<PAGE> 1
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.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(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:
--------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
--------------------------------------------------------------------
<PAGE> 2
4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------
5) Total fee paid:
--------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange act
rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, of the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
--------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
--------------------------------------------------------------------
3) Filing Party:
--------------------------------------------------------------------
4) Date Filed:
April 30, 1999
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<PAGE> 3
AZCO MINING INC.
2068 Main St. Suite C, PO Box 1895
Ferndale, WA 98248
(360) 380-4467
NOTICE OF ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 26, 1999
To Our Shareholders:
An Annual and Special 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 May 26, 1999 in the Prescott Room of The Arizona Biltmore, 24th
Street at Missouri, Phoenix, Arizona for the following purposes:
1. To elect five directors of the Company.
2. To ratify the appointment of PricewaterhouseCoopers as the
Company's independent public accountants for the fiscal year
ending June 30, 1999, and to authorize the directors of the
Company to fix and approve their remuneration.
3. To consider and vote upon a proposal to approve a Voting
Agreement among the Company, Arizona Mica Properties, Inc,
Lawrence G. Olson, John O. Rud, Floyd R. Bleak, Alan P. Lindsay
and Anthony R. Harvey.
4. To consider and vote upon a proposal to amend the Company's Stock
Option Plan.
5. To consider and vote upon a proposal to amend certain issued and
outstanding Stock Options.
6. 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 April 20, 1999 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
April 16, 1999
<PAGE> 4
AZCO MINING INC.
2068 Main St. Suite C, PO Box 1895
Ferndale, WA 98248
(360) 380-4467
PROXY STATEMENT
ANNUAL AND SPECIAL MEETING OF SHAREHOLDERS
MAY 26, 1999
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 and Special Meeting (the
"Meeting") of shareholders (each a "Shareholder") of the Company. The Meeting
will be held at 10:00 a.m. (local time) on May 26, 1999 in the Prescott Room of
The Arizona Biltmore, 24th Street at Missouri, Phoenix, Arizona for the purposes
set forth in the accompanying Notice of Annual and Special 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 10 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 April 23, 1999. 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 April 20, 1999 are entitled to notice of and to vote at the Meeting or any
adjournment thereof. At the close of business on April 20, 1999 there were
29,752,121 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 of a
plurality of shares of the Common Stock represented at the Meeting in person or
<PAGE> 5
by proxy and entitled to vote on the subject matter will be necessary to elect
Directors of the Company and the affirmative vote of the holders 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 approve the
Voting Agreement, the amendment to the Company's Stock Option Plan, the
amendment of certain issued and outstanding Stock Options 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. Similarly, management shares and shares held by Lawrence G.
Olson, John O. Rud and Floyd R. Bleak will not be entitled to be voted on the
approval of the Voting Agreement as described below under "PROPOSAL TO APPROVE
VOTING AGREEMENT" and insider shares and shares held by their associates will
not be entitled to be voted on the approval of the amendment to the insiders
Stock Options as described below under "PROPOSAL TO AMEND ISSUED AND OUTSTANDING
OPTIONS". Such shares will be counted for the purposes of determining a quorum,
but will not be treated as shares present and entitled to vote on the proposals.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information, as of April 5, 1999, 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 1,178,569(1) 3.90%
(Director, Chairman, President and Beneficial
Chief Executive Officer)
999 W. Hastings, Suite 1250
Vancouver, BC V6C 2W2
CANADA
- -----------------------------------------------------------------------------------------------
Anthony R. Harvey Record and 653,252(2) 2.16%
(Director, Vice-Chairman, Beneficial
Executive Vice-President and Secretary)
999 W. Hastings, Suite 1250
Vancouver, BC V6C 2W2
CANADA
- -----------------------------------------------------------------------------------------------
Paul A. Hodges Record and 116,524(3) *
(Director) Beneficial
4536 N. Via Bellas Catallinas
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 150,000(4) *
(Director) Beneficial
Copper Hill House
Butler Hill, Redruth
Cornwall, England TR166SR
- -----------------------------------------------------------------------------------------------
Lawrence G. Olson Record and 1,600,000(8) 5.36%
(Director) Beneficial
3045 S. 35th Avenue
Phoenix, AZ 85009
- -----------------------------------------------------------------------------------------------
Dr. Nick Badham Record and 100,000(5) *
(Chief Geologist) Beneficial
Copper Hill House, Over Wallop
Stockbridge, U.K., S020 8HU
- -----------------------------------------------------------------------------------------------
Gary L. Simmerman Record and 265,000(6) *
(Vice-President of Operations) Beneficial
1211 W. Crystal Palace Place
Oro Valley, AZ 85737
- -----------------------------------------------------------------------------------------------
Ryan A. Modesto Record and 170,000(7) *
(Vice-President of Finance) Beneficial
2068 Main St. Suite C, PO Box 1895
Ferndale, WA 98248
- -----------------------------------------------------------------------------------------------
John O. Rud Record and 1,500,000 5.04%
7239 N. El Mirage Road Beneficial
Glendale, AZ 85307
- -----------------------------------------------------------------------------------------------
Floyd R. Bleak Record and 1,500,000 5.04%
3616 E. Omega Circle Beneficial
Mesa, AZ 85215
- -----------------------------------------------------------------------------------------------
All officers & directors Record and 4,343,345(9) 13.69%
as a group (8 persons) Beneficial
===============================================================================================
* Less than 1%.
</TABLE>
(1) Includes (i) 605,308 shares owned by a corporation which is controlled by
Mr. Lindsay, (ii) options to acquire 300,000 shares at an exercise price of
CDN $1.05 per share and (iii) options to acquire 200,000 shares at an
exercise price of CDN $0.80 per share
(2) Includes (i) 122,224 shares owned by Mr. Harvey's wife, (ii) options to
acquire 300,000 shares at an exercise price of CDN $1.05 per share and
(iii) options to acquire 200,000 shares at an exercise price of CDN $0.80
per share.
(3) Includes options to acquire (i) 50,000 shares at an exercise price of CDN
$1.05 per share and (ii) 50,000 shares at an exercise price of CDN $0.70
per share.
3
<PAGE> 7
(4) Consists of options to acquire (ii) 100,000 shares at an exercise price of
CDN $1.05 per share and (ii) 50,000 shares at an exercise price of CDN
$0.70 per share.
(5) Consists of options to acquire 100,000 shares at an exercise price of CDN
$1.05 per share.
(6) Consists of options to acquire (i) 30,000 shares at an exercise price of
CDN $0.80 per share (ii) 210,000 shares at an exercise price of CDN $1.05
per share and (iii) 25,000 shares at an exercise price of CDN $0.70 per
share.
(7) Consists of options to acquire (i) 30,000 shares at an exercise price of
CDN $0.80 per share (ii) 20,000 shares at an exercise price of CDN $0.70
per share and (iii)120,000 shares at an exercise price of CDN $1.05 per
share.
(8) Includes options to acquire 100,000 shares at an exercise price of CDN
$1.05 per share.
(9) Includes options to acquire an aggregate of 1,985,000 shares.
Management anticipates that insiders and their affiliates as well as
Messrs. Olson, Rud and Bleak owning an aggregate of approximately 18.0% 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 . Management shares and shares held by Lawrence G. Olson, John O. Rud
and Floyd R. Bleak will not be entitled to be voted on the approval of the
Voting Agreement as described below under "PROPOSAL TO APPROVE VOTING
AGREEMENT", and insider shares and shares held by their associates will not be
entitled to vote on the approval of the amendment to the insider's Stock Options
as described below under "PROPOSAL TO AMEND ISSUED AND OUTSTANDING OPTIONS".
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of members of the Board
shall not exceed seven members and currently consists of five members Cumulative
voting in the election of directors is not permitted. Directors are elected by a
plurality of shares of Common Stock represented at the Meeting and entitled to
vote on the matter.
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 or appointed and qualified.
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the names, ages and positions of the Directors
and Executive Officers of the Company as of March 15, 1999. Directors are
elected to serve until the next annual meeting of Shareholders. All officers
have been appointed to serve until their successors are elected or appointed 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.
4
<PAGE> 8
<TABLE>
<CAPTION>
================================================================================================
NAME POSITION HELD WITH THE COMPANY PRINCIPAL OCCUPATION
- ------------------------------------------------------------------------------------------------
<S> <C> <C>
ALAN P. LINDSAY............ Chairman of the Board, Chief Chief Executive Officer of the
Executive Officer, President and Company
a Director of the Company
- ------------------------------------------------------------------------------------------------
ANTHONY R. HARVEY.......... Vice Chairman of the Board, Executive Vice-President of the
Executive Vice President, Company
Secretary and a Director of the
Company
- ------------------------------------------------------------------------------------------------
PAUL A. HODGES............. Director of the Company Mining consultant
- ------------------------------------------------------------------------------------------------
IAN M. GRAY................ Director of the Company Mining consultant
- ------------------------------------------------------------------------------------------------
LAWRENCE G. OLSON.......... Director of the Company Business owner
- ------------------------------------------------------------------------------------------------
GARY L. SIMMERMAN.......... Vice President of Operations Vice-President of Operations
for the Company
- ------------------------------------------------------------------------------------------------
RYAN A. MODESTO............ Vice President of Finance Vice-President of Finance for
the Company
- ------------------------------------------------------------------------------------------------
DOUGLAS W. RAMSHAW......... Vice President of Corporate Vice-President of Corporate
Development Development for the Company
- ------------------------------------------------------------------------------------------------
JOHN P. N. BADHAM Chief Geologist Geologist for the Company
================================================================================================
</TABLE>
The following is a brief biography of each of the Directors and
Executive Officers of the Company.
Alan P. Lindsay -- Chairman of the Board, Chief Executive Officer,
President and a Director
Mr. Lindsay, aged 48, 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 twelve years and since 1989 has been engaged
full time on the Company's business. Prior to being a founder of AZCO in 1988,
Mr. Lindsay headed up and built a significant business and marketing
organization for a major international financial institution in Vancouver,
British Columbia.
Anthony R. Harvey -- Vice-Chairman of the Board, Executive
Vice-President, Secretary and a Director
Mr. Harvey, aged 64, one of the Company's founders, has been associated
with the Company since July 13, 1988. Prior to his association with the Company
Mr. Harvey 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.
Paul A. Hodges -- Director
5
<PAGE> 9
Mr. Hodges, aged 71, 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 M. Gray -- Director
Dr. Gray, aged 62, 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.
Lawrence G. Olson -- Director
Mr. Olson, aged 62, became a director of the Company on March 15, 1999 .
Mr. Olson has owned and operated his own business, Olson Precast of Arizona
Inc., since 1973. In 1998, Olson Precast of New Mexico, Inc., a company
controlled by Mr. Olson, was liquidated under the United States bankruptcy laws
in proceedings in the United States Bankruptcy Court for the district of New
Mexico. Mr Olson received a B.S. in Civil Engineering from the University of
Southern California in 1959. Mr Olson currently serves as a director of both
Interactive Media Technology and Dimensional Visions, Inc., being NASD public
companies.
Ryan Andrew Modesto -- Vice President of Finance
Mr. Modesto, aged 43, joined the Company in June 1994 as the Controller
of the Sanchez Project, January 1, 1996 he became the Company's Corporate
Controller and Principal Accounting Officer and in October 1998 was appointed
Vice-President of Finance. Mr. Modesto earned a B.S. in Accounting from the
University of Utah in 1977 and has 22 years of accounting and administrative
experience in the mining industry. For the six years prior to joining the
Company Mr. Modesto was the Controller of the Santa Fe Mine for Corona Gold Inc.
in Nevada.
Gary L. Simmerman -- Vice President of Operations
Mr. Simmerman, aged 48, joined the Company in September 1992 as Chief
Engineer of the Sanchez Project and in October 1998 was appointed Vice-President
of Operations. Mr. Simmerman, a Mining Engineer from the University of Arizona,
has been working in the mining industry since 1974, and has been involved in
exploration, development and production operations in gold, silver, copper,
cobalt, coal and uranium. For the five years prior to joining the Company Mr.
Simmerman was Chief Engineer for Santa Fe Pacific Gold's Rabbit Creek Mine and
was involved in the original determination of the ore reserves and the
feasibility stage through startup, production and expansion to a 200,000 ton per
day operation.
Douglas W. Ramshaw -- Vice-President of Corporate Development
Mr. Ramshaw, aged 27, joined the Company in February 1997 and was
appointed Vice-President of Corporate Development in May 1997. Mr. Ramshaw
received a degree in Mining Geology in 1993 from the Royal School of Mines,
Imperial College, London, England. Mr Ramshaw was employed as an exploration
geologist for ACA Howe International Ltd in England and St George Metals Inc. in
Battle Mountain, Nevada. From February 1994 to December 1994 Mr. Ramshaw was
first a research consultant and then an Assistant Editor for the Mining Journal,
6
<PAGE> 10
and from January 1996 to February 1997 he was a mining analyst for C.M. Oliver
and Company (UK) Limited, a British based capital markets office of a Canadian
stockbrokerage firm.
John Patrick Nicholas Badham -- Chief Geologist
Dr. Badham, aged 51, joined the Company in August 1997 as the Company's
Chief Geologist. From 1989 to 1996 Dr. Badham was the Chief Geologist for Rio
Tinto Mining and Exploration Ltd. where he was responsible for target
definition, exploration research and area selection. Dr. Badham received a
doctorate degree in Economic Geology from the University of Alberta in 1973.
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, 1998, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with, except that Dr. Badham was late in filing his Initial
Statement of Beneficial Ownership of Securities on Form 3.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Andrew F de P Malim, a non-officer director of the Company through April
24 1998, is the Chairman, managing director and majority shareholder of Lion
Mining Finance, a United Kingdom registered company ("Lion"). On May 9, 1996 the
Company entered into a memorandum of agreement with Eagle River International
Limited, West African Gold and Exploration, Ltd. and Lion concerning the
development of mining concessions in Mali. Pursuant to that agreement Lion
Mining Corporation Limited, a company associated with Lion, was paid $15,692 for
management services. The Company believes that the terms of this agreement were
comparable to those that could have been obtained in arms-length bargaining with
an unrelated third party.
Effective November 18, 1997 the Company and Lion entered into an
agreement whereby Lion assigned to the Company all of its interest in the Mali
project and Lion agreed to grant the Company first right on all mining
opportunities which were brought to it for a minimum three year period. For this
consideration the Company indemnifies and holds harmless Lion from all manner of
action in connection with the Mali project. The Company believes that the terms
of this agreement were comparable to those that could have been obtained in
arms-length bargaining with an unrelated third party.
7
<PAGE> 11
On March 9, 1999 the Company acquired Arizona Mica Properties, Inc., a
company that was one-third owned by Lawrence G. Olson who became a director of
the Company on March 15, 1999 in conjunction with such transaction. The terms of
this agreement were negotiated in arms-length bargaining. The transaction is
described in more detail below under "PROPOSAL TO APPROVE VOTING AGREEMENT".
BOARD MEETINGS AND COMMITTEES
During the Company's fiscal year ended June 30, 1998 the Company's Board
met six times. 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 and Lindsay spend virtually all of
their business time on the Company's business. Mr. Hodges, Dr. Gray and Mr.
Olson each spend approximately ten percent of their business time on the
Company's business.
The Company's Audit Committee is comprised of Messrs. Harvey and Hodges
and Dr. Gray. 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, 1998 the Company had no
nominating, stock option or executive committees.
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following tables show compensation during the fiscal years ended
June 30, 1996, 1997 and 1998, respectively, of those persons who were, at June
30, 1998 (i) the Chief Executive Officer and (ii) other Executive Officers of
the Company whose total compensation was not less than $100,000 (collectively,
the "Named Executive Officers").
Summary Compensation Table
(As at year ended June 30)
<TABLE>
<CAPTION>
=================================================================================================
Annual Compensation Long Term
Compensation
- -------------------------------------------------------------------------------------------------
Securities
Under
Options/
Other Annual SARs
Salary Bonus Compensation Granted
Name and Principal Position Year ($) ($) ($) (#)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE> 12
<TABLE>
<CAPTION>
=================================================================================================
Annual Compensation Long Term
Compensation
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alan P. Lindsay, President, 1998 139,169(1) 5,500 7.250(3) -0-
Chairman of the Board and 1997 110,000(1) 5,500 6,000(3) -0-
Chief Executive Officer 1996 99,482(1) -0- 6,000(3) 300,000
- -------------------------------------------------------------------------------------------------
Anthony R. Harvey 1998 139,169(2) 5,500 7.250(3) -0-
Vice-Chairman, Executive 1997 110,000(2) 5,500 6,000(3) -0-
Vice-President and Secretary 1996 99,482(2) -0- 6,000(3) 300,000
- -------------------------------------------------------------------------------------------------
Dr. John P. N. Badham 1998 148,000 7,500 -0- -0-
Chief Geologist 1997 48,000 -0- -0- 100,000
1996 -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------
Ryan A. Modesto 1998 97,200 4,800 30,000(4) 13,000
Vice-President of Finance 1997 84,479 4,100 -0- 50,000
1996 75,325 1,600 -0- 25,000
=================================================================================================
</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 and a successor Management Agreement
dated February 1, 1998 with the Company.
(2) 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 and a successor Management Agreement dated February 1,
1998 with the Company.
(3) These amounts were paid as reimbursement of medical insurance premiums.
(4) Mr. Modesto was granted a $30,000 relocation allowance in conjunction with
the move of the Company's corporate office from Solomon, Arizona to
Ferndale, Washington.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
=============================================================================================================
Number of % of total Potential Realized Value
Securities Options (Cdn $) at Assumed Annual
Underling granted to Exercise of Rates of Stock Price
Options Employees in Base Price Appreciation for Option Term
Name Granted(#) Fiscal Year (Cdn $/Sh) Expiration Date 5% 10%
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Ryan A Modesto 13,000(*) 15% 1.70 December 10, 2002 6,106 13,492
- -------------------------------------------------------------------------------------------------------------
</TABLE>
(*) These options are exercisable from the date of grant (December 10, 1997).
9
<PAGE> 13
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS VALUES
<TABLE>
<CAPTION>
================================================================================================
Number of Securities Underling Value of Unexercised In-The-money
Unexercised Options at FY-End Options at FY-End ($)(*)
------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alan P. Lindsay 300,000 -0- -0- -0-
Anthony R. Harvey 300,000 -0- -0- -0-
Dr. J.P.N. Badham 100,000 -0- -0- -0-
Ryan A. Modesto 100,000 -0- -0- -0-
================================================================================================
</TABLE>
(*) Based on the closing price of $0.69 of the Company's Common Stock as quoted
on the American Stock Exchange on June 30, 1998.
COMPENSATION OF DIRECTORS
The Company pays to each of its outside, non-officer directors a fee of
$1,500 per month. The Company also reimburses its directors for reasonable
expenses incurred by them in attending meetings of the Board of Directors.
During fiscal 1998 non-officer directors received a total of $8,205 in
consulting fees separate and distinct from directors fees as a result of actual
services rendered above and beyond those typical of an non-officer director.
EMPLOYMENT CONTRACTS AND CHANGE-IN-CONTROL ARRANGEMENTS.
Effective February 1, 1998 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 new agreement replaces an original May 1, 1989 agreement
in its entirety. The agreement requires all salary amounts otherwise payable by
the Company to Mr. Lindsay to be paid to Associates. Associates shall be
compensated a base fee of $180,000 annually and an allowance for equivalent
insurance benefits enjoyed by permanent US based employees (approximately $750
per month). The base fee may be renegotiated annually at the request of either
party. In the event that the parties cannot agree then the base fee shall be
increased by the greater of 5% or the amount of the cost of living index as
published by the Canadian Federal government. The term of the agreement is for a
period of 36 months and shall renew automatically for subsequent one year
periods unless either party gives the other party notice of non-renewal at least
90 days prior to the end of any term. In the event that the agreement is
terminated, or fails to renew due to failure of agreement after the issuance of
a non-renewal notice, Associates shall receive a termination fee equal to either
the sum of the buy-out of any outstanding stock options for a price equal to the
aggregate of the average trading market price of the Company's shares on The
Toronto Stock Exchange on the date of termination multiplied by the number of
shares under option and less the exercise price thereof or, at the election of
Associates and subject to regulatory approval, extension of the option for a
year after termination; together with the greater of(i) the aggregate remaining
base fee for the unexpired remainder of the term; and (ii) the then annual base
fee plus one month of base fee for each year, or portion thereof, served after
the effective date. In the event that Associates is unable to provide the
services due to protracted disability or sickness or the death of its principal
(Mr. Lindsay) it may, at any time, declare such to the Company and may terminate
the agreement as a without fault termination and the termination fee shall be
payable. The Company may elect to effect such termination, and shall pay the
termination fee, in the case of death of Associates' principal or in the event
that sickness or disability has continued for a period in excess of 120 days. It
is the Company's estimation that if the management agreement with Associates was
terminated April 25, 1999 Associates would be due $350,760 as a termination fee.
This fee represents $10,560 (Cdn.$16,000) for the buyout of outstanding stock
options on April 25, 1999 and $340,200 as the aggregate remaining base fee for
the remainder of the term of the agreement.
Effective February 1, 1998 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-
10
<PAGE> 14
Chairman. This new agreement replaces an original May 1, 1989 agreement in its
entirety. The agreement requires all salary amounts otherwise payable by the
Company to Mr. Harvey to be paid to Management. Management shall be compensated
a base fee of $180,000 annually, and an allowance for equivalent insurance
benefits enjoyed by permanent US based employees (approximately $750 per month).
The base fee may be renegotiated annually at the request of either party. In the
event that the parties cannot agree then the base fee shall be increased by the
greater of 5% or the amount of the cost of living index as published by the
Canadian Federal government. The term of the agreement is for a period of 36
months and shall renew automatically for subsequent one year periods unless
either party gives the other party notice of non-renewal at least 90 days prior
to the end of any term. In the event that the agreement is terminated, or fails
to renew due to failure of agreement after the issuance of a non-renewal notice,
Management shall receive a termination fee equal to the sum of the buy-out of
any outstanding stock options for a price equal to the aggregate of the average
trading market price of the Company's shares on The Toronto Stock Exchange on
the date of termination multiplied by the number of shares under option and less
the exercise price thereof or, at the election of Management and subject to
regulatory approval, extension of the option for a year after termination;
together with the greater of(i) the aggregate remaining base fee for the
unexpired remainder of the term: and (ii) the then annual base fee plus one
month of base fee for each year of portion thereof, served after the effective
date. In the event that Management is unable to provide the services due to
protracted disability or sickness or the death of its principal (Mr. Harvey) it
may, at any time, declare such to the Company and may terminate the agreement as
a without fault termination and the termination fee shall be payable. The
Company may elect to effect such termination, and shall pay the termination fee,
in the case of death of Management's principal or in the event that sickness or
disability has continued for a period in excess of 120 days. It is the Company's
estimation that if the management agreement with Management was terminated April
25, 1999 Management would be due $350,760 as a termination fee. This fee
represents $10,560 (Cdn.$16,000) for the buyout of outstanding stock options on
April 25, 1999 and $340,200 as the aggregate remaining base fee for the
remainder of the term of the agreement.
Effective August 15, 1994 management agreements were provided to both
Messrs. Harvey and Lindsay that are effective in the event of a change in
control of the Company. Similar management agreements (collectively, the
"Management Agreements") were provided to Mr. Modesto on November 19, 1996 and
to Dr. Badham on October 7, 1997. 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) upon a change in control of the Company. 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 therein defined to include only the following:
(i) the acquisition (whether direct or indirect) of 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;
(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 SEC under the
Securities and Exchange Act of 1934; or
(iii) any change in the composition of the Board of Directors 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 for Mr. Hodges, and effective November 19,
1996 for Dr. Gray, director's agreements (collectively, the "Director's
Agreements") were provided to each of the above that are effective in the event
of a change in control of the Company. These Director's Agreements provide for a
lump sum distribution not to exceed $100,000 upon a change in control of the
Company. Change in control has the same definition as set forth above in
connection with the Management Agreements.
11
<PAGE> 15
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1998 the Company had a
compensation committee consisting of Messrs. Harvey and Hodges and Dr. Gray. Mr.
Harvey is an employee and an officer of the Company. The Compensation Committee
recommends officer and employee salary adjustments, bonuses and stock option
grants. The Compensation Committee held no formal meetings during the most
recent fiscal year, but met in the context of regular Board meetings.
REPORT OF THE BOARD ON EXECUTIVE COMPENSATION
OVERALL POLICY
Salary compensation of the Company's Executive Officers is determined by
the Compensation Committee. 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
Compensation Committee reviews 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 Compensation Committee 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 Compensation Committee 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
$180,000 by the Company's Compensation Committee on February 1, 1998. This
represents a 64% increase in base fees over annual base fees of $110,000
established February 6, 1996. The compensation committee's basis for this
increase was to bring the salary of Mr.
Lindsay in line with industry standards.
Mr. Harvey's salary as Executive Vice-President and Secretary was
increased to $180,000 by the Company's Compensation Committee on February 1,
1998. This represents a 64% increase in base fees over annual base fees of
$110,000 established February 6, 1996. The compensation committee's basis for
this increase was to bring the salary of Mr. Harvey in line with industry
standards.
During fiscal 1998 year end bonuses were calculated as 5% of base salary
or fees for all employees and officers.
12
<PAGE> 16
STOCK OPTIONS
Under the Company's 1989 Stock Option Plan as amended ("the Plan"),
which has been 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 under the Plan are granted
with an exercise price equal to at least 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.
CONCLUSION
The Company's executive compensation is linked to individual and
corporate performance. The Compensation Committee 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 Compensation Committee.
Anthony R. Harvey
Paul A. Hodges
Ian M. Gray
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 two other
stock market indices: (i) The American Stock Exchange Index (U.S.) (the "Amex
Index (U.S.)"), and (ii) 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, 1993 through June 30, 1998. (The
Company's Common Stock was registered under Section 12 of the Exchange Act in
July 1992.)
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 five companies; Benguet Corporation, Freeport McMoran Copper &
Gold, Cyprus Amax Minerals, O'Okiep Copper Co. Ltd. and Rio Tinto PLC (formerly
RTZ Corp. PLC), all of which are listed on AMEX the NYSE.
CUMULATIVE TOTAL SHAREHOLDER RETURN(1)(2)(3)
JULY 1, 1993 - JUNE 30 1998
<TABLE>
<CAPTION>
FISCAL YEAR ENDING
1993 1994 1995 1996 1997 1998
<S> <C> <C> <C> <C> <C> <C>
Azco Mining Inc. 100 128.21 76.92 80.00 67.18 35.38
Peer Group Index 100 122.94 120.45 102.99 106.11 55.30
AMEX Index 100 96.53 116.15 132.99 141.44 163.53
</TABLE>
13
<PAGE> 17
(1) Assumes $100 invested on July 1, 1993 in the Company's Common Stock, the
AMEX Index, 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.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
The Board has appointed PricewaterhouseCoopers 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, 1999. The Board
recommends that the Shareholders ratify that appointment and authorize the
directors of the Company to fix and approve their remuneration.
PricewaterhouseCoopers 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 PricewaterhouseCoopers 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.
PROPOSAL TO APPROVE VOTING AGREEMENT
On March 9,1999 the Company consummated the acquisition of Arizona Mica
Properties, Inc., an Arizona corporation ("Arizona Mica"), that owned the rights
to develop 43 unpatented lode mining claims located in Yavapai County, Arizona.
This acquisition was accomplished through the merger of Arizona Mica with and
into the Company's wholly-owned subsidiary, Sanchez Mining Inc., a Delaware
corporation ("Sanchez"), with Sanchez being the surviving corporation in the
merger. In connection with the merger the Company issued an aggregate of
4,500,000 shares (collectively, the "Shares") of its Common stock to the three
shareholders of Arizona Mica, Messrs. Lawrence G. Olson, John 0. Rud and Floyd
R. Bleak, with each such shareholder receiving 1,500,000 Shares of the Company's
Common Stock. The Shares were issued as "restricted securities", as that term is
defined in Rule 144 promulgated under the United States Securities Act of 1933,
as amended (the "Act"), and the certificates representing the Shares bear a
restrictive legend permitting transfer only pursuant to registration or
applicable exemption under the Act.
As part of the merger transaction Messrs. Olson, Bleak and Rud also
entered into a Voting Agreement (the "Voting Agreement") with the Company,
Arizona Mica and Messrs. Alan P. Lindsay and Anthony R. Harvey, who are
officers, directors and shareholders of the Company. The Voting Agreement has a
term of five years commencing March 9,1999 and the principal provisions of the
Voting Agreement are as follows:
1. Messrs. Olson, Rud and Bleak each grant to management of the Company, as
such may exist from time to time, the right to vote their Shares in favor of the
nominees to the Company's Board of Directors proposed by management at any
meeting of Shareholders of the Company. This provision is implemented through
the grant of an irrevocable proxy by Messrs. Olson, Rud and Bleak to such member
of the Board of Directors of the Company as the Board of Directors may specify
from time to time;
14
<PAGE> 18
2. the Company agrees to appoint one nominee (the "Nominee") of Messrs.
Olson, Rud and Bleak to the Company's Board of Directors and agrees to include
the Nominee in the management's slate of directors at any meeting, of the
Shareholders of the Company;
3. Messrs. Olson, Rud and Bleak are permitted to sell, assign or otherwise
transfer the Shares covered by the Voting Agreement provided that such transfers
comply with applicable securities laws. Any Shares so transferred will no longer
subject to the terms of the Voting Agreement; and
4. the Voting Agreement is subject to prior and required regulatory
approval, including the approval of The Toronto Stock Exchange and The American
Stock Exchange (the "Exchanges") where the shares of the Company's Common Stock
are listed for trading.
The Exchanges have indicated to the Company that approval by the
Shareholders of the Company is required before the Voting Agreement can become
effective and that members of the Company's management, as well as Messrs.
Lawrence G. Olson, John O. Rud and Floyd R. Bleak, will not be permitted to vote
their shares of Common Stock in connection with such approval. As of March 15,
1999 the Company's Board unanimously approved a resolution to place before the
Shareholders a vote to approve the Voting Agreement. The acquisition of Arizona
Mica Properties was in no way conditional on the approval of the Voting
Agreement. The Company does not plan to take any action if the Shareholders do
not approve the Voting Agreement. A complete copy of the Voting Agreement may be
obtained upon written request to the Secretary of the Company, at PO Box 1895,
Ferndale, Washington, 98248. Any such written request must be accompanied by a
check in the amount of $1.00 payable to the Company to cover copying, handling
and mailing expenses.
The Board of Directors recommends that the Shareholders approve the
Voting Agreement. The Board believes that the Voting Agreement will provide for
stability in the management of the Company while permitting the Company to
obtain valuable input and advice from the former Arizona Mica shareholders. In
addition, the Board believes the above-referenced provisions of the proposed
Voting Agreement will assist the Company in ensuring that the Arizona Mica
property interests are developed in a manner consistent with the best interest
of the Company together with the most efficient use of the Company's resources.
In the event that the Voting Trust is approved by the shareholders,
Messrs. Lindsay and Harvey will control the vote of 5,331,861 shares of the
Company's common stock compared with the vote of 881,861 shares they currently
control.
The Voting Agreement may have certain negative consequences, including
an affect on the ability of shareholders of the Company or other persons to (i)
change the composition of the incumbent board of Directors, (ii) to benefit from
certain transactions which are opposed by the incumbent Board of Directors and
(iii) to make a tender offer or otherwise attempt to gain control of the
Company, even if such attempt was beneficial to the Company and its
Shareholders. If the Voting Agreement is approved, the current management will
control the votes of approximately 18 percent of the Common Stock in connection
with the election of the Company's directors. This would make it very difficult
for any other person or persons to effect a change in the composition of the
incumbent Board of Directors. It would also make it very difficult for any other
person or persons to remove the incumbent Board of Directors if the incumbent
Board opposed a transaction or tender offer favored by such person or persons.
In general, the Voting Agreement, if approved, would make it extremely difficult
for anyone to effect a change in control of the Company without the approval of
the incumbent directors.
On March 15, 1999 Mr. Lawrence G. Olson was appointed as a director of
the Company, and as indicated above under "ELECTION OF DIRECTORS," Mr. Olson is
included in management's current slate of nominee directors. It is anticipated
that Mr. Olson will be the initial Nominee under the provisions of the Voting
Agreement.
The Board recommends that Shareholders vote "FOR" the approval of the
Voting Agreement. 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 Voting Agreement. As
indicated above, members of management and Messrs. Lawrence G. Olson, John O.
Rud and Floyd R. Bleak will not be permitted to vote their shares on the
proposal to approve the Voting Agreement.
15
<PAGE> 19
PROPOSAL TO AMEND THE COMPANY'S STOCK OPTION PLAN
As of March 15, 1999, 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 fix the maximum number of shares for which options
may be granted under the Plan at 5,950,424. Currently the Plan has the potential
to issue upon option exercises an additional 3,645,085 shares that would
represent over 12% dilution to the current Shareholders. If the proposal to
amend the Plan is approved the Plan would have the potential to issue upon
option exercises a total of 4,492,924 additional shares that would represent
over 15% dilution to the current Shareholders. Moreover, additional shares
issued under the Plan and available for sale on the market could have a
depressive effect on the price of the Company's Common Stock. At April 5, 1999,
the closing price of the Company's Common Stock as reported on The American
Stock Exchange was $0.6875 per share.
The Plan was adopted by the Company effective July 24, 1989 and
terminates at midnight on April 30, 2007, 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 21 individuals who qualify as "Key Persons" of
the Company and its subsidiaries.
The Plan is administered by the Board which selects the optionee 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 excisable. 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 (each 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 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 on option may generally
not be exercised during the first six months after the date of 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.
16
<PAGE> 20
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 a long term
capital gain and any loss the optionee may sustain on such sale will be a long
term capital loss. If the optionee disposes of the shares within the two-year or
one-year periods referred to above the disposition will be 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 and
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 corporate office,
located at 2068 Main St, Suite C, Ferndale, Washington 98248, during normal
business hours or may be obtained upon written request to the Secretary of the
Company, at PO Box 1895, Ferndale, Washington, 98248. Any such written request
must be accompanied by a check in the amount of $1.00 payable to the Company 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 5,102,585 shares of Common Stock.
The proposed amendment would fix the number of shares which may be issued under
the Plan at 5,950,424. As of April 5, 1999 1,457,500 shares have already been
issued under the Plan pursuant to option exercises, and options to acquire
another 3,564,500 shares have been granted and are outstanding. Therefore,
80,585 shares of Common Stock would be available for future grants under the
Plan, if the proposed amendment is not approved, and 928,424 shares of Common
Stock would be available for future grants under the Plan if the proposed
amendment is approved.
The following table summarizes the presently outstanding options issued
under the Plan to the indicated persons as of April 5, 1999. As of April 5, 1999
there were 3,564,500 outstanding options issued under the Plan. AZCO's closing
price on The Toronto Stock Exchange on April 5, 1999 was $0.88 (Cnd.). All the
outstanding options are Non-Qualified Stock Options for US optionees.
17
<PAGE> 21
<TABLE>
<CAPTION>
=========================================================================================
Number of
Securities Market Value of
Underling Exercise of Options Granted
Name Options Base Price as of April 5, 1999
or Group Granted(#) (Cdn $/Sh) Expiration Date (Cdn $/Sh)
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alan P. Lindsay 200,000 $0.80 February 22, 2004 $16,000
President, CEO & 300,000 $1.05 March 11, 2004 $0
Chairman
- -----------------------------------------------------------------------------------------
Anthony R Harvey 200,000 $0.80 February 22, 2004 $16,000
Executive Vice- 300,000 $1.05 March 11, 2004 $0
President, Secretary
- -----------------------------------------------------------------------------------------
Dr. John N. P. Badham 100,000 $1.05 March 11, 2004 $0
Chief Geologist
- -----------------------------------------------------------------------------------------
Gary L. Simmerman 25,000 $0.70 October 23, 2003 $4,500
Vice-President 30,000 $0.80 February, 22 2004 $2,400
Operations 210,000 $1.05 March 11, 2004 $0
- -----------------------------------------------------------------------------------------
Ryan A. Modesto 30,000 $0.80 July 13, 2003 $2,400
Vice-President Finance 20,000 $0.70 October 23, 2003 $3,600
120,000 $1.05 March 11, 2004 $0
- -----------------------------------------------------------------------------------------
All Current Executive 30,000 $0.80 July 13, 2003 $2,400
Officers as a Group 45,000 $0.70 October 23, 2003 $8,100
430,000 $0.80 February, 22 2004 $34,400
1,030,000 $1.05 March 11, 2004 $0
- -----------------------------------------------------------------------------------------
Dr. Ian M. Gray 50,000 $0.70 October 23, 2003 $9,000
Director 100,000 $1.05 March 11, 2004 $0
- -----------------------------------------------------------------------------------------
Paul A. Hodges 50,000 $0.70 October 23, 2003 $9,000
Director 50,000 $1.05 March 11, 2004 $0
- -----------------------------------------------------------------------------------------
Lawrence G. Olson 100,000 $1.05 March 11, 2004 $0
Director
- -----------------------------------------------------------------------------------------
All current Directors 100,000 $0.70 October 23, 2003 $18,000
who are not Executive 250,000 $1.05 March 11, 2004 $0
Officers as a Group
- -----------------------------------------------------------------------------------------
Employees who are not 5,000 $0.70 October 23, 2003 $900
Executive Officers as a 50,000 $1.05 March 11, 2004 $0
Group
- -----------------------------------------------------------------------------------------
Others who have
received more than 5%
of the outstanding
options
- -----------------------------------------------------------------------------------------
Michael Baybak 207,500 $1.80 March 8, 2001 $0
- -----------------------------------------------------------------------------------------
Princeton Research, Inc 50,000 $1.00 (US) December 31, 2000 $0
50,000 $1.25 (US) December 31, 2000 $0
50,000 $1.50 (US) December 31, 2000 $0
100,000 $1.75 (US) December 31, 2000 $0
- -----------------------------------------------------------------------------------------
The Catalyst Group 200,000 $0.69 (US) March 16, 2002 $0
- -----------------------------------------------------------------------------------------
Falcon Consulting Co. 200,000 $0.625 (US) March 25, 2002 $0
- -----------------------------------------------------------------------------------------
</TABLE>
18
<PAGE> 22
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.
Passage of the proposal to increase the shares of Common Stock available
under the Plan would have certain effects on the shareholders of the Company.
Any new shares issued under the Plan will dilute the ownership percentage of
existing shareholders and, if issued at a price per share which is less than
book value, will also dilute the book value of shares held by existing
shareholders. Additional shares issued to members of management under the Plan
could also make it more difficult for other shareholders to effect a change in
control of the Company. Moreover, additional shares issued under the Plan and
available for sale on the market could have a depressive effect on the price of
the Company's Common Stock.
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.
PROPOSAL TO AMEND ISSUED AND OUTSTANDING OPTIONS
As of March 15, 1999 the Company's Board unanimously approved a
resolution to place before the Shareholders a vote to amend the following issued
and outstanding Stock Options to acquire up to an aggregate of 1,240,000 common
shares of the Company under the Company's present Plan .
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
NUMBER OF
OPTIONS
AMENDED
EXISTING (Same as previous AMENDED DATE OF OPTION AMENDED OPTION
OPTIONEE allocations) OPTION PRICE AMENDMENT EXPIRY DATE
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
RYAN A. MODESTO 12,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
VICE-PRESIDENT (Original option (Original option (Original option
FINANCE price of $3.50 grant on June 27, expiry date of
(Cdn.)) 1994) June 27, 1999)
- -------------------------------------------------------------------------------------------
RYAN A. MODESTO 25,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
VICE-PRESIDENT (Original option (Original option (Original option
FINANCE price of $1.80 grant on March 8, expiry date of
(Cdn.)) 1996) March 8, 2001)
- -------------------------------------------------------------------------------------------
RYAN A. MODESTO 50,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
VICE-PRESIDENT (Original option (Original option (Original option
FINANCE price of $1.87 grant on May 21, expiry date of
(Cdn.)) 1997) May 21, 2002)
- -------------------------------------------------------------------------------------------
RYAN A. MODESTO 13,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
VICE-PRESIDENT (Original option (Original option (Original option
FINANCE price of $1.70 grant on Dec. 10, expiry date of
(Cdn.)) 1997) Dec. 10, 2002)
- -------------------------------------------------------------------------------------------
THERESA GRIGG 5,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
EMPLOYEE (Original option (Original option (Original option
price of $1.80 grant on March 8, expiry date of
(Cdn.)) 1996) March 8, 2001)
- -------------------------------------------------------------------------------------------
</TABLE>
19
<PAGE> 23
<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
THERESA GRIGG 5,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
EMPLOYEE (Original option (Original option (Original option
price of $1.70 grant on Dec. 10, expiry date of
(Cdn.)) 1997) Dec. 10, 2002)
- -------------------------------------------------------------------------------------------
ANTHONY R. 300,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
HARVEY (Original option (Original option (Original option
EXECUTIVE price of $1.80 grant on March 8, expiry date of
VICE-PRESIDENT (Cdn.)) 1996) March 8, 2001)
- -------------------------------------------------------------------------------------------
PAUL HODGES 50,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
DIRECTOR (Original option (Original option (Original option
price of $1.80 grant on March 8, expiry date of
(Cdn.)) 1996) March 8, 2001)
- -------------------------------------------------------------------------------------------
ALAN P. LINDSAY 300,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
PRESIDENT (Original option (Original option (Original option
CEO price of $1.80 grant on March 8, expiry date of
CHAIRMAN (Cdn.)) 1996) March 8, 2001)
- -------------------------------------------------------------------------------------------
GARY L. 35,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
SIMMERMAN (Original option (Original option (Original option
VICE-PRESIDENT price of $1.80 grant on March 8, expiry date of
OPERATIONS (Cdn.)) 1996) March 8, 2001)
- -------------------------------------------------------------------------------------------
GARY L. 45,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
SIMMERMAN (Original option (Original option (Original option
VICE-PRESIDENT price of $1.87 grant on May 21, expiry date of
OPERATIONS (Cdn.)) 1997) May 21, 2002)
- -------------------------------------------------------------------------------------------
GARY L. 30,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
SIMMERMAN (Original option (Original option (Original option
VICE-PRESIDENT price of $1.80 grant on Jan. 21, expiry date of
OPERATIONS (Cdn.)) 1998) Jan. 21, 2003)
- -------------------------------------------------------------------------------------------
DR. IAN M. GRAY 100,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
DIRECTOR (Original option (Original option (Original option
price of $1.90 grant on Sept. 4, expiry date of
(Cdn.)) 1996) Sept. 4, 2001)
- -------------------------------------------------------------------------------------------
RANDALL R. 30,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
RENEAU (Original option (Original option (Original option
PROJECT MANAGER price of $1.95 grant on Jan. 15, expiry date of Jan.
(Cdn.)) 1997) 15, 2002)
- -------------------------------------------------------------------------------------------
DOUGLAS 100,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
RAMSHAW (Original option (Original option (Original option
VICE-PRESIDENT price of $2.32 grant on Feb. 3, expiry date of
CORPORATE (Cdn.)) 1997) Feb. 3, 2002)
DEVELOPMENT
- -------------------------------------------------------------------------------------------
</TABLE>
20
<PAGE> 24
<TABLE>
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
DR. JOHN 100,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
BADHAM (Original option (Original option (Original option
CHIEF GEOLOGIST price of $1.95 grant on June 27, expiry date of
(Cdn.)) 1997) June 27, 2002)
- -------------------------------------------------------------------------------------------
JAMES R. 25,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
PATERSON (Original option (Original option (Original option
INVESTOR price of $1.40 grant on October expiry date of
RELATIONS (Cdn.)) 30, 1997) October 30, 2002)
REPRESENTATIVE
- -------------------------------------------------------------------------------------------
JAMES R. 15,000 $1.05 (CDN.) MARCH 10, 1999 MARCH 10, 2004
PATERSON (Original option (Original option (Original option
INVESTOR price of $1.50 grant on May 7, expiry date of
RELATIONS (Cdn.)) 1998) May 7, 2003)
REPRESENTATIVE
- -------------------------------------------------------------------------------------------
TOTAL NUMBER OF
OPTIONS
AMENDED: 1,240,000
- -------------------------------------------------------------------------------------------
</TABLE>
Passage of the proposal to amend certain issued and outstanding options
would have certain effects on the shareholders of the Company. Holders of the
affected options will be more likely to exercise those options if the exercise
price is reduced. Any new shares issued under the Plan will dilute the ownership
percentage of existing shareholders and, if issued at a price per share which is
less than book value, will also dilute the book value of shares held by existing
shareholders. Additional shares issued to members of management under the Plan
could also make it more difficult for other shareholders to effect a change in
control of the Company. Moreover, additional shares issued under the Plan and
available for sale on the market could have a depressive effect on the price of
the Company's Common Stock.
In the event that all of the 1,240,000 amended options are exercised the
purchase price of the amended options in total will be Cdn. $1,022,250 less than
the original total purchase price of the amended options.
The Board recommends that disinterested Shareholders vote "FOR" the
proposed amendment of the issued and outstanding Stock Options indicated above.
The Board believes that the proposal to amend issued and outstanding Stock
Options to employees and insiders is necessary to keep compensation competitive
in the industry. The affirmative vote of a disinterested 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 subject Stock Options.
In accordance with the policies of The Toronto Stock Exchange
disinterested approval of the Shareholders of the Company is required before any
shares of Common Stock may be issued under any of the amended Stock Options to
insiders of the Company (each such insider being referenced in the table above).
Correspondingly, neither the referenced insiders nor their respective associates
will be permitted to vote their shares of Common Stock in connection with such
approval.
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. If a Shareholder intends to submit
21
<PAGE> 25
a proposal at the Meeting that is not included in the Company's Proxy Statement,
and the Shareholder fails to notify the Company of such proposal a reasonable
amount of time before the Company mails the proxy materials for the Meeting,
then the proxies appointed by the Company's management would be allowed to use
their discretionary voting authority when the proposal is raised at the Meeting
without any discussion of the matter in the Proxy Statement. 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
The Annual Report on Form 10-K concerning the operation of the Company
during the fiscal year ended June 30, 1998, 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
the corporate office located at P.O. Box 1895, 2068 Main St, Suite C, Ferndale,
Washington 98248.
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
April 16, 1999 Alan P. Lindsay,
Chairman of the Board
22
<PAGE> 26
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 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, have the following meanings:
Board: The Board of Directors of Azco Mining Inc.
Common Stock: The U.S. $.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 hereinbelow) 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
-- Stock Option Plan --
-- Azco Mining Inc. --
<PAGE> 27
-2-
quoted on each such date by any two independent
persons or entities making a market for the Common
Stock, such persons or entities 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.
Incentive Stock
Option: An Option as described in Section 9 hereinbelow
intended to qualify under section 422 of the United
States Internal Revenue Code of 1986, as amended.
Insider: As defined in the Ontario Securities Act, means: (i)
every Director or Senior Officer of the Company;
(ii) every director or senior officer of a company
that is itself an insider or subsidiary of the
Company; (iii) any person or company who
beneficially owns, directly or indirectly, voting
securities of the Company or who exercises control
or direction over voting securities of the Company
or a combination of both carrying more than 10% of
the voting rights attached to all voting securities
of the Company for the time being outstanding other
than voting securities held by the person or company
as underwriter in the course of a distribution; or
(iv) the Company where it has purchased, redeemed or
otherwise acquired any of its securities, for so
long as it holds any of its securities.
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. A Key Person may include a
corporation that is wholly-owned and controlled by a
Key Person who is eligible for an Option grant, but
in no case may the Company grant an option to a
legal entity other than an individual.
Option: The rights granted to a Key Person to purchase
Common Stock pursuant to the terms and conditions of
an Option Agreement (see hereinbelow).
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.
-- Stock Option Plan --
-- Azco Mining Inc. --
<PAGE> 28
-3-
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.
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 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
-- Stock Option Plan --
-- Azco Mining Inc. --
<PAGE> 29
-4-
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 the prior approval of
The Toronto Stock Exchange approval, and in the best interests of the Company;
provided, however, that no such 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 purposes of the Plan, a total number of shares of the Company's
Common Stock not to exceed 5,950,424, 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.
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.
At no time, however, may Options under the Plan, together with
all of the Company's previously established or proposed share compensation
arrangements, result, at any time, in:
(a) the number of Optioned Shares reserved for issuance pursuant to
the Plan under Options granted to Insiders exceed 10% of the
outstanding shares of Common Stock;
(b) the issuance to Insiders, within a one-year period, of Options
pursuant to the Plan for which the number of Optioned Shares
exceed 10% of the outstanding shares of Common Stock; or
-- Stock Option Plan --
-- Azco Mining Inc. --
<PAGE> 30
-5-
(c) the issuance to any one Insider, and to such Insider's
associates, within a one-year period, of Options pursuant to the
Plan for which the number of Optioned Shares exceed 5% of the
outstanding shares of Common Stock.
For the purposes of the foregoing restrictions respecting
Insiders of the Company, the "outstanding shares of Common Stock" will be
determined on the basis of the number of shares of Common Stock that are
outstanding immediately prior to the Option grant in issue, excluding shares
issued pursuant to share compensation arrangements over the preceding one-year
period, and, in addition, an entitlement for Options granted to an Insider prior
to such Insider becoming an Insider may be excluded in determining the number of
Optioned Shares issuable to all Insiders of the Company.
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) hereinabove, 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
-- Stock Option Plan --
-- Azco Mining Inc. --
<PAGE> 31
-6-
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) hereinabove), 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 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 U.S. $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) 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 (or 110% of such Fair Market Value, in
the case of individuals who own more than 10% of the outstanding
equity securities of the Company).
-- Stock Option Plan --
-- Azco Mining Inc. --
<PAGE> 32
-7-
(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 the Option term shall commence no sooner
than 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 hereinabove (or five
years from the Date of Grant, in the case of individuals who own
more than 10% of the outstanding equity securities of the
Company).
(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 U.S. $100,000.00.
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 kind 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.
-- Stock Option Plan --
-- Azco Mining Inc. --
<PAGE> 33
-8-
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 United States
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: (i) that all Option Shares are being acquired solely for his own
account and not on behalf of any other person or entity; (ii) that no Option
Shares will be sold or otherwise distributed in violation of the United States
Securities Act of 1933, as amended, or any other applicable federal or state
securities laws; (iii) that if he is subject to reporting requirements under
Section 16(a) of the United States Securities Exchange Act of 1934, as amended,
he will (a) furnish the Company with a copy of each Form 4 filed by him and (b)
timely file all reports required under the federal securities laws; and (iv)
that he will report all sales of Option Shares to the Company in writing on a
form prescribed by the Company.
-- Stock Option Plan --
-- Azco Mining Inc. --
<PAGE> 34
-9-
16. Effective Date of Plan; Termination Date of Plan.
The Plan shall be deemed effective as of April 30, 1997. 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 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 Delaware.
----------
-- Stock Option Plan --
-- Azco Mining Inc. --
<PAGE> 35
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 in the Prescott Room of
the Arizona Biltmore, 24th Street at Missouri, Phoenix, Arizona, on May 26,
1999, 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, Paul A. Hodges and
Lawrence G. Olson.
WITHHELD [ ] From All Nominees.
FOR [ ] All Nominees Except the Following:
_________________________________.
2. FOR [ ] AGAINST [ ] ABSTAIN [ ] To appoint PricewaterhouseCoopers as
auditors and to authorize the directors
to fix the auditors' remuneration.
3. FOR [ ] AGAINST [ ] ABSTAIN [ ] To approve the Voting Agreement among
the Company, Arizona Mica Properties,
Inc., Lawrence G. Olson, John O. Rud,
Floyd R. Bleak, Alan P. Lindsay and
Anthony R. Harvey.
4. FOR [ ] AGAINST [ ] ABSTAIN [ ] To approve the amendment of the
Company's Stock Option Plan.
5. FOR [ ] AGAINST [ ] ABSTAIN [ ] To approve the amendments specified to
certain issued and outstanding Stock
Options.
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 __________________, 1999.
____________________________________________
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 Shareholder, the Proxy will be 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,
located at 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.
