<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.________)
Filed by the Registrant [ ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] Confidential,For Use of the
[X] Definitive Proxy Statement Commission Only (as per-
[ ] Definitive Additional Materials mitted by Rule 14a-6(e)(2))
[ ] Soliciting Material Pursuant
to Rule 14a-11(c) or Rule 14a-12
Hanover Gold Company, 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)(1) 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):
________________________________________________________________
(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, or 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:
<PAGE>
DEFINITIVE COPY
_____________________________________________________________________
HANOVER GOLD COMPANY, INC.
_____________________________________________________________________
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 1998
TO: THE SHAREHOLDERS OF HANOVER GOLD COMPANY, INC.:
The 1998 annual meeting of shareholders of HANOVER GOLD COMPANY INC.
(the "Company") will be held at North 3303 Sullivan Road, Spokane,
Washington, on Tuesday, May 5, 1998, at 10:00 a.m., (PDT), for the
following purposes:
(1) To elect six members to the board of directors of the Company to
hold office until the next annual meeting of shareholders or until
their successors are elected and have been qualified;
(2) To consider and approve a plan of recapitalization in which each
issued and outstanding share of common stock of the Company, par
value $0.0001 per share (the "Common Stock"), would be exchanged in a
tax-free transaction for one-fourth share of Common Stock of the same
par value;
(3) To consider and approve an amendment to the Company's 1995 Stock
Plan to remove limitations on the aggregate number of options that
may be granted to directors, and the maximum number of options that
may be granted to any one person;
(4) To ratify the selection of BDO Seidman, LLP as the Company's
independent auditor for the year ended December 31, 1998 and any
interim period, and
(5) To conduct any other business as may properly come before the
meeting or any adjournment thereof.
Shareholders of record at the close of business on March 12, 1998 are
entitled to notice of and to vote at the annual meeting and any
adjournment(s) or postponement(s) thereof. Your proxy is important to
assure a quorum at the meeting. Whether or not you plan to attend
the annual meeting, please be sure that the enclosed proxy is
properly completed, dated, signed, and returned without delay in the
enclosed envelope.
BY ORDER OF THE BOARD OF DIRECTORS
James A. Fish, President
<PAGE>
- ---------------------------------------------------------------------
HANOVER GOLD COMPANY, INC.
- ---------------------------------------------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 5, 1998
This proxy statement is furnished in connection with the
solicitation of proxies by the board of directors ("Board of
Directors") of Hanover Gold Company, Inc. (the "Company") for the
annual meeting of shareholders ("Annual Meeting") of the Company to
be held on Tuesday, May 5, 1998 at 10:00 A. M. (PDT) and at any
adjournment thereof. The meeting will be held at North 3303 Sullivan
Road, Spokane, Washington. The approximate date the proxy materials
were first mailed to shareholders was on or about April 7, 1998. The
principal executive offices of the Company are located at 1000
Northwest Blvd, Suite 100, Coeur d'Alene, Idaho 83814.
PURPOSE OF MEETING
------------------
The specific proposals to be considered and acted upon at the
Annual Meeting are summarized in the enclosed Notice of Annual
Meeting of Shareholders. Each of the proposals is described in more
detail in subsequent sections of this Proxy Statement.
VOTING RIGHTS AND SOLICITATIONS
------------------------------
The Board of Directors of the Company has fixed the close of
business on March 12, 1998 as the record date for the determination
of holders of shares of outstanding capital stock entitled to notice
of and to vote at the Annual Meeting. On March 12, 1998, there were
outstanding 30,270,352 shares of common stock, ("Common Stock"), the
holders of which will be entitled to cast one vote per share on each
matter submitted to a vote at the Annual Meeting. The presence, in
person or by proxy, of the holders of issued and outstanding shares
of capital stock entitled to cast an aggregate of 15,135,177 votes at
the Annual Meeting will constitute a quorum for the transaction of
business.
Directors, executive officers, and other affiliates of the Company
beneficially hold 10,234,271 shares of Common Stock, or approximately
33.8% of the outstanding shares of common stock as of the record
date. As a consequence, were all of such affiliates to vote to
approve Item 2, Item 2 would require the affirmative vote of the
holders of only 4,900,907 additional shares of Common Stock, or
approximately 17.3% of the outstanding shares of Common Stock as of
the record date.
Proxies in the accompanying forms, which are properly completed,
signed, dated, returned to the Company and not revoked will be voted
in accordance with instructions given therein. Shareholders are
urged to specify their choices by marking the appropriate boxes on
the enclosed proxy card; if no choice has been specified, the shares
will be voted as recommended by the Board of Directors. Accordingly,
if no choice is specified, proxies will be voted "FOR" Proposals 1,
2, 3, and 4 set forth in the accompanying forms of proxy.
In addition to the election of directors, shareholders may vote
"FOR", "AGAINST", or "ABSTAIN" from voting for Proposals 2, 3, and 4.
Abstentions and broker non-votes (matters of a non-routine nature for
which brokers holding shares in street name have received no
instructions from their clients and, accordingly, do not vote) on
Proposal 2 will have the effect of a negative vote since approval of
the Plan of Recapitalization requires the affirmative vote of holders
of a majority of the outstanding shares. Abstentions and broker non-
votes are counted for purpose of determining the presence or absence
of a quorum for the transaction of business. The Board of Directors
encourages shareholders to exercise their right to vote rather than
abstaining from voting. It is necessary that proxies be signed,
dated, and returned for all such shares to be voted at the Annual
Meeting.
Each shareholder who executes the enclosed proxy may revoke it at
any time prior to the Annual Meeting by delivering written notice to
the Secretary of the Company or may if in attendance at the Meeting,
after giving notice of revocation of such proxy to the Secretary,
vote in person.
EXPENSES OF SOLICITATION
------------------------
The cost of soliciting proxies will be borne by the Company.
These costs include those incurred in connection with the preparation
and mailing of this Proxy Statement and related documents and any
documents that may hereafter be provided as a supplement. The Company
will supply proxies and Proxy Statements to brokers, fiduciaries,
nominees, and custodians requesting such for distribution to
beneficial owners and will reimburse such brokers, fiduciaries,
nominees, and custodians their costs of distribution. The cost of
soliciting proxies, including legal expenses and expenses incurred in
connection with the preparation of this Proxy Statement, is estimated
at $12,500.
The Company's directors, officers, employees, and advisors, none of
whom are employed for this purpose, may solicit proxies, without
remuneration therefor, by mail, telephone, telegraph, or personal
interview.
SECURITY OWNERSHIP OF MANAGEMENT
-------------------------------
The following table sets out, as of March 12, 1998, the names of,
and number of shares beneficially owned by, persons known to the
Company to own more than 5% of the Company's Common Stock, and such
of its directors and executive officers (including nominees to the
Board of Directors), and all directors and officers as a group. As
of that date there were 30,270,352 shares of Common Stock issued and
outstanding and an additional 2,532,970 shares deemed outstanding.
<TABLE>
<CAPTION>
Name of Owner Shares beneficially owned Percent of
----------------------- -------------------------- -----------
<S> <C> <C>
James A. Fish (F1),(F2) 236,814 0.7%
Neal A. Degerstrom (F1),(F3) 7,335,609 22.4%
Karl E. Elers (F1) 0 0.0%
Fred R. Schmid (F4) 3,372,092 9.2%
Laurence Steinbaum (F1),(F5) 447,856 1.4%
Robinson Bosworth III (F1),(F6) 534,351 1.6%
Tim Babcock (F1) 0 0.0%
Frank Duval (F7) 100 0.0%
Hobart Teneff (F8) 2,700,322 8.2%
Hanson Industries (F9) 1,837,189 5.6%
All directors and executive officers
as a group (6 persons) (F10) 8,554,730 26.1%
<FN>
<F1> Director of the Company.
<F2> Mr. Fish is Chairman, President, and Chief Executive Officer of
the Company. The shares attributed to Mr. Fish include 103,000
shares acquired pursuant to the securities purchase agreement
described in footnote 3, below. Such shares are also attributed to
Neal A. Degerstrom in the foregoing table.
<F3> The forgoing table attributes to Mr. Degerstrom all of the
shares of the Company purchased by Mr. Degerstrom and his permitted
assigns pursuant to the securities purchase agreement between the
Company and Mr. Degerstrom dated as of June 1, 1995, as amended.
Although all shares purchased by Mr. Degerstrom and his assigns are
shown in the table above as beneficially owned by Mr. Degerstrom, a
Schedule 13D dated June 20, 1995, as amended through the date of the
report, filed by Mr. Degerstrom and others states that 2,663,200 such
shares were registered in Mr. Degerstrom's or his company's own name
as of the date of the report, representing approximately 12.8% of the
common stock deemed outstanding at such date. The Schedule 13D filed
by Mr. Degerstrom and his permitted assigns also states that none of
the persons identified as reporting persons in the Schedule 13D
controls the voting or disposition of any shares of common stock of
the Company other than those owned by each such person, and on this
basis Mr. Degerstrom disclaims beneficial ownership of the shares
owned by his assigns. On March 17, 1997, the Board of Directors
granted Mr. Degerstrom three-year options to purchase up to 2,312,970
shares of common stock as consideration for his guaranty of certain
obligations in connection with the Company's agreement to acquire
Easton-Pacific and Riverside Mining Company ("Easton-Pacific"). Mr.
Degerstrom subsequently assigned 1,541,978 of the options to two non-
affiliates of the Company, each of whom agreed to severally guaranty
one third of the amount Mr. Degerstrom pays pursuant to his guaranty
with the Company. The options are exercisable by Mr. Degerstrom and
the non-affiliate co-guarantors at the price of $1.25 per share.
After giving effect to Mr. Degerstrom's 470,990 remaining options for
shares of common stock, the 300,000 shares he acquired by partially
exercising the option and the 564,620 shares he and his company
acquired in exchange for Easton Pacific shares, the number of shares
of common stock of the Company beneficially owned by Mr. Degerstrom
at March 12, 1998 was 3,998,810 shares, or approximately 12.2% of the
common stock deemed outstanding.
<F4> Includes 425,000 shares issuable to Mr. Schmid and his son,
Stephen, pursuant to the Company's 1995 Stock Plan. In addition,
members of Mr. Schmid's family beneficially own an additional
2,489,136 shares, which, when combined with Mr. Schmid's
shareholdings, represent approximately 9.2% of the outstanding common
stock as of March 12, 1998. Mr. Schmid disclaims beneficial ownership
of the shares owned by members of his family.
<F5> Includes 125,000 shares issuable pursuant to presently
exercisable options granted under the Company's 1995 Stock Plan and
5,000 shares owned beneficially and of record by Mr. Steinbaum's
spouse.
<F6> Includes 73,938 shares owned by Mr. Bosworth's spouse and
134,433 shares owned by the Robinson Bosworth Jr. Family Trust.
<F7> Frank D. Duval has not been elected to office as an executive
officer or director of the Company, but by virtue of his activities
in the name and on behalf of the Company may be deemed to be an
affiliate of the Company.
<F8> Includes options to acquire 470,990 shares assigned by Mr.
Degerstrom to Mr. Teneff and 671,000 shares acquired pursuant to the
securities purchase agreement between the Company and Mr. Degerstrom.
See footnote 3 above.
<F9> Includes options to acquire 470,990 shares assigned by Mr.
Degerstrom to Hanson Industries, Inc. and 671,000 shares acquired
pursuant to the securities purchase agreement between the Company and
Mr. Degerstrom and 166,200 shares beneficially owned by Raymond A.
Hanson, the President of Hanson Industries. See footnote 3 above.
<F10> See foot notes 2,3, 5, and 6 above.
</FN>
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES
---------------------------------
The Board of Directors held one regular and two special meetings in
1997, while the audit committee and compensation committee each held
one meeting. No incumbent director attended fewer than 75% of the
board meetings and committee meetings on which he served during the
periods for which he served.
Present members of the Company's compensation committee are Mr. Tim
Babcock and Mr. Laurence Steinbaum. The compensation committee is
charged with the responsibility of administering and interpreting the
Company's stock option plan; it also recommends to the Board the
compensation of employee-directors, approves the compensation of
other executives and recommends policies dealing with compensation
and personnel engagements. Present members of the Company's audit
committee are Karl E. Elers, James A. Fish, and Robinson Bosworth
III. The audit committee reviews, in conjunction with the independent
auditors, the general scope of audit coverage. Such review includes
consideration of the Company's accounting practices, procedures and
system of internal accounting controls. The audit committee also
recommends to the Board the appointment of the Company's independent
auditors engaged by the Company. The Company has no standing
nominating committee, the functions customarily attributable to such
committee being performed by the Board of Directors as a whole.
There are no arrangements or understandings with any directors
pursuant to which a director has been elected nor are there any
family relationships among any directors or executive officers.
COMPLIANCE WITH SECTION 16 (A) FILING REQUIREMENTS
--------------------------------------------------
To the Company's knowledge, the following persons failed to file
timely reports with respect to reportable transactions during the
year ended December 31, 1997, as required by Section 16 (a) of the
Exchange Act:
Reporting Person Reports filed late Number of Transactions
------------------ ------------------ ---------------------
Neal A. Degerstrom From 4 1
Karl E. Elers Form 4 1
Executive Compensation
---------------------
SUMMARY COMPENSATION TABLE. The following table discloses
compensation received by the Company's current and former president
and chief executive officer for the years ended December 31, 1997,
1996, and 1995. No other executive officer's salary and bonus
exceeded $100,000 in any of these years.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------- -----------------------------------------------
Other Dollar Value Securities All Other
Executive Annual of Restricted Underlying LTIP Compen-
Officer Year Salary Bonus Compensation Stock Awards Options/SARS Payouts sation
- ------------- ---- ------ ----- ------------ ------------ ------------ ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
JAMES A. FISH 1997 $90,000<F1>$ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
President and 1996 90,000 $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Chief Executive 1995 - 0 - $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Officer
FRED R. SCHMID 1997 $- 0 - $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Former President 1996 - 0 - 90,000<F2> $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
and Chief Execu- 1995 137,435 $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
tive Officer
___________________
<FN>
<F1> Mr. Fish succeeded Mr. Fred R. Schmid as president and chief executive
officer of the Company effective March of 1996. Mr. Fish's annual salary is
payable each month in the form of $3,750 in cash and $3,750 in restricted shares
of common stock based on 60% of the average of the "closing" market prices of
the common stock as reported on the NASDAQ SmallCap Market during the preceding
calendar month.
<F2> Consists of compensation paid to Mr. Schmid pursuant to the terms of a
consulting agreement entered into in March of 1996. Such agreement terminated
effective December 31, 1996.
</FN>
</TABLE>
OVERALL COMPENSATION POLICY. Salary compensation of the
Company's executive officers is determined by the Board of
Directors and by a compensation committee of the Board, which is
responsible for considering specific information and making
recommendations to the full Board. The compensation committee is
comprised of two outside directors appointed annually by the
Company's Board of Directors and presently comprises Mr. Babcock
and Mr. Steinbaum. In considering and recommending executive
compensation, the compensation committee reviews factors such as
individual executive compensation, corporate performance, stock
price appreciation and the total return to stockholders. The
committee also takes into consideration, executive compensation
levels within a peer group of publicly-held North American gold-
mining companies and, at least historically, the views of the
Company's chief executive officer. Where appropriate, the
compensation committee also considers other performance measures,
such as increase in market share, safety, environmental
awareness, and improvements in relations with the Company's
stockholders, employees, the public, and government regulators.
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 stockholder interests through stock option plans,
and to provide a compensation package that recognizes an
executive's individual results and contributions to the Company's
overall business objectives.
SALARY. The key elements of the Company's executive compensation
consists of salary and incentive stock options. The compensation
committee of the board recommends 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 market for executive
talent, the latter of which provides a comparison of salaries for
comparable positions at other gold mining companies. The salary
levels of the chief executive officer and other executive
officers of the Company for the following calendar year are
generally set by the Board of Directors at its annual meeting or
at a later special meeting. Specific individual performance and
overall corporate or business segment performance are reviewed in
determining the compensation level of each individual officer.
In evaluating the performance and setting the compensation of the
chief executive officer and the other executive officers of the
Company, the compensation committee and Board of Directors have
traditionally maintained salary compensation at levels below
those of other companies within the Company's peer group; in
order to compensate for these lower salaries, the chief executive
officer and other executive officers of the Company have
historically been granted performance incentives in the form of
incentive stock options.
CASH BONUSES. From time to time, the Board of Directors and the
compensation committee may approve cash bonuses to executives and
key employees, based on outstanding achievement in the
performance of their respective duties. During 1994 the
compensation committee recommended to the Board, and the board
authorized and approved, the payment to Fred R. Schmid of a cash
bonus of $150,000 for his services in raising the initial working
capital and completing the 1993 public financing for the Company.
No cash bonuses were awarded in 1997.
STOCK OPTIONS. The Company currently maintains one stock option
plan, the 1995 Stock Plan. The Plan provides for the issuance of
incentive stock options intended to qualify under Section 422A of
the Internal Revenue Code of 1986, as amended ("the Code"), and
non-qualified options under the Code. Key individuals of the
Company including officers and directors who are also employees,
are eligible to receive grants of options under the Plan. All
options are exercisable at prices equivalent to the mean of the
high and low sales prices of the common stock, as reported by the
Nasdaq SmallCap Market as of the date of grant. As of the date
of this report, options for 920,000 shares of common stock had
been granted, and options for 3,080,000 additional shares were
available for grant, under the 1995 Stock Plan. 250,000 of such
options had been issued to Fred R. Schmid; these options are
exercisable by Mr. Schmid at the price of $1.60 per share through
the end of the year 2000. No other named executive officer has
been granted an option pursuant to the 1995 Stock Plan as of the
date of this report.
The Company's 1995 Stock Plan is jointly administered by the
compensation committee and the Board. The primary function of the
compensation committee is to review and evaluate the fairness of
the recommendations of management concerning proposed grants of
options to directors and executive officers of the Company. The
primary function of the Board in such matters is to consider the
recommendations of the compensation committee and to authorize
proposed grants of options to such persons.
Stockholder approval of the 1995 Stock Plan was obtained at the
1996 special meeting of shareholders for the purposes of
qualifying the Plan pursuant to Rule 16b-3 promulgated under the
Securities Exchange Act of 1934 (the "Exchange Act").
OPTIONS GRANTED IN 1997. Options totaling 120,000 shares of
common stock were granted to three key employees during the year
ended December 31, 1997. The options are exercisable at $0.37 per
share through 2008.
OPTIONS EXERCISES AND OPTION VALUES. No options were exercised
during the year ended December 31, 1997 by any named executive
officer or director of the Company. At December 31, 1997 Nasdaq's
quoted closing price for the Company's common stock was lower
than the option exercise price for 800,000 of the shares for
which options were granted.
- ----------------------------------------------------------------
PROPOSAL 1 - ELECTION
OF DIRECTORS
- -----------------------------------------------------------------
The Company's Board of Directors consists of six members all of
whom have been nominated for election at the Annual Meeting. The
names, ages, business experience, and positions of these
director/nominees are set out below. All directors serve until
the next annual meeting of the Company's stockholders or until
their successors are elected and qualified. Executive officers of
the Company are appointed by the Board of Directors.
Unless authority to vote for election of directors (or for one
or all nominees) is withheld in the manner provided in the
accompanying proxies, the votes represented by such proxies will
be cast for the election of the nominees set forth herein, or for
one or more substitute nominees recommended by the Board of
Directors in the event that, by reason of contingencies not
presently known to the Board of Directors, one or all nominees
should be withdrawn for election. The affirmative vote of a
majority of the votes cast at the Annual Meeting by shareholders
present in person or by proxy, is required for the election of
such directors.
Name Age Position
--------------------- ---- -------------------------
James A. Fish 67 Chairman, President, and
CEO
Neal A. Degerstrom 73 Director
Tim Babcock 78 Director
Karl E. Elers 59 Director
Laurence Steinbaum 74 Director
Robinson Bosworth III 56 Director
JAMES A. FISH. Mr. Fish was appointed a director of the Company
in September of 1995, President in March of 1996, and Chairman
and Chief Executive Officer in May of 1996. He is also Vice
President and General Counsel for N. A. Degerstrom, Inc.,
positions he has held since September of 1987. Prior to that, he
was in private law practice with the firm of Winston & Cashatt in
Spokane from 1980 through 1987, and at the firm of Fish, Schultz
& Tombari from 1962 through 1980. Mr. Fish was employed as
superintendent at S&F Construction from 1955 through 1962. He
received a Bachelor of Arts degree in geology from Berea College
in Kentucky in 1952 and a law degree from Gonzaga University
School of Law in 1962.
NEAL A. DEGERSTROM. Mr. Degerstrom was appointed a director of
the Company in September of 1995. He is President of N. A.
Degerstrom, Inc., Spokane, Washington, a privately-held company
which has been engaged in railroad, heavy highway, bridge and dam
construction, large open pit mining, and worldwide mineral
exploration since 1904, and prior to that was the managing
partner of N. A. Degerstrom Company, the predecessor in interest
to N. A. Degerstrom, Inc. Mr. Degerstrom has been a member of
the Advisory Board of the College of Engineering at Washington
State University, president of the Spokane Chapter of Associated
General Contractors, a member of the Society of Explosives
Engineers and the Society of Mining Engineers, and a trustee of
the Northwest Mining Association. He received a Civil
Engineering degree from Washington State University in 1949.
ROBINSON BOSWORTH III. Mr. Bosworth has been a director of the
Company since September 1997. He is also Managing Director and
Advisory Director of Robert W Baird & Company, Inc. and has been
the Head of the IMS Department for the same since 1971. Robert W.
Baird & Co., Inc., is registered as an investment adviser under
the Investment Advisers Act of 1940. Established in 1971, Baird
Investment Management Services is a separate department of Baird
providing portfolio management services on a fee basis to clients
with substantial assets. Baird is an 80%-owned, indirect
subsidiary of Northwestern Mutual Life Insurance Company (NML).
Prior to 1971 Mr. Bosworth worked as a security analyst for
Standard & Poor's Corporation and for Stein Roe & Farnham. He
graduated cum laude with a Bachelors of Arts degree in Economics
from Amhurst College in 1963 and with highest honors and an MBA
from Amos Tuck School of Business Administration at Darthmouth in
1967.
KARL E. ELERS. Mr. Elers was appointed a director of the Company
in September 1997 to fill a vacancy created by the resignation of
Pierre Gousseland. Mr. Elers is also chairman of the board of
directors of Battle Mountain Gold Company, a position he has held
since 1990. He has been affiliated with Battle Mountain since
1987, and has served in a number of capacities, including
president and chief executive officer. From 1985 to 1988, Mr.
Elers was managing director of Western Ag-Minerals, and from 1962
to 1985 served in various capacities with Duval Corporation. He
is currently a director of the National Mining Association and
the SME Foundation of A.I.M.E. , and serves on the International
Committee on Metals and the Environment and a number of
international relations and civic boards. Mr. Elers is also a
member of the American Institute of Mining, Metallurgical and
Petroleum Engineers, and the Canadian Institute of Mining. In
1994 he was awarded the Order of Simon Bolivar by the President
of the Republic of Bolivia for services to that nation.
TIM BABCOCK. Mr. Babcock was appointed a director of the company
in September 1997 to fill a vacancy created by the resignation of
Fred Owsley. Since 1986 Mr. Babcock has owned and operated a
consulting firm providing consulting services to the mining
industry, and from 1970 to 1980 he owned Capital City Television,
Mineral Resources Development, and January Mining Company. From
1970 to 1974, Mr. Babcock served as Senior Executive Vice
President of Occidental International Corporation, which was
engaged primarily in the petroleum business world wide, and from
1960 to 1969, served as Governor of the State of Montana.
LAURENCE STEINBAUM. Mr. Steinbaum has been a director of the
Company since December of 1994. From October 1990 through
December 1994, he was co-chairman of the Company's Board of
Advisors. Since 1986 he has been a private financier and
owner/investor of several businesses, including restaurants, real
estate, and oil and gas producing companies. Between 1960 and
1985, he was Executive Director of the Sommerset Hills School, a
private school located in New Jersey for handicapped children,
which he owns. From 1975 to 1980, he owned a major dredging
company in Florida. He graduated from New York University in 1951
receiving a Bachelor of Science degree and completed courses
toward a Masters Degree at New York University's School of Social
Sciences.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 1 TO ELECT THE NOMINEES TO THE BOARD.
- -----------------------------------------------------------------
PROPOSAL 2 - TO CONSIDER
AND APPROVE
A PLAN OF RECAPITALIZATION
- -----------------------------------------------------------------
At the Annual Meeting the shareholders will be asked to
consider and approve a plan of recapitalization (the
"Recapitalization Plan") in which each issued and outstanding
share of Common Stock would be exchanged in a tax-free
transaction for one-fourth share of Common Stock of the same par
value. Important information concerning the Recapitalization Plan
is set forth below.
PLAN OF RECAPITALIZATION. The Company has authorized capital
stock of 50,000,000 shares, consisting of 48,000,000 shares of
Common Stock ($0.0001 par value) and 2,000,000 shares of
preferred stock ($0.001 par value) ("Preferred Stock"). As of
March 12, 1998, the number of issued and outstanding shares of
Common Stock was 30,270,352; no Preferred Stock was outstanding.
Based upon the Company's best estimates, the number of issued and
outstanding shares of Common Stock will be reduced from
30,270,352 to approximately 7,600,000 as a result of the
Recapitalization Plan.
After the effective date of the recapitalization (the
"Effective Date"), each share of the Common Stock issued and
outstanding immediately prior thereto (the "Old Common Stock"),
will be reclassified as and changed into one fourth of a share of
the Company's Common Stock, par value $0.0001 (the "New Common
Stock"), subject to the treatment of fractional share interests
as described below. No share certificates representing the New
Common Stock will be issued to holders of Old Common Stock unless
and until such certificates are surrendered to Company's transfer
agent for transfer.
From and after the Effective Date, certificates representing
the Old Common Stock shall represent their corresponding
proportionate number of recapitalized shares of Common Stock
outstanding, subject to treatment of fractional interests as
described below.
No certificates representing fractional share interests will be
issued. In lieu of any such fractional share interest, each
holder of Old Common Stock, who would otherwise be entitled to
receive a fractional share of New Common Stock, will be entitled
to receive one whole share of Common Stock for such fractional
interest. See Appendix A - Plan of Recapitalization.
PURPOSE AND EFFECTS OF THE RECAPITALIZATION PLAN. The
principal purpose of the Recapitalization Plan is to increase the
marketability of the Company's Common Stock by increasing the
trading price of Common Stock to levels more acceptable to
investors and in keeping with Nasdaq guide lines. The Board of
Directors believes that to achieve the Company's objectives it is
essential that the Common Stock of the Company has better
marketability and trades at a higher price. Under new criteria
implemented by Nasdaq and approved by the SEC, all Nasdaq
SmallCap Market tier companies are required to maintain a minimum
bid price of $1.00 per share after February 23, 1998. The Company
has been notified by Nasdaq that it is deemed to be non-compliant
for having failed to maintain a bid price of $1.00 for its
shares. If the Company is to regain compliance the bid price for
its stock must, within 90 days from February 23, 1998, trade at
or above $1.00 for 10 consecutive days. At the record date the
minimum bid price for the Company's Stock was $0.50 per share.
The Recapitalization Plan will not alter the number of
authorized shares of Common Stock, currently 48,000,000 shares.
Proportionate voting rights and other rights of stockholders will
not be altered by the Recapitalization Plan. Fractional interests
after the Effective Date will be rounded up to the next whole
number. Shareholders owning fewer than four shares will receive
one share of Common Stock after the Effective Date. The Company
believes that there will be no material federal tax consequences
to stockholders as a result of the Recapitalization Plan.
The Board believes that a decrease in the number of shares of
Common Stock outstanding, without any material alteration of the
proportionate economic interest in the Company represented by
individual shareholdings, may increase the trading price of such
shares to a price that would allow the Company to maintain its
listing on the Nasdaq SmallCap Market, although no assurance can
be given that the market price of the Common Stock will rise in
proportion to the reduction in the number of outstanding shares
resulting from the recapitalization or that it will remain at
such level.
Additionally, the Board believes that the current per share
price of the Company's Common Stock limits the effective
marketability of the Common Stock because of the reluctance of
many brokerage firms and institutional investors to recommend
lower-priced stocks to their clients or to hold them in their own
portfolios. Certain policies and practices of the securities
industry tend to discourage individual brokers within those firms
from dealing in lower-priced stocks. Some of those policies and
practices involve time-consuming procedures that make the
handling of lower-priced stocks economically unattractive. The
brokerage commission on a sale of lower-priced stock usually
represents a higher percentage of the sale price than the
brokerage commission on a higher-priced issue. Any reduction in
brokerage commissions resulting from a recapitalization may be
offset, however, in whole or in part, by increased brokerage
commissions required to be paid by stockholders selling "odd
lots" created by adoption of the Recapitalization Plan.
The par value of the Common Stock will remain at $0.0001
following the recapitalization, and the number of shares of
Common Stock outstanding will be reduced. As a consequence, the
aggregate par value of the outstanding Common Stock will be
reduced, while the aggregate capital in excess of par value
attributable to the outstanding Common Stock for statutory and
accounting purposes will be correspondingly increased. The
exercise price of outstanding stock options would be adjusted
accordingly upon the effectiveness of the Recapitalization.
FEDERAL INCOME TAX CONSEQUENCES OF THE PROPOSED
RECAPITALIZATION PLAN. The following discussion describes certain
federal income tax consequences of the adoption of the
Recapitalization Plan to stockholders of the Company who are
citizens or residents of the United States, and who are not
dealers with respect to the Common Stock. The actual consequences
for each stockholder will be governed by the specific facts and
circumstances pertaining to his acquisition and ownership of the
Common Stock. Thus the Company makes no representations or
warranties concerning the tax consequences for any of its
stockholders and recommends that each stockholder consult with
his tax advisor concerning the tax consequences (including
federal, state, local and foreign income or other tax
consequences) of the recapitalization. The Company has not sought
and will not seek an opinion of counsel or a ruling from the
Internal Revenue Service regarding the federal income tax
consequences of the recapitalization. However, the Company
believes that the Recapitalization Plan is considered a
"recapitalization" for purposes of Section 368(a)(1)(E) of the
Code, which should have the following federal income tax
consequences for the stockholders and the Company:
1. A stockholder will not recognize gain or loss with respect
to the New Common Stock. The adjusted basis and holding period of
the shares of New Common Stock will be the same as the adjusted
basis and holding period of the Old Common Stock.
2. The Company will not recognize any gain or loss as a result
of the recapitalization.
VOTE REQUIRED FOR APPROVAL. The affirmative vote of the holders
of a majority of the issued and outstanding Common Stock entitled
to vote at the Annual Meeting, is required to approve this
proposal. Consequently, any shares not voted (whether by
abstention or broker non-votes) have the same effect as votes
against Proposal 2. Unless otherwise instructed the proxies will
be voted "FOR" approval of the proposal.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 2.
- -----------------------------------------------------------------
PROPOSAL 3 - TO CONSIDER
AND APPROVE AN AMENDMENT
TO THE COMPANY'S 1995 STOCK PLAN
- -----------------------------------------------------------------
At the Annual Meeting the shareholders will be asked to
consider and approve an amendment to the Company's 1995 Stock
Plan (the "Plan") to remove limitations on the aggregate number
of options that may be granted to directors. Important
information concerning the Plan and the proposed amendment is set
forth below.
GENERAL. The Plan was adopted by the Board of Directors on May
17, 1995 and provides for the issuance of incentive stock options
intended to qualify under Section 422A of the Code, and options
that are not qualified under the Code.
Key individuals, including officers and directors who are also
employees, are eligible to receive grants of options under the
Plan. All options are exercisable at prices equivalent to the
mean of the high and low sales prices of the Common Stock, as
reported by the Nasdaq SmallCap Market as of the date of grant.
The Plan is jointly administered by the compensation committee of
the Board of Directors, presently comprised of directors
Steinbaum and Babcock, and by the Board of Directors. The primary
function of the committee is to review and evaluate the fairness
of the recommendations of the compensation committee and to
authorize proposed grants of options to such persons. Stockholder
approval of the Plan was obtained at the 1996 special meeting of
shareholders for the purpose of qualifying the Plan pursuant to
Rule 16b-3 promulgated under the Exchange Act.
The Plan authorizes the grant of options for the purchase of up
to 4,000,000 shares of Common Stock, of which no more than
800,000 can be granted to directors of the Company and no more
than 250,000 can be granted to any one individual. As of the date
of this Proxy Statement, options for 920,000 shares of Common
Stock had been granted, and options for 3,080,000 additional
shares were available for grant under the Plan; all 800,000
options authorized for grant to the directors had been granted as
of 1995, when the Plan was first adopted.
THE PROPOSED AMENDMENT. The proposed amendment to the Plan
eliminates the limitation on the number of options that may be
granted to directors of the Company, and the limitation on the
number of options that may be granted to any one individual,
thereby making additional options available for grant.
Specifically, Section 4.1 of the Plan is amended to read in its
entirety as follows:
"Number: The total number of shares of Stock
subject to issuance under the Plan shall not exceed
4,000,000 (1,000,000 shares if the recapitalization
proposal specified in Item 2 of this Proxy Statement is
approved). The shares to be delivered under the Plan may
consist, in whole or in part, of authorized but unissued
Stock or treasury Stock not reserved for any other
purpose. The number of shares of Stock referred to herein
shall be subject to adjustment upon occurrence of any of
the events indicated in Subsection 4.5."
The proposed amendment does not increase the overall number of
options that may be granted under the Plan. That number remains
at 4,000,000 (1,000,000 if the recapitalization proposal
discussed elsewhere in the Proxy Statement is approved).
THE PURPOSE OF THE PROPOSED AMENDMENT. The purpose of the
proposed amendment is to give the compensation committee and the
Board of Directors the means and flexibility to grant options to
key individuals, including directors, whose contributions to the
success of the Company merit reward. This is especially
necessary, in the Board's judgement, now that the Company has
consolidated its holdings in the Virginia City Mining District
and is moving forward with additional exploration and other work
with a view toward eventually putting the holdings into
production. Like other junior mining companies, the Company
historically has not had the cash resources to compensate its
directors, executive officers and key employees at levels
commensurate with their experience and contributions, as a
consequence of which it has had to rely on equity-based
compensation, such as options, to attract and retain these
people.
The Company has particularly relied on equity-based
compensation in the case of its directors, none of whom are
otherwise compensated for their services as directors. Of the six
directors who currently serve the Company, only one was also a
director in 1995 when all of the 800,000 options available under
the Plan for grant to directors were granted. None of the five
directors who have held office since 1995 have been granted any
options under the Plan, and none can be granted options unless
and until the limitations contained in the Plan are removed by
the proposed amendment. As of the date of this Proxy Statement,
neither the compensation committee nor the Board of Directors
have determined which directors will be granted options or in
what amount.
EFFECT OF THE RECAPITALIZATION PROPOSAL. If the plan of
recapitalization specified in Item 2 of this Proxy Statement is
approved, options that have been granted under the Plan and that
remain available for future grant will be reduced by a factor of
75%. For example, the number of options authorized under the Plan
will be reduced from 4,000,000 to 1,000,000, the number of
options granted will be reduced from 920,000 to 230,000 and the
number of options available for grant will be reduced from
3,080,000 to 770,000.
Approval of this Item 3 to amend the Plan is not conditioned on
the approval of the recapitalization proposal set forth as Item
2.
The Board of Directors recommends a vote FOR adoption of
amendments to the 1995 Stock Plan in Proposal 3.
- -----------------------------------------------------------------
PROPOSAL 4 - RATIFICATION
OF INDEPENDENT AUDITOR
- -----------------------------------------------------------------
The firm of BDO Seidman, LLP, independent certified public
accountants, has been selected by the Board of Directors to serve
as the independent auditor of the Company for the year ended
December 31, 1998 and any interim period. The firm is experienced
in auditing and advising public companies and has served as the
Company's auditor since 1996. Representatives of the firm of BDO
Seidman, LLP will be present at the Annual Meeting to respond to
questions of the shareholders.
Ratification by the Company's shareholders of the independent
auditor is not required under the Delaware General Corporation
Law. The Board of Directors believes that the selection of an
auditor is an important matter, however, and that the Company's
shareholders are entitled to approve or disapprove the Board's
choice of auditor through ratification. The affirmative vote of
the holders of a majority of the issued and outstanding shares of
Common Stock present at the Annual Meeting, in person or by
proxy, is required to ratify the selection of an auditor. If the
Board of Directors' selection is not ratified, the Board will
determine whether the auditor should be replaced.
The Board of Directors recommends a vote FOR the
ratification of BDO Seidman, LLP as the Company's independent
Auditor.
- -----------------------------------------------------------------
CONCLUSION
- -----------------------------------------------------------------
It is important that proxies be returned promptly. Shareholders
are asked to vote, sign, date, and promptly return the proxy in
the enclosed self-addressed envelope.
The Board of Directors knows of no other matters, which may be
presented for shareholder action at the Annual Meeting. If other
matters do properly come before the Meeting, the persons named in
the proxies will use their discretion to vote according to their
best judgement.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ James A. Fish
------------------------
James A. Fish, President
<PAGE>
APPENDIX A
PLAN OF RECAPITALIZATION
OF
HANOVER GOLD COMPANY, INC.
This Plan of Recapitalization (the "Plan") of Hanover Gold
Company, Inc. (the "Company") is made and entered into effective
as of May ____, 1998 (the "Effective Date").
RECITALS:
A. The board of directors of the Company have considered the
importance of maintaining an active secondary
market for the Company's common stock and, in particular, the
likely effect on such market of newly-imposed maintenance and
listing standards. The board of directors, deeming it advisable
and in the best interests of the Company and its shareholders to
do so, voted on March 2, 1998 to adopt a plan of
recapitalization, the effect of which would be to reduce the
number of issued and outstanding shares of the Company's common
stock and thereby increase the price per share of the common
stock so as to meet such newly-imposed maintenance standards.
B. The shareholders of the Company, at the annual meeting of
shareholders held on May ____, 1998, considered
and approved the Plan.
NOW, THEREFORE, it is hereby agreed as follows:
1. AUTOMATIC CONVERSION OF SHARES. As of the Effective Date,
each share of common stock of the Company,
par value $.0.0001 per share, outstanding immediately prior to
the Effective Date (the "Old Common Stock"), shall automatically
and without any action on the part of the holder thereof be
reclassified and changed into one-fourth share of common stock of
the same par value (the "New Common Stock"), subject to the
treatment of fractional share interests, as described in section
2 below. Each holder of a certificate or certificates
representing Old Common Stock (the "Old Certificates") shall be
entitled to receive, upon the surrender of such certificates to
the Company's transfer agent, a new certificate or certificates
for the number of shares of New Common Stock into which and for
which the shares of Old Common Stock are converted (the "New
Certificates") under the terms of this Plan. Even if not so
surrendered, from and after the Effective Date, Old Certificates
shall represent the number of shares of New Common Stock into
which and for which the shares of Old Common Stock are converted
under the terms of this Plan. The shares of New Common Stock
issued pursuant to the Plan shall be duly authorized, validly
existing and non-assessable.
2. FRACTIONAL SHARES. The Company shall not issue fractional
shares of New Common Stock as part of this
Plan. Rather, in lieu of any fraction of a share of New Common
Stock to which a holder of Old Common Stock would otherwise be
entitled under the terms of this Plan, the holder shall receive
one whole share of New Common Stock. If more than one Old
Certificate shall be surrendered at any time for the account of
the same shareholder, the number of whole shares of New Common
Stock for which New Certificates shall be issued shall be
determined on the basis of the aggregate number of shares
represented by the Old Certificates so surrendered. In the event
the Company's transfer agent determines, based upon its records,
that a holder of Old Certificates has not surrendered all of his
or her certificates, the transfer agent shall carry forward on
its records any fractional shares of Old Common Stock owned by
such holder until such time as all of such holder's Old
Certificates have been surrendered for exchange.
3. ACCOUNTING TREATMENT. The capital accounts of the Company
shall be adjusted as of the Effective Date to
transfer from capital to surplus an amount necessary to reflect
the decrease in the aggregate par value of the issued and
outstanding shares of New Common Stock.
4. ADDITIONAL MATTERS. The proper officers of the Company are
hereby authorized and empowered to execute
such other and further documents and instruments as they or
counsel to the Company deem necessary or advisable to carry out
the purpose and effect of this Plan.
DATED as of the date first above written.
HANOVER GOLD COMPANY, INC.,
A Delaware corporation
____________________________
James A. Fish, its president
<PAGE>
- -----------------------------------------------------------------
PROXY
- -----------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
OF HANOVER GOLD COMPANY, INC.
MAY 5, 1998
- -----------
The undersigned hereby constitutes and appoints James A. Fish and
Laurence Steinbaum, and each of them, the undersigned's attorney-
in-fact and proxy to vote all of the shares of common stock of
Hanover Gold Company, Inc. ("Hanover") owned of record by the
undersigned on March 12, 1998 at the annual meeting of
shareholders of Hanover to be held on May 5, 1998 or any
adjournment(s) or postponement(s) thereof.
UNLESS OTHERWISE INDICATED, THE SHARES OF COMMON STOCK OWNED BY
THE UNDERSIGNED WILL BE VOTED FOR ELECTION OF THE DIRECTOR-
NOMINEES (ITEM 1) AND FOR APPROVAL OF ITEMS 2, 3 AND 4.
ITEM 1. ELECTION OF DIRECTORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
With respect to the election of the following director-nominees:
James A. Fish Neal A. Degerstrom Karl E. Elers
Laurence Steinbaum Robinson Bosworth III Tim Babcock
NOTE: To withhold authority to vote for a particular director-
nominee(s), strike a line through such director-nominee(s) name.
ITEM 2. PLAN OF RECAPITALIZATION
[ ] FOR [ ] AGAINST [ ] ABSTAIN
ITEM 3. AMENDMENT TO THE COMPANY'S 1995 STOCK PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
ITEM 4. RATIFICATION OF AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Ratification of BDO Seidman, LLP as Hanover's independent auditor
for the year ending December 31, 1998 and any interim period.
DATED: ____________, 1998 ______________________________
Signature of Shareholder
______________________________
Additional Signature, if Jointly Owned
This proxy is solicited on behalf of the board of directors.
You may revoke or change your proxy at any time before it is
exercised at the annual meeting. To do this, send a written
notice of revocation or another signed proxy bearing a later date
to the secretary of the Company at its principal executive
office. You may also revoke your proxy by giving notice and
voting in person at the annual meeting.
