be
present at the Meeting, will make available to such representatives an
opportunity to make a statement if they so desire, and expects them to be
available to respond to appropriate questions.
12
<PAGE> 16
PROPOSAL TO AMEND THE COMPANY'S STOCK OPTION PLAN
As of February 28, 1997, the Company's Board unanimously approved a
resolution to place before the Shareholders a vote to amend the Company's Stock
Option Plan (the "Plan") to (i) fix the maximum number of shares for which
options may be granted under the Plan at 5,102,585, and (ii) to extend the
expiration date of the Plan to April 30, 2007. At March 3, 1997, the closing
price of the Company's Common Stock as reported on The American Stock Exchange
was $2.12 per share.
The Plan was adopted by the Company effective July 24, 1989 and
terminates at midnight on July 23, 1999 except as to options previously granted
and outstanding under the Plan at that time. The purpose of the Plan is to
advance the interests of the Company and its Shareholders by affording "Key
Persons" upon whose judgment, initiative and efforts the Company may rely for
the successful conduct of its business an opportunity for investment in the
Company and the incentive advantages inherent in stock ownership in the
Company. The Plan authorizes the Board to grant options to purchase shares of
Common Stock to "Key Persons" selected by the Board while considering criteria
such as employment position or other relationship with the Company, duties and
responsibilities, ability, productivity, length of service or association,
morale, interest in the Company, recommendations by supervisors and other
matters. The Plan defines a "Key Person" as a person designated by the Board
upon whose judgment, initiative and efforts the Company may rely, who shall
include any director, officer, full-time employee or consultant of the Company.
There are currently approximately 12 individuals who qualify as "Key Persons".
The Plan is administered by the Board which selects the optionees and
determines; (i) the number of shares of Common Stock to be subject to each
option (however, in no event may the maximum number of shares reserved for any
one individual exceed 5% of the issued and outstanding share capital of the
Company); (ii) the type of each option to be granted (non-qualified or
incentive stock option); (iii) the time at which each option is to be granted;
(iv) the purchase price for the option shares; (v) the option period; and (vi)
the manner in which the option becomes exercisable. The Plan is also subject
to applicable rules of The Toronto Stock Exchange and The American Stock
Exchange.
The Plan permits the Board to designate certain options granted under
the Plan as incentive stock options (an "Incentive Stock Option"). An option
designated by the Board as an Incentive Stock Option is intended to qualify as
an "incentive stock option" within the meaning of Section 422 of the U.S.
Internal Revenue Code. The purchase price of the Incentive Stock Option may
generally not be less than 100 percent of the fair market value of the stock at
the time the option is granted (110% if the optionee owns more than ten percent
of the total voting shares of the Company). In addition, the aggregate fair
market value, determined at the time of grant, of the shares under any
Incentive Stock Option which are exercisable for the first time by any one
individual in any calendar year may not exceed $100,000. An Incentive Stock
Option may only be granted to a Key Person who is an employee of the Company.
The exercise price of all options granted under the Plan must not be
less than the fair market value of the applicable shares on the date of grant.
The period within which an option must be exercised may not be later than 10
years from the date on which the option was granted and an option may generally
not be exercised during the first six months after the grant. An option
generally must be exercised by an employee within 30 days after the termination
of his employment with the Company. An option is not transferable otherwise
than by will or the laws of descent and distribution. At the time of exercise
the optionee must pay to the Company the full purchase price of the shares in
cash.
FEDERAL INCOME TAX CONSEQUENCES
An optionee will not be deemed to receive any income at the time an
Incentive Stock Option is granted or exercised, although the exercise may give
rise to alternative minimum tax liability for the optionee. If an optionee
does not dispose of shares acquired on exercise of an Incentive Stock Option
within the two-year period beginning the day after the day of grant of the
option or within the one-year period beginning on the day after the day of the
transfer of the shares to the optionee, the gain (if any) on a subsequent sale
(i.e., the excess of the proceeds received over the option price) will be long
term capital gain and any loss the optionee may sustain on such sale will be
long term capital loss. If the optionee
13
<PAGE> 17
disposes of the shares within the two-year or one-year periods referred to
above, the disposition is a "disqualifying disposition" and the optionee will
generally recognize ordinary income taxable as compensation in the year of the
disqualifying disposition to the extent of the excess of the fair market value
of the shares on the date of exercise over the option price. The balance, if
any, will be a long term or short term capital gain depending, generally, on
whether the shares were held more than one year after the Incentive Stock
Option was exercised. To the extent the optionee recognizes ordinary income
with respect to a disqualifying disposition the Company will be entitled to a
corresponding deduction, subject to general rules relating to the
reasonableness of compensation.
With respect to options that are not Incentive Stock Options (each a
"Non-Qualified Stock Option"), there is no taxable income to the optionee as a
result of the grant of such an option. However, an optionee generally
recognizes taxable income upon the exercise of a Non-Qualified Stock Option
equal to the excess of the fair market value of the stock on the date of
exercise over the option price. The Company is not entitled to a tax deduction
upon the grant of a Non-Qualified Stock Option, but is entitled to a tax
deduction upon exercise corresponding to the optionee's taxable income.
The discussion herein sets forth all material terms of the amended Plan.
A copy of the amended Plan may be viewed at the Company's office at 999 W.
Hastings, Suite 1250, Vancouver, British Columbia, Canada, V6C 2W2 during
normal business hours or may be obtained upon written request to the Secretary
of the Company, at 999 W. Hastings, Suite 1250, Vancouver, British Columbia,
Canada, V6C 2W2. Any such written request must be accompanied by a check in
the amount of $1.00 payable to Azco Mining Inc. to cover copying, handling and
mailing expenses.
MAXIMUM NUMBER OF SHARES SUBJECT TO PLAN
The Plan currently provides that the Board is authorized to grant
options under the Plan up to a total number of 3,826,939 shares of Common
Stock. The proposed amendment would fix the number of shares which may be
issued under the Plan at 5,102,585. As of February 15, 1997, 1,331,032 shares
have already been issued under the Plan pursuant to option exercises, and
options to acquire another 2,369,468 shares have been granted and are
outstanding. Therefore, 126,439 shares of Common Stock would be available for
future grants under the Plan if the proposed amendment is not approved, and
1,402,085 shares of Common Stock would be available for future grants under the
Plan if the proposed amendment is approved.
EXTENSION OF TERM OF THE PLAN
The Plan is set to terminate on July 23, 1999. The proposed amendment
would extend the term of the plan to April 30, 2007, an additional ten years
from the date of approval by the Company's shareholders. The Company's Board
approved this proposed amendment to the Plan in order to extend the Company's
opportunity to provide incentive compensation to eligible participants under
the Plan.
The following table summarizes the presently outstanding options issued
under the Plan to the indicated persons as of February 15, 1997. All of the
options outstanding are Non-Qualified stock options.
<TABLE>
<CAPTION>
Name or Group Number
------------- --------
<S> <C>
Alan Peter Lindsay, Chairman of
the Board and Chief Executive
Officer 300,000
David Coates Beling, President and
Chief Operating Officer 423,000
Anthony Richard Harvey, Vice-Chairman,
Vice President and Secretary 300,000
</TABLE>
14
<PAGE> 18
<TABLE>
<S> <C>
All current executive officers as
a group 1,060,000
All current directors who are not
executive officers, as a group 325,000
All employees, excluding executive
officers 255,000
Persons owning more than 5% of
outstanding options:
David Coates Beling 423,000
Alan Peter Lindsay 300,000
Anthony Richard Harvey 300,000
Michael Bayback 207,500
Barry Ching 193,000
Andrew F. de P. Malim 125,000
Each of the five nominees for
director:
Alan Peter Lindsay 300,000
Anthony Richard Harvey 300,000
Andrew F. de P. Malim 125,000
Paul Arthur Hodges 100,000
Ian McFarlane Gray 100,000
</TABLE>
The Board recommends that Shareholders vote "FOR" the proposed amendment
to the Plan. The affirmative vote of a majority of the shares of Common Stock
represented at the Meeting in person or by proxy and entitled to vote on the
subject matter is necessary for the approval of the proposed amendment to the
Plan.
The shares of Common Stock represented by Proxies in the accompanying
form will be voted "FOR" the approval of the amendment to the Company's Plan
unless a contrary direction is indicated.
SHAREHOLDER PROPOSALS
Proposals by Shareholders of the Company to be presented at the next
Annual Meeting of Shareholders must be received by the Company a reasonable
amount of time prior to such meeting to be included in the Company's Proxy
Statement and proxy for that meeting. The proponent must be a record or
beneficial owner entitled to vote on his or her proposal at the next Annual
Meeting and must continue to own such security entitling him or her to vote
through that date on which the Meeting is held. The proponent must own 1% or
more of the outstanding shares, or $1,000.00 in market value, of the Company's
Common Stock and must have owned such shares for one year in order to present a
shareholder proposal to the Company.
ANNUAL REPORT ON FORM 10-K(A)
The Annual Report on Form 10-K concerning the operation of the Company
during the fiscal year ended June 30, 1996, including certified financial
statements for the year then ended, is being mailed to each Shareholder of the
Company with this Notice of Annual Meeting. Additional copies of the Annual
Report may be obtained upon written request to the Secretary of the Company, at
999 West Hastings, Suite 1250, Vancouver, British Columbia, Canada, V6C 2W2.
15
<PAGE> 19
OTHER MATTERS
The Board knows of no other business to be presented at the Meeting of
Shareholders. If other matters properly come before the Meeting the persons
named in the accompanying form of Proxy intend to vote on such other matters in
accordance with their best judgment.
By Order of the Board
March 4, 1997 Alan P. Lindsay,
Chairman of the Board
16
<PAGE> 20
EXHIBIT A
AZCO MINING INC.
STOCK OPTION PLAN
This Stock Option Plan (the "Plan") is adopted in consideration
of services rendered and to be rendered by key personnel and consultants to
Azco Mining Inc., its subsidiaries and affiliates.
1. Definitions.
The terms used in this Plan shall, unless otherwise indicated or
required by the particular context, having the following meanings:
BOARD: The Board of Directors of Azco Mining Inc.
COMMON STOCK: The $.002 par value Common Stock of Azco Mining
Inc.
COMPANY: Azco Mining Inc., a corporation incorporated under
the laws of Delaware, and any successors in
interest by merger, operation of law, assignment or
purchase of all or substantially all of the
property, assets or business of the Company.
DATE OF GRANT: The date on which an Option (see below) is granted
under the Plan.
FAIR MARKET VALUE: The Fair Market Value of the Option Shares. Such
Fair market Value as of any date shall be
reasonably determined by the Board; provided,
however, that if there is a public market for the
Common Stock, the Fair Market Value of the Option
Shares as of any date shall not be less than the
closing price for the Common Stock on the last
trading day preceding the date of grant; provided,
further, that if the Company's shares are not
listed on any exchange the Fair Market Value of
such shares shall not be less than the average of
the means between the bid and asked prices quoted
on each such date by any two independent persons or
entities making a market for the Common Stock, such
persons or entities making a market for the Common
Stock, to be selected by the Board. Fair Market
Value shall be determined without regard to any
restriction other than a restriction which, by its
terms, will never lapse.
<PAGE> 21
INCENTIVE STOCK
OPTION: An Option described in Section 9.
KEY PERSON: A person designated by the Board upon whose
judgment, initiative and efforts the Company or a
Related Company may rely, who shall include any
Director, Officer, full-time employee or consultant
of the Company.
OPTION: The rights granted to a Key Person to purchase
Common Stock pursuant to the terms and conditions
of an Option Agreement (see below).
OPTION AGREEMENT: The written agreement (and any amendment or
supplement thereto) between the Company and a Key
Person designating the terms and conditions of an
Option.
OPTION SHARES: The shares of Common Stock underlying an Option
granted to a Key Person.
OPTIONEE: A Key Person who has been granted an Option.
RELATED COMPANY: Any subsidiary or affiliate of the Company. The
determination of whether a corporation is a Related
Company shall be made without regard to whether the
entity or the relationship between the entity and
the Company now exists or comes into existence
hereafter.
2. Purpose and Scope.
(a) The purpose of the Plan is to advance the interests of the
Company and its stockholders by affording Key Persons, upon whose
judgment, initiative and efforts the Company may rely for the
successful conduct of their businesses an opportunity for
investment in the Company and the incentive advantages inherent
in stock ownership in the Company.
(b) This Plan authorizes the Board to grant Options to purchase
shares of Common Stock to Key Persons selected by the Board while
considering criteria such as employment position or other
relationship with the Company, duties and responsibilities,
ability, productivity, length of service or association, morale,
interest in the Company, recommendations by supervisors, and
other matters.
2
<PAGE> 22
3. Administration of the Plan.
The Plan shall be administered by the Board. The Board shall
have the authority granted to it under this section and under each other
section of the Plan.
In accordance with and subject to the provisions of the Plan, the
Board shall select the Optionees, shall determine (i) the number of shares of
Common Stock to be subject to each Option, however, in no event may the maximum
number of shares reserved for any one individual exceed 5% of the issued and
outstanding share capital of the Company, (ii) the time at which each Option is
to be granted, (iii) the purchase price for the Option Shares, based on Fair
Market Value, (iv) the option period, and (v) the manner in which the Option
becomes exercisable. In addition, the Board shall fix such other terms of each
Option as it may deem necessary or desirable. The Board may determine the form
of Option Agreement to evidence each Option.
The Board from time to time may adopt such rules and regulations
for carrying out the purposes of the Plan as it may deem proper and in the best
interests of the Company subject to the rules and policies of any exchange or
over-the-counter market which is applicable to the Company.
The Board may from time to time make such changes in and
additions to the Plan as it may deem proper, subject to prior Toronto Stock
Exchange approval, and in the best interests of the Company; provided, however,
that no change or addition shall impair any Option previously granted under the
Plan. If the shares are not listed on any exchange, then such approval is not
necessary.
Each determination, interpretation or other action made or taken
by the Board shall be final, conclusive and binding on all persons, including
without limitation, the Company, the stockholders, directors, officers and
employees of the Company and the Related Companies, and the Optionees and their
respective successors in interest.
4. The Common Stock.
The Board is authorized to appropriate, grant options, issue and
sell for the purpose of the Plan, a total number of shares of the Company's
common stock not to exceed 5,102,585, or the number and kind of shares of stock
or other securities which in accordance with Section 10 shall be substituted
for the shares or into which such shares shall be adjusted. All or any unsold
shares subject to an option that for any reason expires or otherwise terminates
may again be made subject to Options under the Plan.
3
<PAGE> 23
5. Eligibility.
Options will be granted only to Key Persons. Key Persons may
hold more than one Option under the Plan and may hold Options under the Plan
and options granted pursuant to other plans or otherwise.
6. Option Price.
The Board shall determine the purchase price for the Option
Shares.
7. Duration and Exercise of Options.
(a) The option period shall commence on the Date of Grant and shall
be up to 10 years in length subject to the limitations in this
Section 7 and the Option Agreement. Unless otherwise agreed by
the Board, no Option shall be exercised for a period of 6 months
following the Date of Grant; provided, however, that this
limitation shall not apply to the exercise of an Option pursuant
to the terms of the relevant Option Agreement upon the Optionee's
death.
(b) During the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee. Subject to the limitations in
Paragraph (a) above, any Option held by an Optionee at the time
of his death may be exercised by his estate within one year of
his death or such longer period as the Board may determine.
(c) The Board may determine whether an Option shall be exercisable as
provided in Paragraph (a) of this Section 7 or whether the Option
shall be exercisable in installments only; if the Board
determines the latter, it shall determine the number of
installments and the percentage of the Option exercisable at each
installment date. All such installments shall be cumulative.
(d) In the case of an Optionee who is an employee of the Company or a
Related Company, if, for any reason (other than death or
termination for cause by the Company or a Related Company, the
Optionee ceases to be employed by either the Company or a Related
Company, any option held by the Optionee at the time his
employment ceases may, at the sole discretion of the Board, be
exercised within 30 days after the date that his employment
ceased (subject to the limitations at Paragraph (a) above), but
only to the extent that the option was exercisable according to
its terms on the date the Optionee's employment ceased. After
such 30 day period, any unexercised portion of an Option shall
expire.
(e) In the case of an Optionee who is an employee of the Company or a
Related Company, if the Optionee's employment by the Company or a
Related Company ceases due to the Company's termination of such
Optionee's employment for
4
<PAGE> 24
cause, any unexercised portion of any Option held by the optionee
shall immediately expire. For this purpose "cause" shall mean
conviction of a felony or continued failure, after notice, by the
Optionee to perform fully and adequately the Optionee's duties.
(f) Each Option shall be exercised in whole or in part by delivering
to the office of the Treasurer of the Company written notice of
the number of shares with respect to which the Option is to be
exercised and by paying in full the purchase price for the Option
Shares purchased as set forth in Section 8; provided, that an
Option may not be exercised in part unless the purchase price for
the Option Shares purchased is at least $1,000.00.
8. Payment for Option Shares.
In the case of all Option exercises, the purchase price shall be
paid in cash or certified funds upon exercise of the Option.
9. Incentive Stock Options.
(a) The Board may from time to time, and subject to the provisions of
this Plan and such other terms and conditions as the Board may
prescribe, grant to any Key Person who is an employee eligible to
receive Options one or more Incentive Stock Options to purchase
the number of shares of Common Stock allotted by the Board.
(b) Subject to subparagraph (e) below, the Option price per share of
Common Stock deliverable upon the exercise of an Incentive Stock
Option shall be 100% of the Fair Market Value of a share of
Common Stock on the Date of Grant of the Incentive Stock Option.
(c) The option term of each Incentive Stock Option shall be
determined by the Board and shall be set forth in the Option
Agreement, provided that (except as set forth in subparagraph (e)
below) the option term shall commence no sooner than six months
from the Date of Grant, and shall terminate no later than 10
years from the Date of Grant and shall be subject to possible
early termination as set forth in Section 7.
(d) Any award of Incentive Stock Options shall be structured such
that the aggregate Fair Market Value (determined as of the Date
of Grant of the Incentive Stock Options) of the shares of Common
Stock with respect to which the Incentive Stock Options are
exercisable for the first time by an Option holder during any
calendar year under all plans of the Company and Related
Companies shall not exceed $100,000.
5
<PAGE> 25
(e) No Incentive Stock Option may be granted to an individual who, at
the Date of Grant of the Option, owns stock representing more
than 10 percent of the total combined voting power of all classes
of stock of the Company or any Related Company, unless the
purchase price of the shares of Common Stock is at least 110
percent of the Fair Market Value of the shares of Common Stock on
the Date of Grant and such Incentive Stock Option by its terms is
not exercisable after the expiration of five years from the Date
of Grant. For purposes of the preceding sentence, stock
ownership shall be determined as provided in section 424(d) of
the Internal Revenue Code of 1986, as amended.
10. Change in Stock, Adjustments, Etc.
In the event that each of the outstanding shares of Common Stock
(other than shares held by dissenting stockholders which are not changed or
exchanged) should be changed into, or exchanged for, a different number or kind
of shares of stock or other securities of the Company, or, if further changes
or exchanges of any stock or other securities into which the Common Stock shall
have been changed, or for which it shall have been exchanged, shall be made
whether by reason of merger, consolidation, reorganization, recapitalization,
stock dividends, reclassification, split-up, combination of shares or
otherwise), then there shall be substituted for each share of Common Stock that
is subject to the Plan, the number and kinds of shares of stock or other
securities into which each outstanding share of Common Stock (other than shares
held by dissenting stockholders which are not changed or exchanged) shall be so
changed or for which each outstanding share of Common Stock (other than shares
held by dissenting stockholders) shall be so changed or for which each such
share shall be exchanged. Any securities so substituted shall be subject to
similar successive adjustments.
In the event of any such changes or exchanges, the Board shall
determine whether, in order to prevent dilution or enlargement of rights, an
adjustment should be made in the number, kind, or option price of the shares or
other securities then subject to an Option or Options granted pursuant to the
Plan and the Board shall make any such adjustment, and such adjustments shall
be made and shall be effective and binding for all purposes of the Plan.
11. Relationship of Employment.
Nothing contained in the Plan, or in any Option granted pursuant
to the Plan, shall confer upon any Optionee any right with respect to
employment by the Company, or interfere in any way with the right of the
Company to terminate the Optionee's employment or services at any time.
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12. Non-transferability of Option.
No Option granted under the Plan shall be transferable by the
Optionee, either voluntarily or involuntarily, except by will or the laws of
descent and distribution, and any attempt to do so shall be null and void.
13. Rights as a Stockholder.
No person shall have any rights as a stockholder with respect to
any share covered by an Option until that person shall become the holder of
record of such share and, except as provided in Section 10, no adjustments
shall be made for dividends or other distributions or other rights as to which
there is an earlier record date.
14. Securities Laws Requirements.
No Option Shares shall be issued unless and until, in the opinion
of the Company, any applicable registration requirements of the Securities Act
of 1933, as amended, any applicable listing requirements of any securities
exchange on which stock of the same class is then listed, and any other
requirements of law or of any regulatory bodies having jurisdiction over such
issuance and delivery, have been fully complied with. Each Option and each
Option Share certificate may be imprinted with legends reflecting federal and
state securities laws restrictions and conditions, and the Company may comply
therewith and issue "stop transfer" instructions to its transfer agent and
registrar in good faith without liability.
15. Disposition of Shares.
Each Optionee, as a condition of exercise, shall represent,
warrant and agree, in a form of written certificate approved by the Company, as
follows: (a) that all Option Shares are being acquired solely for his own
account and not on behalf of any other person or entity; (b) that no Option
Shares will be sold or otherwise distributed in violation of the Securities Act
of 1933, as amended, or any other applicable federal or state securities laws;
(c) that if he is subject to reporting requirements under Section 16(a) of the
Securities Exchange Act of 1934, as amended, he will (I) furnish the Company
with a copy of each Form 4 filed by him, and (ii) timely file all report
required under the federal securities laws; and (d) that he will report all
sales of Option Shares to the Company in writing on a form prescribed by the
Company.
16. Effective Date of Plan; Termination Date of Plan.
The Plan, as amended, shall be deemed effective as of April 30,
1997; provided that all Options previously granted and outstanding under the
Plan as of such date shall remain in full force and effect. The Plan shall
terminate at midnight on April 30, 2007 except as to Options previously granted
and outstanding under the Plan at the time. No Options shall be granted after
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<PAGE> 27
the date on which the Plan terminates. The Plan may be abandoned or terminated
at any earlier time by the Board, except with respect to any Options then
outstanding under the Plan.
17. Other Provisions.
The following provisions are also in effect under the Plan:
(a) The use of a masculine gender in the Plan shall also include
within its meaning the feminine, and the singular may include the
plural, and the plural may include the singular, unless the
context clearly indicates to the contrary;
(b) Any expenses of administering the Plan shall be borne by the
Company;
(c) This Plan shall be construed to be in addition to any and all
other compensation plans or programs. The adoption of the Plan
by the Board shall not be construed as creating any limitations
on the power or authority of the Board to adopt such other
additional incentive or other compensation arrangements as the
Board may deem necessary or desirable; and
(d) The validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and the
rights of any and all personnel having or claiming to have an
interest therein or thereunder shall be governed by and
determined exclusively and solely in accordance with the laws of
the State of Colorado.
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PROXY SOLICITED BY MANAGEMENT OF THE COMPANY
The undersigned shareholder of Azco Mining Inc. (the "Company") hereby appoints
Alan P. Lindsay, or, failing him, Anthony R. Harvey, or, in place of the
foregoing,_________________________ , as nominee of the undersigned to attend,
vote and act for and in the name of the undersigned at the Annual Meeting of
the Shareholders of the Company (the "Meeting") to be held at the Company's
offices at 999 West Hastings, Suite 1250, Vancouver, British Columbia, Canada,
on Wednesday, the 30th day of April, 1997, at the hour of 10:00 a.m. (local
time), and at every adjournment thereof, and the undersigned hereby revokes any
former proxy given to attend and vote at the meeting.
THE NOMINEE IS HEREBY INSTRUCTED TO VOTE AS FOLLOWS WITH RESPECT TO THE
FOLLOWING MATTERS:
1. FOR [ ] All Nominees as Directors - Alan
P. Lindsay, Anthony R. Harvey,
Ian M. Gray, Andrew F. de P.
Malim and Paul A. Hodges.
WITHHELD [ ] From All Nominees.
FOR [ ] All Nominees Except the Following:
_________________________.
2. FOR [ ] AGAINST [ ] ABSTAIN [ ] To appoint Coopers & Lybrand as
auditors and to authorize the
directors to fix the auditors'
remuneration.
3. FOR [ ] AGAINST [ ] ABSTAIN [ ] To approve the amendment of the
Company's Stock Option Plan.
THIS PROXY WILL BE VOTED FOR OR AGAINST OR WITHHELD OR ABSTAINED IN RESPECT OF
THE MATTERS LISTED IN ACCORDANCE WITH THE CHOICE, IF ANY, INDICATED IN THE
SPACE PROVIDED. IF NO CHOICE IS INDICATED, THE PROXY WILL BE VOTED FOR SUCH
MATTER. IF ANY AMENDMENTS OR VARIATIONS ARE TO BE VOTED ON, OR ANY FURTHER
MATTERS COME BEFORE THE MEETING, THIS PROXY WILL BE VOTED ACCORDING TO THE BEST
JUDGMENT OF THE PERSON VOTING THE PROXY AT THE MEETING. THIS FORM SHOULD BE
READ IN CONJUNCTION WITH THE ACCOMPANYING NOTICE OF MEETING AND PROXY
STATEMENT.
DATED this _________ day of _________________, 1997.
- ---------------------------------------
Signature of Shareholder
- ---------------------------------------
(Please print name of Shareholder)
NOTES:
1. YOU HAVE THE RIGHT TO APPOINT A PERSON TO REPRESENT YOU AT THE MEETING
OTHER THAN THE PERSONS DESIGNATED IN THE FORM OF PROXY. IF YOU WISH TO
EXERCISE THIS RIGHT, INSERT THE NAME OF YOUR NOMINEE IN THE BLANK SPACE
PROVIDED FOR THAT PURPOSE IN THE FORM OF PROXY AND STRIKE OUT THE TWO
PRINTED NAMES.
2. Please date and sign (exactly as the shares represented by this Proxy are
registered) and return promptly. Where the instrument is signed by a
corporation, its corporate seal must be affixed and execution must be made
by an officer or attorney thereof duly authorized. If no date is stated by
the Shareholders, the Proxy is deemed to bear the date upon which it was
mailed by management to the Shareholder.
3. To be valid, this Proxy form, duly signed and dated, must arrive at the
office of the Company's transfer agent, Montreal Trust Company of Canada,
510 Burrard Street, Vancouver, British Columbia, V6C 3B9 not less than
forty-eight (48) hours (excluding Saturdays, Sundays and holidays) before
the day of the Meeting or any adjournment thereof.
<PAGE> 29
PARCEL, MAURO, HULTIN & SPAANSTRA, P.C.
1801 CALIFORNIA ST., STE. 3600
DENVER, CO 80202
(303) 292-6400
March 4, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Definitive Proxy Statement
Gentlemen and Ladies:
On behalf of our client, Azco Mining Inc. (the "Company") we file with
you, pursuant to Rule 14a-6(b) under the Securities Exchange Act of 1934, as
amended (the "Act"), the definitive proxy material which the Company intends to
mail on or about March 5, 1997, to its shareholders in connection with the
solicitation of proxies for its 1997 Annual Meeting of Shareholders. No fee is
required for this filing.
In connection with the foregoing, we deliver to you via EDGAR the
following:
1. One copy of the Notice of Annual Meeting of Shareholders and
Proxy Statement (the "Proxy Statement"), including the cover page required by
Rule 14a-6(m) and a copy of the Company's Stock Option Plan as Appendix A; and
2. The form of proxy.
As set forth in the Proxy Statement, the action to be taken at the
meeting includes a request for approval to increase the number of shares
issuable pursuant the granting of options under the Company's Stock Option Plan
(the "Plan"). If the proposal to amend the Plan is approved by the
shareholders, the Company intends to file a Registration Statement on Form S-8
to cover the issuance of the additional shares issuable upon the exercise of
options granted under the Plan.
Very truly yours,
/s/ Scott M. Reed
Scott M. Reed
