SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
AZCO MINING INC.
- ------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- ------------------------------------------------------------
(Name of Person(s) filing Proxy Statement if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
1) Title of each class of securities to which transaction
applies:
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2) Aggregate number of securities to which transaction
applies:
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3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by
Exchange act rule 0-11(a)(2) and identify the filing for which
the offsetting fee was paid previously. Identify the previous
filing by registration statement number, of the Form or
Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
January 26, 2000
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AZCO MINING INC.
2068 Main St. Suite C, PO Box 1895
Ferndale, WA 98248
(360) 380-4467
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD MARCH 1, 2000
To Our Shareholders:
An Annual Meeting (the "Meeting") of Shareholders of AZCO Mining Inc.(the
"Company"), a Delaware corporation, will be held at 10:00 a.m. (local time) on
Wednesday, March 1, in the board room of the Inn at Semiahmoo, 9565 Semiahmoo
Drive, Blaine, Washington 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, 2000,
and to authorize the directors of the Company to fix and approve their
remuneration.
3. 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 January 25, 2000 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
Ferndale, Washington
January 21, 2000
AZCO MINING INC.
2068 Main St. Suite C, PO Box 1895
Ferndale, WA 98248
(360) 380-4467
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
MARCH 1, 2000
This Proxy Statement is furnished to the shareholders of AZCO Mining Inc.
(the "Company"), a Delaware corporation, in connection with the solicitation by
and on behalf of the Company's Board of Directors (collectively, the "Board") of
proxies to be voted at the Annual Meeting (the "Meeting") of shareholders (each
a "Shareholder") of the Company. The Meeting will be held at 10:00 a.m. (local
time) on March 1, 2000 in the board room of the Inn at Semiahmoo, 9565 Semiahmoo
Drive, Blaine, Washington for the purposes set forth in the accompanying Notice
of Annual Meeting of Shareholders.
Solicitation expenses will be paid by the Company. In addition to
solicitation by mail, directors, officers and other employees of the Company
may, without additional compensation, solicit proxies by mail, in person or by
telecommunication.
The Company has retained Morrow & Co., professional proxy solicitors, at an
estimated fee of $5,500 plus reasonable out-of-pocket expenses, to assist in the
solicitation process. Approximately 4 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 February 3, 2000. 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 January 25, 2000 are entitled to notice of and to vote at the Meeting or any
adjournment thereof. At the close of business on January 25, 2000 there were
29,847,121 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
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 ratify the
appointment of the auditors.
An abstention or withholding authority to vote will be counted as present
for determining whether the quorum requirement is satisfied. With respect to the
vote on any particular proposal, abstentions will be treated as shares present
and entitled to vote and, for purposes of determining the outcome of the vote on
any such proposal, shall have the same effect as a vote against the proposal. A
broker "non-vote" occurs when a nominee holding shares for a beneficial holder
does not have discretionary voting power and does not receive voting
instructions from the beneficial owner. Broker "non-votes" on a particular
proposal will not be treated as shares present and entitled to vote on the
proposal.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The table below sets forth information, as of January 10, 2000, 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.
NAME AND ADDRESS TYPE OF NUMBER OF PERCENT
OF BENEFICIAL OWNER OWNERSHIP SHARES OF CLASS
- ------------------------------------------------------------ ----------- --------- --------
Alan P. Lindsay............................................. Record and 1,178,569(1) 3.88%
(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) 2.15%
(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
Ian M. Gray................................................. Record and 151,000(4) *
(Director) Beneficial
Copper Hill House
Butler Hill, Redruth
Cornwall, England TR166SR
Lawrence G. Olson........................................... Record and 1,750,000(5) 5.84%
(Director) Beneficial
3045 S. 35th Avenue
Phoenix, AZ 85009
Gary L. Simmerman........................................... Record and 315,000(6) *
(Vice-President of Operations) Beneficial
1211 W. Crystal Palace Place
Oro Valley, AZ 85737
2
NAME AND ADDRESS TYPE OF NUMBER OF PERCENT
OF BENEFICIAL OWNER OWNERSHIP SHARES OF CLASS
- ------------------------------------------------------------ ----------- --------- --------
Ryan A. Modesto............................................. Record and 170,000(7) *
(Vice-President of Finance) Beneficial
2068 Main St. Suite C, PO Box 1895
Ferndale, WA 98248
Floyd R. Bleak.............................................. Record and 1,500,000 5.03%
3616 E. Omega Circle Beneficial
Mesa, AZ 85215
All officers & directors
as a group (7 persons).................................... Record and 4,334,345(8) 13.68%
Beneficial
- ------------------------
* Less than 1%.
(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.
(4) Includes 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 (iii) 25,000 shares at an exercise price of CDN $0.70 per share and
(iv) 50,000 shares at an exercise price of CDN $0.95 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 an aggregate of 1,835,000 shares.
Management anticipates that insiders and their affiliates owning an
aggregate of approximately 8.4% of the outstanding shares of Common Stock will
vote in favor of each of the proposals to be submitted at the Meeting, including
votes for all the nominees for directors.
ELECTION OF DIRECTORS
The Company's Bylaws provide that the number of members of the Board shall
not exceed seven 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.
3
DIRECTORS AND EXECUTIVE OFFICERS
The following table lists the names, ages and positions of the Directors and
Executive Officers of the Company as of January 10, 2000. 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 in the table below.
NAME POSITION HELD WITH THE COMPANY PRINCIPAL OCCUPATION
- ---- ------------------------------ -----------------------------
Alan P. Lindsay.............. Chairman of the Board, Chief Chief Executive Officer of
Executive Officer, President the Company
and a Director of the Company
Anthony R. Harvey............ Vice Chairman of the Board, Executive Vice President of
Executive Vice President, the 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 Operations for
the Company
Ryan A. Modesto.............. Vice President of Finance Vice President Finance for
the Company
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 49, 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 65, 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
Mr. Hodges, aged 73, 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,
4
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 64, a P.Eng. of Ontario, Canada, and a Fellow of the Society
of Economics Geologists, became a director of the Company on September 4, 1996.
Dr. Gray, a Mining geologist from the Royal School of Mines in London, UK, has
spent over 40 years in the international mining industry. His experience ranges
from mineral exploration through project development to mine production for a
wide variety of minerals throughout North, Central and South America, Australia,
East and Southeast Asia and Central and Southern Africa. During his career
Dr. Gray has held senior positions with major mining companies such as
INCO Ltd. and BP Minerals International Ltd., followed by considerable
experience in the formation and general management of Canadian based junior
mining public companies. Notable achievements include important roles in the
development of the huge Olympic Dam copper, uranium and gold production complex
in South Australia and the 370,000 ounce per year Fort Knox gold mine located
near Fairbanks Alaska.
LAWRENCE G. OLSON--DIRECTOR
Mr. Olson, aged 63, became a director of the Company on March 15, 1999 in
connection with the acquisition of Arizona Mica Properties Inc. 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.
RYAN A. MODESTO--VICE PRESIDENT OF FINANCE
Mr. Modesto, aged 44, 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 49, 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.
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.
5
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, 1999, all filing requirements
applicable to its officers, directors and greater than ten percent beneficial
owners were complied with, except that Dr. Nicholas Badham, a former officer of
the Company who resigned as such on July 31, 1999, was late in filing his
Statement of Beneficial Ownership of Securities on Form 4 for the month of
June 1999 reporting 5 transactions.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On March 9, 1999 the Company completed the acquisition of Arizona Mica
Properties, Inc.("Arizona Mica"), which owned the rights to develop 43
unpatented lode-mining claims located in Yavapai County, Arizona. This
acquisition was accomplished though the merger of Arizona Mica with and into the
Company's wholly owned subsidiary, Sanchez Mining Inc.("Sanchez"), with Sanchez
being the surviving corporation in the merger. Sanchez has subsequently changed
its name to AZCO Mica, Inc. In connection with the merger the Company issued an
aggregate of 4, 500,000 shares (the "Shares") of its common stock to the three
shareholders of Arizona Mica, Messrs. Lawrence G. Olson, John O. 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 the 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;
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.
The Voting Agreement was ratified by the Shareholders at the last Annual and
Special Meeting of Shareholders on May 26, 1999.
Lawrence G. Olson, a non-officer director of the Company since March 15,
1999 is the owner of Olson Precast of Arizona Inc. ("Precast"). Precast, through
a closed bidding arrangement, was awarded the concrete contract on the Company's
Glendale, Arizona, mica processing facility. Precast was compensated a total of
$141,385 for the contract.
BOARD MEETINGS AND COMMITTEES
During the Company's fiscal year ended June 30, 1999 the Company's Board of
Directors ("the Board") met 17 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.
6
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, 1999 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, 1997, 1998 and 1999, respectively, of those persons who were, at
June 30, 1999 (i) the Chief Executive Officer and (ii) other Executive Officers
of the Company whose total compensation was not less than $100,000
(collectively, the "Named Executive Officers").
SUMMARY COMPENSATION TABLE
(AS AT YEAR ENDED JUNE 30)
LONG TERM
COMPENSATION
ANNUAL COMPENSATION ----------------
------------------------------------------- SECURITIES UNDER
OTHER ANNUAL OPTIONS/SARS
SALARY BONUS COMPENSATION GRANTED
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($) (#)
- --------------------------- -------- --------------- -------- -------------- ----------------
Alan P. Lindsay,.......................... 1999 183,750(1) 9,000 9,000(3) 200,000
President, Chairman of the Board and 1998 139,169(1) 5,500 7,250(3) 0
Chief Executive Officer 1997 110,000(1) 5,500 6,000(3) 0
Anthony R. Harvey......................... 1999 183,750(2) 9,000 9,000(3) 200,000
Vice Chairman, Executive Vice President 1998 139,169(2) 5,500 7,250(3) 0
and Secretary 1997 110,000(2) 5,500 6,000(3) 0
Dr. John P. N. Badham(6).................. 1999 154,083 7,750 0 0
Chief Geologist 1998 148,000 7,500 0 0
1997 48,000 0 0 100,000
Ryan A. Modesto........................... 1999 109,084 5,500 0 70,000
Vice President Finance 1998 97,200 4,800 30,000(4) 13,000
1997 84,479 4,100 0 50,000
Gary L. Simmerman......................... 1999 115,973 7,750 30,000(5) 155,000
Vice President Operations 1998 96,000 4,800 0 30,000
1997 88,344 4,100 0 45,000
- ------------------------
(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.
7
(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.
(5) Mr. Simmerman was granted a $30,000 relocation allowance in conjunction with
the move of the Company's establishment of its Glendale office to oversee
the Black Canyon Mica Project.
(6) Dr. Badham resigned his position with the Company on July 31, 1999.
OPTION GRANTS IN LAST FISCAL YEAR
POTENTIAL
REALIZED
(CDN $) AT
ASSUMED
ANNUAL RATES
OF STOCK
APPRECIATION
% OF TOTAL FOR OPTION
NUMBER OF OPTIONS EXERCISE -------------------
SECURITIES GRANTED TO OF BASE VALUE
UNDERLING EMPLOYEES PRICE PRICE
OPTIONS IN FISCAL (CDN $ TERM
NAME GRANTED (#) YEAR /SH) EXPIRATION DATE 5% 10%
- ---- ----------- ---------- -------- ----------------- -------- --------
Ryan A. Modesto.................. 30,000(1) 4% 0.80 July 13, 2003 6,631 14,652
Gary L. Simmerman................ 25,000(2) 4% 0.70 October 23, 2003 4,834 10,684
Ryan A. Modesto.................. 20,000(2) 3% 0.70 October 23, 2003 3,868 8,547
Alan P. Lindsay.................. 200,000(3) 29% 0.80 February 22, 2004 44,205 97,681
Anthony R. Harvey................ 200,000(3) 29% 0.80 February 22, 2004 44,205 97,681
Gary L. Simmerman................ 30,000(3) 4% 0.80 February 22, 2004 6,631 14,652
Ryan A. Modesto.................. 20,000(4) 3% 1.05 March 11, 2004 5,802 12.820
Gary L. Simmerman................ 100,000(4) 15% 1.05 March 11, 2004 29,010 64,104
- ------------------------
(1) These options are exercisable from the date of grant (July 13, 1998).
(2) These options are exercisable from the date of grant (October 23, 1998).
(3) These options are exercisable from the date of grant (February 22, 1999).
(4) These options are exercisable from the date of grant (March 11, 1999).
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FY-END OPTIONS VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLING UNEXERCISED THE-MONEY
OPTIONS AT FY-END OPTIONS AT FY-END ($)(*)
--------------------------- ---------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
Alan P. Lindsay................................ 500,000 0 146,290 0
Anthony R. Harvey.............................. 500,000 0 146,290 0
Dr. J.P.N. Badham.............................. 100,000 0 22,470 0
Gary L. Simmerman.............................. 265,000 0 70,576 0
Ryan A. Modesto................................ 170,000 0 48,042 0
- ------------------------
(*) Based on the closing price of $0.94 of the Company's Common Stock as quoted
on the American Stock Exchange on June 30, 1999.
8
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 1999 non-officer directors received a total of $320 in consulting
fees separate and distinct from directors fees as a result of actual services
rendered above and beyond those typical of a 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 January 10, 2000 Associates would be due $277,195 as a termination
fee. This fee represents $72,445 (Cdn.$105,759) for the buyout of outstanding
stock options on January 10, 2000 and $204,750 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-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
9
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
January 10, 2000 Management would be due $277,195 as a termination fee. This fee
represents $72,445 (Cdn.$105,759) for the buyout of outstanding stock options on
January 10, 2000 and $204,750 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 Mr. Simmerman on October 23, 1998. 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, November 19, 1996 for Dr. Gray and
December 8, 1999 for Mr. Olson, 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended June 30, 1999 the Company had no compensation
committee. Each of the Company's directors participated in deliberations
concerning officer compensation in the context of regular Board meetings.
10
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 $189,000 by
the Company's Compensation Committee on February 1, 1999. This represents a 5%
increase in base fees over annual base fees of $180,000 established February 1,
1998. The compensation committee's basis for this increase was to adjust the
salary of Mr. Lindsay in line with industry standards.
Mr. Harvey's salary as Executive Vice-President and Secretary was increased
to $189,000 by the Company's Compensation Committee on February 1, 1999. This
represents a 5% increase in base fees over annual base fees of $180,000
established February 1, 1998. The compensation committee's basis for this
increase was to bring the salary of Mr. Harvey in line with industry standards.
During fiscal 1999 year end bonuses were calculated as 5% of base salary or
fees for all employees and officers except Mr. Simmerman who was granted a 6.5%
of base salary year end bonus.
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
11
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 Board intends to continue the policy of linking executive
compensation to corporate performance, recognizing that the ups and downs of the
business cycle, and in particular depressed mineral prices, from time to time,
may result in an imbalance for a particular period.
This report has been provided by the Board.
Anthony R. Harvey Alan P. Lindsay
Paul A. Hodges Lawrence G. Olson
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 Market Index (U.S.) (the
"Amex Market 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, 1994
through June 30, 1999. (The Company's Common Stock was registered under
Section 12 of the Exchange Act in July 1992.)
The AMEX Market 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, Rio Tinto PLC (formerly RTZ Corp. PLC), Canyon Resources Corp.
and Hecla Mining Co. all of which are listed on AMEX the NYSE. The stocks of
O'Okiep Copper Co. Ltd. and Cyprus Amax Minerals, members of last year's peer
group, are no longer traded on a major exchange and have been replaced by Canyon
Resources Corp. and Hecla Mining Co.
CUMULATIVE TOTAL SHAREHOLDER RETURN(1)(2)(3)
JULY 1, 1994--JUNE 30 1999
1994 1995 1996 1997 1998 1999
-------- -------- -------- -------- -------- --------
AZCO Mining Inc................................ 100 60.00 62.50 52.50 27.50 37.50
Peer Group Index............................... 100 95.64 80.18 79.54 42.51 47.44
AMEX Market Index.............................. 100 120.33 137.78 146.53 169.41 166.65
- ------------------------
(1) Assumes $100 invested on July 1, 1994 in the Company's Common Stock, the
AMEX Market 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.
12
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, 2000. 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.
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 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 recorded 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, 1999, 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
Alan P. Lindsay,
Chairman of the Board
January 21, 2000
13
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 board room of the
Inn at Semiahmoo, 9565 Semiahmoo Drive, Blaine, Washington, on, March 1, 2000,
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.
1. YOU HAVE THE RIGHT TO APPOINT A PERSON TO REPRESENT YOU AT THE MEETING
OTHER THAN THE PER SONS 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 offcer or attorney thereof duly authorized. If no date is stated by
the Shareholders, the Proxy is deemed to bear the date upon which it was
mailed by management to the Shareholder.
3. To be valid, this Proxy form, duly signed and dated, must arrive at the
office of the Company's transfer agent, Montreal Trust Company of Canada,
510 Burrard Street, Vancouver, British Columbia, V6C 3B9 not less than
forty-eight (48) hours (excluding Saturdays, Sundays and holidays) before
the day of the Meeting or any adjournment thereof.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *
Please mark
your votes as /X/
indicated in
this example
THE NOMINEE IS HEREBY INSTRUCTED TO VOTE AS FOLLOWS WITH RESPECT TO THE
FOLLOWING MATTERS:
WITHHOLD
FOR all FROM ALL
nominees nominees
1. All Nominees as Directors - Alan P. / / / /
Lindsay, Anthony R. Harvey, Ian M.
Gray, Paul A. Hodges and Lawrence G.
Olson.
FOR AGAINST ABSTAIN
2. To appoint PricewaterhouseCoopers as auditors
and to authorize the directors to fix the / / / / / /
auditors remuneration.
FOR all nominees
except the following:
- -------------------------------------------------
DATED this ______ day of ______________,2000
--------------------------------------------
Signature of Shareholder
--------------------------------------------
(Please print name Shareholder)
Signature(s) ________________________________________ Dated _____________, 1997
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
* FOLD AND DETACH HERE *