2
<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:
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<PAGE>
- ----------------------------------------------------------------
HANOVER GOLD COMPANY, INC.
- ----------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 27, 1999
TO: THE SHAREHOLDERS OF HANOVER GOLD COMPANY, INC.:
The 1999 annual meeting of shareholders of HANOVER GOLD COMPANY
INC. (the "Company") will be held at North 3303 Sullivan Road,
Spokane, Washington, on Thursday, May 27, 1999, at 2:00 P.M.,
(PDT), for the following purposes:
(1) To elect four 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 the Company's 1998 Equity Incentive
Plan;
(3) To ratify the selection of BDO Seidman, LLP as the Company's
independent auditor for the year ended December 31, 1999 and any
interim period, and
(4) 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 31, 1999
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.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Raymond A. Hanson
----------------------------
Raymond A. Hanson, President
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. Your
proxy is revocable, either in writing or by voting in person at
the Annual Meeting, at any time prior to its exercise.
<PAGE>
DEFINITIVE COPY
- ------------------------------------------------------------------
HANOVER GOLD COMPANY, INC.
- ------------------------------------------------------------------
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 27, 1999
This proxy statement ("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 Thursday, May 27, 1999 at
2:00 P.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 19, 1999. The principal
executive offices of the Company are located at 15102 E. Indiana
Ave., Spokane, WA 99216-1814.
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 31, 1999 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 31, 1999, there were outstanding 9,653,533 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 4,826,767 votes at the Annual
Meeting will constitute a quorum for the transaction of business.
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, and 3 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 and 3.
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 $10,500.
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 forth as of March 1, 1999 the names
of, and number of shares beneficially owned by, persons known to
the Company to own more than five percent (5%) of the Company's
common stock; the names of, and number of shares beneficially
owned by each director and executive officer of the Company; and
the number of shares beneficially owned by all directors and
executive officers as a group. At such date, the number of
shares of common stock of the Company outstanding was 9,353,533
shares and an additional 3,472,398 shares were deemed
outstanding.
<TABLE>
<CAPTION>
Ownership (all direct
Amount and Nature of Beneficial
Name of Owner unless otherwise noted) Percent of (Class)
- ------------- ---------------------- -----------------
<S> <C> <C>
Raymond A. Hanson (1) 1,734,112 13.52%
James A. Fish (2), (3) 96,306 0.75%
Neal A. Degerstrom (2), (4) 3,534,421 27.55%
Karl E. Elers (2), (5) 417,500 3.25%
Fred R. Schmid (6) 747,929 5.83%
Robinson Bosworth III (2), (7) 437,331 3.41%
Tim Babcock (2), (8) 104,450 0.81%
Frank Duval (9) 0 0.00%
Hobart Teneff (10) 1,761,563 13.73%
All directors and executive officers
as a group (6 persons) (11) 8,833,612 68.85%
</TABLE>
- -------------
Mr. Laurence Steinbaum was a director of the Company from 1994
until he resigned February 1999. Mr. William S. Neal was Vice-
President of Exploration until his position was eliminated by the
Company February 1999.
(1) Mr. Hanson is President and Chief Executive Officer of the
Company. The shares attributed to Mr. Hanson include 969,814
shares owned by Hanson Industries, Inc. (167,750 of which were
acquired pursuant to the securities purchase agreement described
in footnote 4 below), 500,000 shares issuable to Hanson
Industries, Inc. pursuant to currently exercisable options
granted in connection with the purchase of shares, 117,748 shares
of common stock issuable pursuant to a partial assignment of the
Degerstrom guaranty in connection with the Company's agreement to
acquire Easton-Pacific, and 55,000 shares issuable pursuant to
currently exercisable options granted in lieu of compensation and
rent for the period October 1, 1998 through December 31, 1998.
(2) Director of the Company.
(3) Mr. Fish is Vice President of the Company. The shares
attributed to Mr. Fish include 27,000 shares (108,000 shares pre
recapitalization) acquired pursuant to the securities purchase
agreement described in footnote 4, below. Such shares are also
attributed to Neal A. Degerstrom in the foregoing table. Also
includes 58,020 shares issuable pursuant to currently exercisable
options of common stock granted to replace the compensation Mr.
Fish tendered back to the Company in the form of 19,668 shares of
common stock and the right to receive 38,352 shares of common
stock for services rendered between January 1, 1998 through
September 31, 1998.
(4) 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 (665,800 post
recapitalization) were registered in Mr. Degerstrom's or his
company's 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 (578,243 shares post recapitalization) of common stock as
consideration for his guaranty of certain obligations in
connection with the Company's agreement to acquire Easton-
Pacific. Mr. Degerstrom subsequently assigned 1,541,978 of the
options (385,495 post recapitalization) to two then non-
affiliates of the Company, each of whom agreed to severally
guarantee one third of the amount Mr. Degerstrom paid pursuant to
his guaranty with the Company. The options were exercisable by
Mr. Degerstrom and the then non-affiliate co-guarantors at the
price of $1.25 per share ($5.00 / share post recapitalization).
After giving effect to Mr. Degerstrom's remaining options for
470,990 shares of common stock (117,748 shares post
recapitalization), the 300,000 shares (75,000 shares post
recapitalization) he acquired by partially exercising the option,
the 564,620 shares (141,155 shares post recapitalization) he and
his company acquired in exchange for Easton Pacific shares, the
options for 500,000 shares he was granted in connection with
certain of his purchases and the 193,067 shares and options for
386,134 shares his company received for drilling services, the
number of shares of common stock of the Company beneficially
owned by Mr. Degerstrom at March 1, 1998 was 2,700,221 shares, or
approximately 21.5% of the common stock deemed outstanding.
(5) All are shares issuable pursuant to presently exercisable
options granted under the Company's 1995 Stock Option Plan.
(6) Includes 106,250 shares issuable to Mr. Schmid and his son,
Stephen, pursuant to the Company's 1995 Stock Option Plan. In
addition, members of Mr. Schmid's family beneficially own an
additional 527,189 shares, which, when combined with Mr. Schmid's
shareholdings, represent approximately 6% of the outstanding
common stock as of March 1, 1999. Mr. Schmid disclaims
beneficial ownership of the shares owned by members of his
family.
(7) Includes 18,485 shares owned by Mr. Bosworth's spouse,
33,609 shares owned by the Bosworth Jr. Family Trust, and 104,450
shares issuable pursuant to presently exercisable options granted
under the Company's 1995 Stock Option Plan.
(8) All are shares issuable pursuant to presently exercisable
options granted under the Company's 1995 Stock Option Plan.
(9) 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.
(10) Includes options to acquire 117,748 shares of common stock
pursuant to an assignment by Mr. Degerstrom to Mr. Teneff of one
third of the option that was granted to Mr. Degerstrom by the
Company's Board of Directors as consideration in connection with
the Easton-Pacific transaction. Also includes 167,750 shares
acquired pursuant to the securities purchase agreement between
the Company and Mr. Degerstrom, 20,000 shares owned by General
Equipment Company, and 500,000 shares issuable pursuant to
currently exercisable options granted in connection with the
purchase of shares. See footnote 4 above.
(11) See foot notes 1, 3, 4, 5, 7, and 8 above.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND EXECUTIVE OFFICERS; OTHER KEY INDIVIDUALS. The
names, ages, business experience (for at least the past five
years) and positions of the directors, executive officers and
other key individuals of the Company as of March 1, 1998 are set
out below. The Company's board of directors consists of five
members. 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. Mr. Degerstrom and Mr. Fish were each
appointed to the board of directors in September of 1995 and Mr.
Fish was elected President of the Company in March of 1996, all
pursuant to the terms of a securities purchase agreement between
the Company and Mr. Degerstrom. Mr. Fish resigned his position as
President October 1, 1998 and was appointed Vice President.
Name Age Position
----- ---- -------
Raymond A. Hanson 76 President, CEO
Karl E. Elers 60 Chairman, Director
James A. Fish 68 Vice President, Director
Neal A. Degerstrom 74 Director
Tim Babcock 79 Director
Robinson Bosworth III 57 Director
Frank D. Duval (1) 63 Chief Operating Officer (de facto)
Wayne Schoonmaker (2) 62 Secretary, Treasurer
- ------------------------------
(1) Mr. Duval has not been elected an executive officer of the
Company, but may be deemed to be an executive officer by virtue
of his activities on behalf of the Company.
(2) Mr. Schoonmaker is not an executive officer of the Company.
BIOGRAPHIES OF DIRECTORS, EXECUTIVE OFFICERS, AND KEY
INDIVIDUALS.
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. March 30, 1998 Mr.
Fish resigned as Chairman and October 1, 1998 as President and
CEO. He was appointed Vice President October 1, 1998 and 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 and
served in the Navy from 1952 to 1955. 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., (Baird) is registered as an investment
adviser under the Investment Advisers Act of 1940. Established
in 1971, Baird Investment Management Services (Baird IMS) 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 and Chairman of the Board March 31, 1998. He
is also a director of Niugini Mining Ltd. and Chairman of Crown
Butte Resources Ltd. In 1987 he joined Battle Mountain Gold as
Executive Vice President, a position he held until he was
appointed President in 1988. Mr. Elers served as President of
Battle Mountain Gold from 1988 until 1997, CEO from 1990 until
1992, and Chairman from 1990 to present. From 1985 to 1988 he
worked for Western Ag-Minerals as Managing Director. He worked
for Pennzoil Sulphor Co. as Senior Vice President of Operations
in 1985 and for Duval Corporation from 1962 to 1985. Mr. Elers
is a director of the National Mining Association, the
International Committee on Metals and the Environment, and the
SME Foundation of A.I.M.E. He previously served on the board of
directors of the Fertilizer Institute, the Northwest Mining
Association, and was Chairman of the Western Governor's Mining
Advisory Council, and President of the New Mexico Mining
Association. He currently serves on a number of international
relations and civic boards; and is a member of the American
Institute of Mining, Metallurgical and Petroleum Engineers, and
the Canadian Institute of Mining. He was awarded the Order of
Simon Bolivar by the President of the Republic of Bolivia for
services to that nation.
RAYMOND A. HANSON. Mr. Hanson was appointed President and CEO
October 1, 1998. Mr. Hanson is also President of Hanson
Industries, Inc. a privately held company that engages in the
manufacture of fertilizer, the development of commercial real
estate and mining. Prior to the formation of Hanson Industries,
Inc. in 1995, Mr. Hanson served as President of R. A. Hanson
Company, Inc., a corporation with world wide distribution that he
founded in 1946 to develop and manufacture farm equipment and
construction machinery used in mining and canal building. Mr.
Hanson has been Chairman of the Engineering Advisory Board at
Washington State University and President and Chairman of the
Board for the Washington State International Trade Fair. He is
currently a member of the American Concrete Institute; the
Society of Mining Engineers; Washington State District Export
Council; Mountain States Legal Foundation Board of Directors;
University of Idaho College of Mines & Earth Resources Advisory
Board; Washington State Governors Key Business Leaders Advisory
Board; Spokane International Airport Governing Board and
University of Idaho Alumni Hall of Fame. In 1985 Mr. Hanson
received an honorary Doctorate of Engineering Science from the
University of Idaho.
TIM BABCOCK. Mr. Babcock was appointed a director of the company
in September 1997. Since 1986 he has owned and operated a
consulting firm providing consulting services to the mining
industry. From 1970 to 1980 he owned Capital City Television,
Mineral Resources Development, and January Mining Company. In
1969 he was appointed a member of the Committee on Oceans and
Atmosphere by President Nixon. He served as Senior Executive
Vice President of Occidental International Corporation from 1970
to 1974. Mr. Babcock served as Governor of the State of Montana
from 1960 to 1969. He was awarded the Bronze Star for Valor in
action during WWII and three Battle Stars.
FRANK D. DUVAL. Mr. Duval presently serves in an ex officio
capacity as acting Chief Operating Officer of the Company and
exercises responsibility with respect to the Company's day-to-day
operations. He is also presently the president and a director of
Midnite Mines, Inc., based in Spokane, Washington. From 1974
until his resignation in 1987, Mr. Duval served in various
capacities as a director or executive officer of Pegasus Gold
Inc., a major North American mining company, which he founded.
He is also a co-founder of Montana Reserves Company, a privately-
held mining company which, until operations were curtailed in
1995, was a joint venture partner with Noranda Minerals Corp. in
a large copper and silver project located in Sanders and Lincoln
counties, Montana. Mr. Duval has been engaged in the mining
business in various capacities for over 30 years.
In 1991, Star Phoenix Mining Company, an Idaho corporation with
which Mr. Duval was affiliated as its president, a director and a
significant shareholder, filed for protection from creditors
under federal bankruptcy law following the termination by Hecla
Mining Company of a lease and option agreement between Star
Phoenix and Hecla covering mining properties in the Coeur d'Alene
Mining District that Star Phoenix was then operating. Star
Phoenix subsequently brought suit against Hecla in Shoshone
County, Idaho District Court for breach of the lease and option
agreement, and in 1994 obtained a $20 million judgement against
Hecla. Hecla appealed the decision to the Idaho Supreme Court and
in May 1996 the Supreme Court overturned the lower courts ruling.
Mr. Duval was one of several guarantors of Star Phoenix's
indebtedness. The Supreme Court's reversal of the District
Court's award of damages lead Mr. Duval to seek protection under
chapter 7 of the federal bankruptcy law in October 1997.
WAYNE SCHOONMAKER. Mr. Schoonmaker was appointed Secretary,
Treasurer, and Principal Accounting Officer of the Company
effective as of January of 1996, succeeding Stephen J. Schmid.
From 1981 until 1993, he was Financial Manager of the Northwest
Mining Department of ASARCO, and from 1978 until 1981 was Chief
Accountant at ASARCO's Troy Unit in Montana, where he was
responsible for the installation and implementation of the
accounting system for the start-up Troy mine. From July of 1978
through December of 1978, Mr. Schoonmaker was Assistant Treasurer
of the Bunker Hill Company, and from 1964 to 1978, was Assistant
Corporate Secretary of Hecla Mining Company. Mr. Schoonmaker
received a Bachelor of Science degree in Accounting from the
University of Montana in 1962 and MBA from the University of
Idaho in 1987. He is a Certified Public Accountant in Idaho and
Montana.
SECTION 16(A) REPORTING OBLIGATIONS. Section 16(a) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
requires the Company's directors and executive officers, and
persons who own more than 10% of a registered class of the
Company's equity securities, to file initial reports of ownership
and reports of changes in ownership with the Securities and
Exchange Commission (the "Commission"). Such persons are
required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based solely on its review of copies of reports made pursuant
to Section 16(a) of the Exchange Act and related regulations, the
Company believes that during the year ended December 31, 1998,
Mr. Laurence Steinbaum, who resigned as a director February 20,
1999, failed to file a report on Form 4 and Form 5.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As previously reported, on March 17, 1997, Neal A. Degerstrom,
who is affiliated with Hanover, guaranteed the payment of
Hanover's obligations to the landowner-lessors of its mining
claims and leases through September 7, 1998, up to the aggregate
amount of $2,891,210. As consideration for the guaranty, Hanover
granted Mr. Degerstrom three-year options to purchase up to
2,312,970 shares of Hanover's common stock at an exercise price
of $1.25 per share (578,244 shares at $5.00 per share post
recapitalization). Effective April 29, 1997, Mr. Degerstrom
assigned two-thirds of these options equally to Mr. Hobart Teneff
and Hanson Industries, Inc. each of whom, as of the date of this
report, beneficially own more than 10% of the Company's deemed
outstanding shares of common stock. Mr. Teneff and Hanson
Industries, Inc. individually undertook to severally guarantee
payment to Mr. Degerstrom of one-third of the amount Mr.
Degerstrom paid to the Company during the term of his guarantee.
The guaranty was given by Mr. Degerstrom, in connection with the
reorganization agreement, dated as of April 30, 1997, between
Hanover and Easton Pacific. As of December 31, 1998, $1,125,000
had been paid pursuant to the guaranty and options exercised for
225,000 shares (post recapitalization).
During 1998 N. A. Degerstrom, Inc., an affiliated company of
Mr. Degerstrom's, conducted exploration drilling as part of the
Company's exploration program at Virginia City. N. A. Degerstrom,
Inc. was partially compensated for its services with 193,067
shares of stock valued at $0.525 per share and a five year option
for 386,134 shares of stock exercisable at a price of $0.50 per
share. The shares were calculated by averaging the closing prices
for the Company's stock for each entire month during which
drilling was conducted and then averaging the monthly averages.
N. A. Degerstrom, Inc. also received $60,961 in cash. At March 1,
1999 a balance of $43,922 is due on the contract.
October 1, 1998 the Company commenced renting office space from
Hanson Industries, Inc. an affiliated company of the Company's
President, Raymond A. Hanson. Annual rent is $10,000 payable with
options for 20,000 shares of common stock. The options are for
five years and exercisable at a price of $0.50 per share.
BOARD OF DIRECTORS AND COMMITTEES
The Board of Directors held one regular and three special
meetings in 1998, while the audit committee and compensation
committee each held one meeting. No incumbent director attended
fewer than 75% of the meetings of the Board or committee on which
he served.
Present members of the Company's compensation committee are Mr.
Tim Babcock and Mr. Karl Elers. Mr. Laurence Steinbaum served on
the compensation committee during 1998 and until February 1999
when he resigned as a director and was replaced on the committee
by Mr. Elers. 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, 1998, as required by Section
16 (a) of the Exchange Act:
Reporting Person Delinquent Filing Number of Transactions
------------- ------------- -------------------
Laurence Steinbaum Form 4 1
Laurence Steinbaum Form 5 1
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE. The following table discloses
compensation received by the Company's current and former
presidents and chief executive officers for the years ended
December 31, 1998, 1997, and 1996. 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>
RAYMOND A. HANSON 1998 $22,500<F1> $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
President, CEO
JAMES A. FISH 1998 $67,500<F2> $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Former President 1997 90,000 $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
and CEO 1996 90,000 $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
FRED R. SCHMID 1998 $ - 0 - $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
Former President 1997 - 0 - $ -0- $ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
1996 - 0 - 90,000<F3>$ -0- $ - 0 - $ - 0 - $ - 0 - $ - 0 -
- ----------------------------------
<FN>
<FN1> Mr. Hanson succeeded Mr. Fish as President and Chief Executive Officer
of the Company effective October 1, 1998. Mr. Hanson's salary for the period
commencing October 1, 1998 to December 31, 1998 is payable in the form of a
five-year option for 50,000 shares of common stock, exercisable at $0.50 per
share. Mr. Hanson's annual salary is $90,000 payable in five-year options for
200,000 shares exercisable at $0.50 per share.
<FN2> 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 was
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. Mr. Fish has tendered the 19,668 shares of
common stock he received for compensation in 1997 and has forgone receiving
the shares he was entitled to receive for compensation in 1998 and in lieu
thereof has been granted a five year option for 58,020 shares of common stock
at $0.0001 per share. October 1, 1998 Mr. Fish resigned his position as
President and Chief Executive Officer and was succeeded by Raymond A. Hanson.
<FN3> Consists of compensation paid to Mr. Schmid pursuant to the terms of a
consulting agreement entered into in March of 1996. The 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. Elers. 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
employees and determines 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 1998.
STOCK OPTIONS. The Company currently maintains two stock option plans,
the 1995 Stock Option Plan and the 1998 Equity Incentive Plan. The 1998
Equity Incentive Plan is subject to shareholder approval at the Annual
Meeting of the shareholders and will replace the 1995 Stock Option Plan
upon such approval. Both plans provide 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 options that do not
qualify under the Code. Key individuals of the Company, including
officers, directors, employees, and consultants, are eligible to
receive grants of options under the plans. All of the options under the
1995 plan 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 or a national exchange as of the date of grant - 110%
of such sales prices in the case of incentive stock options granted to
any person owning more than 10% of the total combined voting power of
all classes of the Company's stock. If the Company's stock is not
trading on Nasdaq or a national securities exchange then the Board of
Directors shall determine exercise prices in accordance with Sec. 422
of the Code. Under the 1998 Equity Incentive Plan non-qualified stock
options may be granted at no less than 85% of fair market value as
defined under the plan. No options have been granted under the 1998
Equity Incentive Plan during 1998 except the option granted to the
Company's President, Raymond A. Hanson for the services rendered from
October 1, 1998 through December 31, 1998. Options for all 1 million
shares available under the 1995 Stock Option Plan have been granted.
62,500 of these options have been issued to Fred R. Schmid; the options
are exercisable by Mr. Schmid at the price of $6.40 per share through
the end of the year 2000. Options for 125,000 shares exercisable at
$2.25 per share and 292,500 shares exercisable at $0.375 per share have
been granted to Karl Elers; the options will expire in 2008. William S.
Neal has been granted options for 12,500 shares exercisable at $1.50
per share and 29,300 shares exercisable at $0.375 per share. As a
result of his employment having been terminated, the date Mr. Neal's
options will expire has been accelerated to June 11, 1999. Forfeited
Options under the 1995 Stock Option Plan may be reissued under the
provisions of the 1998 Equity Incentive Plan. The Equity Incentive Plan
is administered by the compensation committee of the Board of
Directors. The committee's function is to determine those persons
entitled to receive an award based on their contributions to the
Company or on their ability to contribute to the long term growth and
financial success of the Company. The committee also determines the
type of an award, the amount of an award, and its terms. Shares subject
to grants which expire or otherwise terminate will again become
available for granting.
OPTIONS GRANTED IN 1998. The following table provides information on
options granted under the 1995 Stock Plan during the year ended
December 31, 1998, to the named executive officers of the Company.
<TABLE>
<CAPTION>
Number Percent of Option
Of Securities Total Options Exercise
Underlying Granted to Price
Options Employees and Per Expiration
Executive Officer Granted <F1> Directors in 1998 Share<F2> Date
- -----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Karl E. Elers 125,000 2.25 03/31/2008
Chairman 292,500 54% 0.375 10/11/2008
William S. Neal 29,300 3.8% 0.375 10/11/2008(F1)
Vice President
of Exploration
- ----------------------------------------------------
<FN>
<FN1> Options for the purchase of 770,000 shares of common stock
authorized pursuant to the Company's 1995 Stock Option Plan, -- 70,300
of which are intended to qualify under Section 422 of the Code --, were
granted to four directors and three key employees during the year ended
December 31, 1998. Mr. Elers options for 125,000 shares of common stock
became fully vested three months from the date of grant. The options
for 292,500 shares vest ratably over three years commencing three
months from their date of grant. All of Mr. Neal's options became fully
vested three months from the date of grant. However, because of his
termination, unless Mr. Neal exercises his options by June 1999, the
options will expire and become available for reissuance under the
Company's 1998 Equity Incentive Plan, subject to the Plan being
approved by the shareholders of the Company.
<FN2> Fair market value at date of grant.
</FN>
</TABLE>
OPTIONS GRANTED IN 1998. The following table provides information on
options granted under the 1998 Equity Incentive Plan during the year
ended December 31, 1998, to the named executive officers of the
Company.
<TABLE>
<CAPTION>
Number of Percent of
Securities Total Options Option
Underlying Granted to Exercise
Options Employees and Price Per Expiration
Executive Officer Granted Directors in 1998 Share Date
- ---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Raymond A. Hanson 50,000 100 0.50 12/31/2003
Chief Executive
Officer, President
</TABLE>
OPTIONS EXERCISED AND OPTION VALUES. No options were exercised during
the year ended December 31, 1998 by any named executive officer of the
Company. At December 31, 1998 the OTC-Bulletin Board's quoted closing
price for the Company's common stock was lower than the option exercise
price for all of the shares for which options were granted.
- -----------------------------------------------------------------------
PROPOSAL 1 - ELECTION
OF DIRECTORS
- -----------------------------------------------------------------------
The Company's Board of Directors consists of five members, four 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 68 Vice President, Director
Neal A. Degerstrom 74 Director
Tim Babcock 79 Director
Karl E. Elers 60 Chairman, Director
BIOGRAPHIES OF THE NOMINEES ARE SET FORTH IN THE SECTION OF THIS PROXY
STATEMENT ENTITLED DIRECTORS AND EXECUTIVE OFFICERS.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR
PROPOSAL 1 TO ELECT THE NOMINEES TO THE BOARD.
- -----------------------------------------------------------------------
PROPOSAL 2 - TO CONSIDER
AND APPROVE
THE COMPANY'S 1998
EQUITY INCENTIVE PLAN
- -----------------------------------------------------------------------
At the Annual Meeting the shareholders will be asked to consider and
approve the Company's 1998 Equity Incentive Plan (the "Plan") which was
adopted by the Company's Board on December 1, 1998. A description of
certain features of the Plan summarized below is qualified in its
entirety by reference to the Plan attached hereto as Schedule "A".
THE PLAN.
GENERAL. Under the Plan, the Company may grant "incentive stock
options", options that do not qualify as incentive stock options under
the Internal Revenue Code, as amended ("the Code"), and shares of
common stock (unless otherwise noted hereinafter, collectively referred
to as "options"). Key individuals of the Company and its subsidiaries
(including the Company's employees, directors, executive officers,
advisers and consultants) are eligible to receive grants of options.
The Plan authorizes the grant of options for the purchase of up to
2,000,000 shares of common stock of which no more than 25% may be
granted to any one individual. In addition, shares subject to
outstanding options which are subject to forfeiture under the Company's
1995 Stock Option Plan shall upon such forfeiture become available for
re-issuance under and subject to the terms and conditions of the Plan.
The Board has terminated the 1995 Stock Option Plan conditioned upon
the effectiveness of shareholder approval of the Plan at the Annual
Meeting. The number of options for which the 1995 Plan was approved
have all been granted.
The Plan is administered by a committee of not less than two members
of the Board (the "Committee"), each of whom is a "Non-Employee
Director" as defined in Rule 16b-3 under the Securities Exchange Act of
1934, as amended, and an "outside director" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended. The
Committee determines those directors, officers and employees of, and
advisors and consultants to the Company who have contributed or are in
a position to contribute to the Company's growth and financial success,
and are deserving of receiving options under the Plan. The Committee
also determines the type, amount and terms of the options to be
granted.
PURPOSE OF THE PLAN. The purpose of the Plan is to attract, retain,
and motivate officers and other employees of and consultants and
advisors to the Company by providing an opportunity to acquire or
increase an equity interest in the Company. 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, 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.
EXERCISE PRICE. The exercise price of common stock for which an
option is granted shall be determined by the Committee but such
exercise price shall, in the case of an incentive stock option granted
under the Plan, not be less than fair market value (110% of fair market
value in the case of an incentive stock option granted to any person
who owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company or any subsidiary). Non-
qualified options granted under the Plan may be exercised at a price
equal to not less than 85% of the fair market value of the shares at
the date of grant. "Fair Market Value" as of any specified date, is
defined by the Plan to mean the closing price of the Company's common
stock reported by the exchange on which the Company's stock is traded
on the date of grant or if no trades are reported on that date, on the
last preceding date on which prices of the common stock are reported.
If the Company's common stock is not traded on an exchange, but is
traded over-the-counter ("OTC"), the Fair Market Value means the
average between the reported high and low sales prices for the common
stock on the most recent date on which common stock was publicly
traded. If the common stock is not being traded on an exchange or OTC
and Fair Market Value cannot be determined then the Committee acting in
good faith and in accordance with Section 422 of the Code shall
determine Fair Market Value.
DURATION OF OPTIONS. An option has a duration of up to ten (10) years
from the time that it is granted, except that an incentive stock option
granted to a stockholder who owns stock possessing more than 10% of the
total combined voting power of all classes of the Company's stock shall
have a duration of up to five (5) years from the time it is granted.
The Plan provides that each option granted shall be exercisable at such
times and be subject to such restrictions and conditions as the
Committee shall determine. Such restrictions and conditions may vary
between participants. An option may be immediately exercisable or
exercisable within a shortened period of time upon the occurrence of
certain events, including termination, disability, and death of the
optionee. No option may be transferred other than at death to a
designated beneficiary, or by the laws of descent and distribution.
COMMON STOCK. The Committee may grant common stock under the Plan to
eligible participants in such amounts as are consistent with the
limitations of the Plan, and which, in exercising its discretion, it
deems appropriate. Each grant of common stock shall be made pursuant to
a written agreement which shall contain the terms and any restrictions
as the Committee may determine in its discretion.
ADJUSTMENTS FOR CHANGES IN CONTROL. In the event of a change in
control of the Company (as defined in the Plan), the Committee may take
such action and make such adjustments with respect to the options as it
deems appropriate including, but not limited to, the right to
accelerate the exercisability of options.
AMENDMENTS. The Plan may be terminated or amended from time to time
by the Committee, provided, however, that the Committee may not,
without the approval of the shareholders, increase the total amount of
stock that may be issued under the Plan, except in the case of a change
in capitalization as defined in the Plan. No amendment may impair the
rights of a grantee under any stock option granted under the Plan
without the grantee's consent.
DURATION OF PLAN. The Plan will remain in effect, subject to the
Committee's right to earlier terminate the Plan, until all of the stock
subject to the Plan has been purchased or acquired or until November
30, 2008. A termination of the Plan will have no effect on outstanding
grants.
FEDERAL INCOME TAX ASPECTS. The following discussion is a general
summary of the material federal income tax consequences to participants
in the Plan. The discussion is based on the "Code", regulations
thereunder, rulings and decisions now in effect, all of which are
subject to change. The summary does not discuss all aspects of federal
taxation that may be relevant to a particular participant in light of
the participant's personal investment circumstances. Also, state and
local income taxes are not discussed and may vary from locality to
locality.
NON QUALIFIED STOCK OPTIONS. Recipients of non qualified stock
options granted under the Plan will not have a taxable event upon the
grant of such options, but normally will recognize compensation taxable
at ordinary income rates upon the exercise of such options to the
extent that the fair market value of the shares of common stock on the
date of the exercise of such options exceeds the option exercise price
paid. Subject to Section 162(m) of the Code, discussed below, the
Company will be entitled to a tax deduction in an amount equal to the
amount that the participant is required to include in ordinary income
at the time of such inclusion and will be required to withhold taxes on
such ordinary income. The participant's initial tax basis for shares of
common stock acquired upon the exercise of a non qualified stock option
will be the option exercise price paid plus the amount of ordinary
income recognized by the participant.
INCENTIVE STOCK OPTIONS. Recipients of incentive stock options
granted under the Plan will not have taxable income upon either the
grant of an incentive stock option or its exercise. Upon the sale or
other taxable disposition of shares of common stock, long-term capital
gain will normally be recognized in the full amount of the difference
between the amount realized and the option exercise price if no
disposition of shares has taken place within either (a) two years from
the date of grant of the incentive stock option or (b) one year from
the date of transfer of such shares of common stock to the participant
upon exercise. If shares of common stock acquired upon the exercise of
an incentive stock option are sold or otherwise disposed of before the
end of the one-year or two-year periods referenced above, the
difference between the option exercise price and the fair market value
of the shares of common stock on the date of the option's exercise will
be taxed as ordinary income; the balance of the gain, if any, will be
taxed as capital gain. If shares of common stock acquired upon the
exercise of an incentive stock option are disposed of before the
expiration of the one-year or two-year periods referenced above and the
amount realized is less than the fair market value of the shares at the
date of exercise, the participant's ordinary income is limited to the
excess, if any, of the amount realized less the option exercise price
paid. Subject to Section 162(m) of the Code, discussed below, the
Company will be entitled to a tax deduction in regard to an incentive
stock option only to the extent the participant has ordinary income
upon sale or other disposition of the shares of common stock.
The difference between the fair market value of common stock on the
exercise date and the exercise price of an incentive stock option is
deemed to be an item of adjustment for purposes of the alternative
minimum tax rules of the Code. The consequences of the application of
these provisions to individual participants may vary depending on their
particular circumstances.
SECTION 162(M). Section 162(m) of the Code places limits on
deductibility for income tax purposes of compensation paid to certain
executive officers of the Company. The Company is only allowed to
deduct up to a maximum of one million dollars annually for non-
performance-based compensation paid to each of its five highest paid
executives whose annual compensation during the year (including gains
upon the exercise of incentive stock options) exceeded $1,000,000 (the
"named executive officers"). Options granted below market value, and
restricted stock will not be considered performance based under Section
162(m).
ACCOUNTING. The Company has elected to be governed by Accounting
Principles Board Opinion No. 25, so that there is no earnings charge in
connection with the grant or exercise of at-market stock options
granted under the Plan. Effective for 1996, the financial Accounting
Standards Board Statement No. 123 requires companies to show in a
footnote to their annual financial statements, the pro-forma affect
that option grants would have had on earnings if the "value" of the
stock options granted that year were treated as compensation expense.
See note 7 of the "Notes to Financial Statements" in the Company's 1998
annual report to the shareholders. Restricted stock grants under the
Plan would, however, involve an earnings charge.
EFFECT ON PRIOR PLANS. The Plan shall be effective on the date of its
adoption by the Board of Directors upon approval by the shareholders at
the Annual Meeting. The Board has terminated the 1995 Stock Option Plan
as to future grants conditioned upon stockholder approval of the Plan
at the Annual Meeting. Subject to shareholder approval of the Plan,
shares subject to outstanding options and which are forfeited under the
Company's 1995 Stock Option Plan may be reissued under and subject to
the terms and conditions of the Plan.
NEW PLAN BENEFITS. Subject to shareholder approval of the Company's
Plan, Mr. Hanson will receive options for 50,000 shares of common stock
as compensation valued at $22,500 for the period October 1, 1998
through December 31, 1998 and options for 50,000 shares as compensation
valued at $22,500 for the period January 1, 1999 through March 31,
1999. It is intended that Mr. Hanson be compensated each quarter
thereafter the same as above for so long as he serves as President and
Chief Executive Officer of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ADOPTION OF THE 1998
EQUITY INCENTIVE PLAN.
VOTE AND RECOMMENDATIONS. Approval of the adoption of the 1998 Equity
Incentive Plan will require the affirmative vote of the holders of a
majority of the shares of common stock represented and voting in person
or by proxy at the Annual Meeting. Abstentions as to this Proposal 2
will be treated as votes against Proposal 2. Broker non-votes, however,
will be treated as unvoted for purposes of determining approval of
Proposal 2 and will not be counted as votes for or against Proposal 2.
Properly executed, unrevoked Proxies will be voted FOR Proposal 2
unless a vote against Proposal 2 or abstention is specifically
indicated in the Proxy.
- -----------------------------------------------------------------------
PROPOSAL 3 - 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,
1999 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
- -----------------------------------------------------------------------
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no other matters which may come before the Annual
Meeting. However, if any matters other than those referred to herein
should be presented properly for consideration and action at the Annual
Meeting, or any adjournment or postponement thereof, the proxies will
be voted with respect thereto in accordance with the best judgement and
in the discretion of the proxy holders.
Please sign the enclosed proxy and return it in the enclosed return
envelope.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Raymond A. Hanson
------------------------
Raymond A. Hanson, President
<PAGE>
SCHEDULE "A"
1998
Equity Incentive Plan
SECTION 1. PURPOSE
Hanover Gold Company, Inc., in order to attract and retain able
persons and to provide its employees, directors, officers, and
other individuals or entities with additional incentive and
reward opportunities, designed to enhance the profitable growth
of the Corporation over the long term, hereby adopts this 1998
Equity Incentive Plan. The Plan provides for granting of Common
Stock, Incentive Stock Options, Non-Qualified Stock Options, or
any combination thereof.
SECTION 2. DEFINITIONS
For purposes of the Plan the following terms shall have the
following meanings unless specified otherwise by any other
section:
(a) AWARD means, individually or collectively, any Option
granted pursuant to the Plan.
(b) BOARD means the board of directors of the Corporation.
(c) CHANGE OF CONTROL VALUE means the amount determined in
Clause (i), (ii) or (iii), whichever is applicable, as
follows: (i) the per share price offered to stockholders of
the Corporation in any merger, consolidation, sale of assets
or dissolution transaction, (ii) the price per share offered
to stockholders of the Corporation in any tender offer or
exchange offer whereby a Corporate Change takes place or
(iii) if a Corporate Change occurs other than as described
in Clause (i) or Clause (ii), the fair market value per
share determined by the Committee as of the date determined
by the Committee to be the date of cancellation and
surrender of an Option. If the consideration offered to
stockholders of the Corporation in any transaction described
in this Paragraph or Paragraphs (c) and (d) of 8 consists
of anything other than cash, the Committee shall determine
the fair cash equivalent of the portion of the consideration
offered which is other than cash.
(d) CODE means the Internal Revenue Code of 1986, as amended.
Reference in the Plan to any Section of the Code shall be deemed
to include any amendments or successor provisions to such Section
and any regulations under such Section.
(e) COMMITTEE means the committee referred to in 4.
(f) COMMON STOCK means the common stock of the Corporation.
(g) CORPORATION means Hanover Gold Company, Inc.
(h) CORPORATE CHANGE means one of the following events: (i) the
merger, consolidation or other reorganization of the Corporation
in which the outstanding Common Stock is converted into or
exchanged for a different class of securities of the Corporation,
a class of securities of any other issuer (excluding a
Subsidiary), cash or other property, other than (a) a merger,
consolidation or reorganization of the Corporation which would
result in the voting stock of the Corporation outstanding
immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the
ownership of any trustee or other fiduciary holding securities
under an employee benefit plan of the Corporation, at least sixty
percent (60%) of the combined voting power of the voting stock of
the Corporation or such surviving entity outstanding immediately
after such merger, consolidation or reorganization of the
Corporation, or (b) a merger, consolidation or reorganization of
the Corporation effected to implement a recapitalization of the
Corporation (or similar transaction) in which no person acquires
more than forty-nine percent (49%) of the combined voting power
of the Corporation's then outstanding stock; (ii) the sale, lease
or exchange of all or substantially all of the assets of the
Corporation to any other corporation or entity (except to a
Subsidiary); (iii) the adoption by the stockholders of the
Corporation of a plan of liquidation and dissolution; (iv) the
acquisition (other than an acquisition pursuant to any other
clause of this definition) by any person or entity, including
without limitation a "group" as contemplated by 13(d)(3) of the
Exchange Act, of beneficial ownership, as contemplated by such
Section, of more than twenty-five percent (25%) based on voting
power) of the Corporation's outstanding capital stock or
acquisition by a person or entity who currently has beneficial
ownership which increases such person's or entity's beneficial
ownership to fifty percent (50%) or more based on voting power)
of the Corporation's outstanding capital stock; or (v) as a
result of or in connection with a contested election of
directors, the persons who were directors of the Corporation
before such election shall cease to constitute a majority of the
Board. Notwithstanding the provisions of clause (iv) above, a
Corporate Change shall not be considered to have occurred upon
the acquisition (other than an acquisition pursuant to any other
clause of the preceding sentence) by any person or entity,
including without limitation a "group" as contemplated by
13(d)(3) of the Exchange Act, of beneficial ownership, as
contemplated by such Section, of more than twenty-five percent
(25%) based on voting power) of the Corporation's outstanding
capital stock or the requisite percentage to increase their
ownership to fifty percent (50%) resulting from a public offering
of securities of the Corporation under the Securities Act of
1933, as amended.
(i) EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended.
(j) FAIR MARKET VALUE means, as of any specified date, the
closing price of the Common Stock on the NASDAQ (or, if the
Common Stock is not listed on such exchange, such other national
securities exchange on which the Common Stock is then listed) on
that date, or if no prices are reported on that date, on the last
preceding date on which such prices of the Common Stock are so
reported. If the Common Stock is not then listed on any national
securities exchange but is traded over the counter at the time
determination of its Fair Market Value is required to be made
hereunder, its Fair Market Value shall be deemed to be equal to
the average between the reported high and low sales prices of
Common Stock on the most recent date on which Common Stock was
publicly traded. If the Common Stock is not publicly traded at
the time a determination of its value is required to be made
hereunder, the determination of its Fair Market Value shall be
made by the Committee in such manner as it deems appropriate
(such determination will be made in good-faith as required by
422(c)(1) of the Code and may be based on the advice of an
independent investment banker or appraiser recognized to be an
expert in making such valuations).
(k) GRANT means individually or collectively, any Common Stock
granted pursuant to the Plan.
(1) GRANTEE means an employee, director, officer, other
individual or entity who has been granted Common Stock
pursuant to the Plan.
(m) HOLDER means an individual or entity who has been granted an
Award.
(n) INCENTIVE STOCK OPTION means an Option within the meaning of
422 of the Code.
(o) NON-QUALIFIED STOCK OPTION means a stock option which does
not constitute an Incentive Stock Option.
(p) OPTION means an Award granted under 7 of the Plan and
includes both Incentive Stock Options and Non-Qualified
Stock Options.
(q) OPTION AGREEMENT means a written agreement between the
Corporation and an Holder with respect to an Option.
(r) PLAN means the Hanover Gold Company, Inc. 1998 Equity
Incentive Plan.
(s) RULE 16B-3 means Rule 16b-3 of the General Rules and
Regulations of the Securities and Exchange Commission under the
Exchange Act, as such rule is currently in effect or as hereafter
modified or amended.
(t) SUBSIDIARY means a company (whether a corporation,
partnership, joint venture or other form of entity) in which the
Corporation, or a corporation in which the Corporation owns a
majority of the shares of capital stock, directly or indirectly,
owns an equity interest of fifty percent (50%) or more, except
solely with respect to the issuance of Incentive Stock Options
the term "Subsidiary" shall have the same meaning as the term
"subsidiary corporation" as defined in 424(f) of the Code.
SECTION 3. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall be effective as of December 1, 1998 the date of
its adoption by the Board, provided that the Plan is approved by
the stockholders of the Corporation within twelve (12) months
thereafter and on or prior to the date of the first annual
meeting of stockholders of the Corporation held subsequent to the
acquisition of an equity security by a Holder hereunder for which
exemption is claimed under Rule 16b-3. Notwithstanding any
provision of the Plan or of any Option Agreement, no Option shall
be exercisable and no Common Stock may be granted prior to such
stockholder approval. The Plan shall be terminated and no further
Awards of Common Stock may be granted under the Plan after ten
(10) years from the date the Plan is adopted by the Board or the
date the Plan is approved by the Corporation's shareholders,
whichever is earlier. Subject to the provisions of 9, the Plan
shall remain in effect until all Options granted under the Plan
have been exercised or have expired by reason of lapse of time.
SECTION 4. ADMINISTRATION
(a) ADMINISTRATION OF PLAN BY COMMITTEE. The Plan shall be
administered by a committee of the Board ("the Committee")
composed of not less than two directors of the Company, each
of whom shall be both a disinterested person as defined in
Rule 16b-3 ("Disinterested Person") and an "outside
director" for purposes of 162(m) of the Code ("Outside
Director"). The Committee may act only by a majority of its
members, except that the Committee (i) may authorize any one
or more of its members or any officer of the Company to
execute and deliver documents on behalf of the Committee.
The Committee shall have the authority to approve the Award
of Options which might reasonably be anticipated to result
in the payment of employee remuneration that would otherwise
exceed the limit on employee remuneration deductible for
income tax purposes by the Corporation pursuant to Code
162(m). Options under the Plan shall be granted upon
satisfaction of the conditions to such grants provided
pursuant to Code 162(m) and any Treasury Regulations
promulgated thereunder.
(b) POWERS. Subject to the terms of the Plan, the Committee
shall have sole authority, in its discretion, to designate
which employees, officers, directors, individuals or
entities shall receive an Award or Grant and the time or
times when such Award or Grant shall be made. Exercising
its discretion the Committee shall determine whether the
designee shall be granted Common Stock or awarded an
Incentive Stock Option or a Non-Qualified Stock Option. If
the Committee determines that an Award shall be made to a
designee then it shall determine the number of shares of
Common Stock which may be issued under the Option awarded.
In making such designations and determinations, the
Committee may take into account the nature of the services
rendered by these individuals, their present and potential
contribution to the success of the Corporation, or a
Subsidiary, and such other factors as in its discretion
shall deem relevant.
(c) ADDITIONAL POWERS. The Committee shall have such additional
powers as are delegated to it by the provisions of this Plan.
Subject to the express provisions of the Plan, the Committee is
authorized in its sole discretion, exercised in a
nondiscriminatory manner, to construe and interpret the Plan and
the respective agreements executed thereunder, to prescribe such
rules and regulations relating to the Plan as it may deem
advisable to carry out the Plan, and to determine the terms,
restrictions and provisions of each Award or Grant, including
such terms, restrictions and provisions as shall be requisite in
the judgement of the Committee to cause designated Options to
qualify as Incentive Stock Options, and to make all other
determinations necessary or advisable for administering the Plan.
The Committee may correct any defect or supply any omission or
reconcile any inconsistency in any agreement relating to an Award
or Grant in the manner and to the extent it shall deem expedient
to carry it into effect. The determination of the Committee on
the matters referred to in this 4 shall be conclusive.
SECTION 5. GRANT OF OPTIONS AND STOCK SUBJECT TO THE PLAN
(a) AWARD LIMITS. The Committee may from time to time grant
Awards and/or make Grants to one or more employees,
directors, officers, individuals or entities determined by
it to be eligible for participation in the Plan in
accordance with the provisions of 6 of this Plan. However,
any shares subject to options previously issued under
existing plans that as a result of forfeiture to the Company
become subject to reissuance shall be reissued and
administered pursuant to the Plan. The aggregate number of
shares of Common Stock that may be issued under the Plan
shall not exceed 2,000,000 shares. The aggregate number of
shares of Common Stock that may be issued to any Holder
and/or granted to any Grantee under the Plan shall not
exceed twenty-five percent (25%) of the aggregate number of
shares referred to in the preceding sentence. The total
number of shares issuable upon exercise of all outstanding
Options shall not exceed a number of shares which is equal
to twenty-five percent (25%) of the then outstanding shares
of the Corporation. Any of such shares which remain unissued
and which are not subject to outstanding Options and/or
Grants at the termination of the Plan shall cease to be
subject to the Plan but, until termination of the Plan, the
Corporation shall at all times reserve a sufficient number
of shares to meet the requirements of the Plan. Shares shall
be deemed to have been issued under the Plan only to the
extent actually issued and delivered pursuant to an Award or
Grant. To the extent that an Award or Grant lapses or the
rights of its Holder or Grantee terminate, any shares of
Common Stock subject to such Award or Grant shall again be
available for the grant of an Award or making of a Grant.
The aggregate number of shares which may be issued under the
Plan shall be subject to adjustment in the same manner as
provided in 8 of the Plan with respect to shares of Common
Stock subject to Options then outstanding.
(b) STOCK OFFERED. The stock to be offered pursuant to an Award
or Grant may be authorized but unissued Common Stock or
Common Stock previously issued and outstanding and
reacquired by the Corporation.
SECTION 6. ELIGIBILITY
An Incentive Stock Option Award made pursuant to the Plan may be
granted only to an individual who, at the time of grant, is an
employee of the Corporation or a Subsidiary. An Award of a Non-
Qualified Stock Option or a Grant of Common Stock may be made to
an individual who, at the time of Award or Grant, is an employee
of the Corporation or a Subsidiary or to an individual who has
been identified by the Committee to receive an Award or Grant due
to their contribution or service to the Corporation, including
members of the Board of Directors of the Corporation or a
Subsidiary. An Award or Grant made pursuant to the Plan may be
made on more than one occasion to the same person, and such Award
or Grant may include a Common Stock Grant, an award of an
Incentive Stock Option, a Non-Qualified Stock Option, or any
combination thereof. Each Award or Grant shall be evidenced by a
written instrument duly executed by or on behalf of the
Corporation.
SECTION 7. STOCK OPTIONS/GRANTS
(a) STOCK OPTION AGREEMENT. Each Option shall be evidenced by an
Option Agreement between the Corporation and the Holder
which shall contain such terms and conditions as may be
approved by the Committee and agreed upon by the Holder. The
terms and conditions of the respective Option Agreements
need not be identical. Each Option Agreement shall specify
the effect of termination of employment, total and permanent
disability and retirement or death on the exercisability of
the Option. Under each Option Agreement, a Holder shall have
the right to appoint any individual or legal entity in
writing as his or her beneficiary under the Plan in the
event of his death. Such designation may be revoked in
writing by the Holder at any time and a new beneficiary may
be appointed in writing on the form provided by the
Committee for such purpose. In the absence of such
appointment, the beneficiary shall be the legal
representative of the Holder's estate.
(b) OPTION PERIOD. The term of each Option shall be as specified
by the Committee at the date of grant and shall be stated in
the Option Agreement; provided, however, that an option may
not be exercised more than ten (10) years from the effective
date of the plan.
(c) LIMITATIONS ON EXERCISE OF OPTION. Options granted
hereunder shall be exercisable at such times and under such
conditions as determined by the Committee and as shall be
permissible under the terms of the Plan, which shall be
specified in the Option Agreement evidencing the Option
provided. An Option may not be exercised for fractional
shares.
(d) SPECIAL LIMITATIONS ON INCENTIVE STOCK OPTIONS. To the
extent that the aggregate Fair Market Value (determined at the
time the respective Incentive Stock Option is granted) of Common
Stock with respect to which Incentive Stock Options are
exercisable for the first time by an individual during any
calendar year under all incentive stock option plans of the
Corporation (and Subsidiary) exceeds One Hundred Thousand Dollars
($100,000) (within the meaning of 422 of the Code), such excess
Incentive Stock Options shall be treated as Non-Qualified Stock
Options. The Committee shall determine, in accordance with
applicable provisions of the Code, Treasury Regulations and other
administrative pronouncements, which of an Holder's Incentive
Stock Options will not constitute Incentive Stock Options because
of such limitation and shall notify the Holder of such
determination as soon as practicable after such determination. No
Incentive Stock Option shall be granted to an individual if, at
the time the Option is granted, such individual owns stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation or of a
Subsidiary, within the meaning of 422(b)(6) of the Code, unless
(i) at the time such Option is granted the Option price is at
least one hundred ten percent (110%) of the Fair Market Value of
the Common Stock subject to the Option and (ii) such Option by
its terms is not exercisable after the expiration of five years
from the date of grant.
(e) OPTION PRICE. The purchase price of Common Stock issued
under each Option shall be determined by the Committee and shall
be stated in the Option Agreement, but such purchase price shall,
in the case of Incentive Stock Options, not be less than the Fair
Market Value of Common Stock subject to the Option on the date
the Option is granted (one hundred ten percent (110%) of the fair
value in the case of any person or entity who owns stock
comprising more than ten percent (10%) of the total combined
voting power of all classes of stock of the Corporation), and, in
case of Non-Qualified Stock Options, not be less than eighty-five
percent (85%) of the fair value of the stock at the time the
option is granted.
(f) OPTIONS AND RIGHTS IN SUBSTITUTION FOR STOCK OPTIONS MADE BY
OTHER CORPORATIONS. Options may be granted under the Plan from
time to time in substitution for stock options held by employees
of corporations who become, or who became prior to the effective
date of the Plan, employees of the Corporation, or of any
Subsidiary, as a result of a merger or consolidation of the
employing corporation with the Corporation, or such Subsidiary,
or the acquisition by the Corporation, or a Subsidiary of all or
a portion of the assets of the employing corporation, or the
acquisition by the Corporation, or a Subsidiary of stock of the
employing corporation with the result that such employing
Corporation becomes a Subsidiary.
SECTION 8. RECAPITALIZATION OR REORGANIZATION
(a) ADJUSTMENTS TO AWARDS AND GRANTS. Except as hereinafter
otherwise provided, Awards or Grants shall be subject to
adjustment by the Committee at its discretion as to the
number and price of shares of Common Stock in the event of
changes in the outstanding Common Stock by reason of stock
dividends, stock splits, reverse stock splits,
reclassifications, recapitalizations, reorganizations,
mergers, consolidations, combinations, exchanges or other
relevant changes in capitalization occurring after the date
of the Award or Grant of any such Options or Common Stock.
(b) PRICE AND SHARE ADJUSTMENT. The shares with respect to which
Options may be granted are shares of Common Stock as
presently constituted but if and whenever, prior to the
expiration of an Option theretofore granted, the Corporation
shall effect a subdivision or consolidation of shares of
Common Stock or the payment of a stock dividend on Common
Stock, the number of shares of Common Stock with respect to
which such Option may thereafter be exercised (i) in the
event of an increase in the number of outstanding shares
shall be proportionately increased, and the purchase price
per share shall be proportionately reduced, and (ii) in the
event of a reduction in the number of outstanding shares
shall be proportionately reduced, and the purchase price per
share shall be proportionately increased.
(c) HOLDERS RIGHT TO PURCHASE SHARES PURSUANT TO TERMS OF
RECAPITALIZATION. If the Corporation recapitalizes or
otherwise changes its capital structure, thereafter upon any
exercise of an Option theretofore granted, the Holder shall
be entitled to purchase under such Option, in lieu of the
number of shares of Common Stock as to which such Option
shall then be exercisable, the number and class of shares of
stock and securities, and the cash and other property to
which the Holder would have been entitled pursuant to the
terms of the recapitalization if, immediately prior to such
recapitalization, the Holder had been the holder of such
record of the number of shares of Common Stock then covered
by such Option.
(d) ADJUSTMENT ALTERNATIVES. In the event of a Corporate Change,
unless otherwise deemed to be impractical by the Committee,
then no later than (i) two business days prior to any
Corporate Change referenced in Clause (i), (ii), (iii), (v)
or (vi) of the definition thereof or (ii) ten business days
after any Corporate Change referenced in Clause (iv) of the
definition thereof, the Committee, acting in its sole
discretion without the consent or approval of any Holder or
Grantee, shall act to effect the following alternatives with
respect to outstanding Options which acts may vary among
individual Holders and, with respect to acts taken pursuant
to Clause (i) above, may be contingent upon effectuation of
the Corporate Change: (A) in the event of a Corporate Change
referenced in Clauses (i), (ii) and (vi) acceleration of
exercise for all Options then outstanding so that such
Options may be exercised in full for a limited period of
time on or before a specified date (before or after such
Corporate Change) fixed by the Committee, after which
specified date all unexercised Options and all rights of
Holders thereunder shall terminate; (B) in the event of a
Corporate Change referenced in Clauses (iii), (iv) and (v)
require the mandatory surrender to the Corporation by
selected Holders of some or all of the outstanding Options
held by such Holders (irrespective of whether such Options
are then exercisable under the provisions of the Plan) as of
a date before or after such Corporate Change) specified by
the Committee, in which event the Committee shall thereupon
cancel such Options and pay to each Holder an amount of cash
per share equal to the excess, if any, of the Change of
Control Value of the shares subject to such Option over the
exercise price(s) under such Options for such shares; (C) in
the event of a Corporate Change referenced in Clauses (iii),
(iv) and (v), make such adjustments to Options then
outstanding as the Committee deems appropriate to reflect
such Corporate Change (provided, however, that the Comittee
may determine in its sole discretion that no adjustment is
necessary to Options then outstanding); (D) in the event of
a Corporate Change referenced in Clauses (iii), (iv) and
(v), provide that thereafter upon any exercise of an Option
theretofore granted the Holder shall be entitled to purchase
under such Option, in lieu of the number of shares of Common
Stock as to which such Option shall then be exercisable, the
number and class of shares of stock or other securities or
property (including, without limitation, cash) to which the
Holder would have been entitled pursuant to the terms of the
agreement of merger, consolidation or sale of assets or plan
of liquidation and dissolution if, immediately prior to such
merger, consolidation or sale of assets or any distribution
in liquidation and dissolution of the Corporation, the
Holder had been the holder of record of the number of shares
of Common Stock then covered by such Option; or (E) in the
event of a Corporate Change referenced in Clauses (iii),
(iv) and (v), cancel the Options granted if the Fair Market
Value of the Common Stock underlying the Options is below
the Option exercise price.
(e) CONDITIONS FOR WHICH NO ADJUSTMENT WILL BE MADE. Except as
hereinbefore expressly provided, issuance by the Corporation
of shares of stock of any class or securities convertible
into shares of stock of any class, for cash, property,
labor, or services, upon direct sale, upon the exercise of
rights or warranty to subscribe therefore, or upon
conversion of shares or obligations of the Corporation
convertible into such shares or other securities, and in any
case whether or not for fair value, shall not affect, and no
adjustment by reason thereof shall be made with respect to,
the number of shares of Common Stock subject to Options
theretofore granted, or the purchase price per share of
Common Stock subject to Options.
SECTION 9. AMENDMENT OR TERMINATION OF THE PLAN
The Committee in its discretion may terminate the Plan or any
Option or Grant or alter or amend the Plan or any part thereof or
any Option from time to time; provided that no change in any
Award or Grant previously made may be made which would impair the
rights of the Holder or
Grantee without the consent of the Holder or Grantee, and
provided further, that the Committee may not, without approval of
the stockholders, amend the Plan:
(a) to increase the aggregate number of shares which may be
issued pursuant to the provisions of the Plan on exercise or
surrender of Options or upon Grants;
(b) to change the minimum Option exercise price;
(c) to change the class of employees eligible to receive Awards
and/or Grants or increase materially the benefits accruing
to employees under the Plan;
(d) to extend the maximum period during which Awards may be
granted or Grants may be made under the Plan;
(e) to modify materially the requirements as to eligibility for
participation in the Plan; or
(f) to decrease any authority granted to the Committee hereunder
in contravention of Rule 16b-3.
SECTION 10. OTHER
(a) NO RIGHT TO AN AWARD OR GRANT. Neither the adoption of the
Plan nor any action of the Committee shall be deemed to give
an employee any right to be granted an Option to purchase
Common Stock, to receive a Grant or to any other rights
hereunder except as may be evidenced by an Option / Grant
Agreement duly executed on behalf of the Corporation, and
then only to the extent of and on the terms and conditions
expressly set forth therein. The Plan shall be unfunded. The
Corporation shall not be required to establish any special
or separate fund or to make any other segregation of funds
or assets to assure the payment of any Award or Grant.
(b) NO EMPLOYMENT RIGHTS CONFERRED. Nothing contained in the
Plan or in any Award or Grant made hereunder shall (i)
confer upon any employee any right with respect to
continuation of employment with the Corporation or
Subsidiary or (ii) interfere in any way with the right of
the Corporation or Subsidiary to terminate his or her
employment at any time.
(c) OTHER LAWS; WITHHOLDING. The Corporation shall not be
obligated to issue any Common Stock pursuant to any Award
granted or any Grant made under the Plan at any time when
the offering of the shares covered by such Award has not
been registered (or exempted) under the Securities Act of
1933 and such other state and federal laws, rules or
regulations as the Corporation or the Committee deems
applicable and, in the opinion of legal counsel for the
Corporation, there is no exemption from the registration
requirements of such laws, rules or regulations available
for the issuance and sale of such shares. No fractional
shares of Common Stock shall be delivered, nor shall any
cash in lieu of fractional shares be paid. The Corporation
shall have the right to deduct in connection with all Awards
or Grants any taxes required by law to be withheld and to
require any payments necessary to enable it to satisfy its
withholding obligations. The Committee may permit the Holder
of an Award or Grant to elect to surrender, or authorize the
Corporation to withhold shares of Common Stock (valued at
their Fair Market Value on the date of surrender or
withholding of such shares) in satisfaction of the
Corporation's withholding obligation, subject to such
restrictions as the Committee deems necessary to satisfy the
requirements of Rule 16b-3.
(d) NO RESTRICTION OF CORPORATE ACTION. Nothing contained in the
Plan shall be construed to prevent the Corporation or Subsidiary
from taking any corporate action which is deemed by the
Corporation or Subsidiary to be appropriate or in its best
interest, whether or not such action would have an adverse effect
on the Plan or any Award made under the Plan. No employee,
beneficiary or other person shall have any claim against the
Corporation or Subsidiary as a result of such action.
(e) RESTRICTIONS ON TRANSFER. An Award shall not be transferable
otherwise than at death to a designated beneficiary of the Holder
or by the laws of descent and distribution and shall be
exercisable during the lifetime of the Holder only by such Holder
or the Holder's guardian or legal representative.
(f) EFFECT OF DEATH, DISABILITY OR TERMINATION OF EMPLOYMENT.
The Option Agreement or other written instrument evidencing
an Award shall specify the effect of the death, disability
or termination of employment of the Holder of the Award;
provided, however that a Holder shall be entitled to
exercise (i) at least six (6) months from the date of
termination of employment with the Corporation if such
termination is caused by death or disability or (ii) at
least thirty (30) days from the date of termination of
employment with the Corporation if such termination is
caused by reasons other than death or disability.
All outstanding Incentive Stock Options will automatically
be converted to Nonqualified Stock Options if the Holder
does not exercise the Incentive Stock Option (i) within
three (3) months of the date of termination caused by
reasons other than death or disability; or (ii) within
twelve (12) months of the date of termination caused by
disability.
(g) RULE 16B-3. It is intended that the Plan and any Award made
to a person subject to 16 of the Exchange Act meet all of
the requirements of Rule 16b-3. If any provisions of the
Plan or any such Award would disqualify the Plan or such
Award hereunder, or would otherwise not comply with Rule 16b-
3, such provision or Award shall be construed or deemed
amended to conform to Rule 16b-3.
(h) GOVERNING LAW. The Plan shall by construed in accordance
with the laws of the State of Washington and all applicable
federal law. The securities issued hereunder shall be
governed by and in accordance with the Corporate Securities
Laws of the State of Washington.
ADOPTED BY THE BOARD OF DIRECTORS OF HANOVER GOLD COMPANY INC. AS
OF DECEMBER 1, 1998. APPROVED BY THE SHAREHOLDERS AS OF_______ 1999.
<PAGE>
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Hanover Gold Company, Inc. - PROXY
- -------------------------------------------------------------------
ANNUAL MEETING OF SHAREHOLDERS
MAY 27, 1999 at 2:00 PM PDT
The undersigned hereby constitutes and appoints Raymond A. Hanson
and James A. Fish, 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 31, 1999 at the annual meeting of
shareholders of Hanover to be held on May 27, 1999 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 AND 3.
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 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. COMPANY'S 1998 EQUITY INCENTIVE PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
ITEM 3. RATIFICATION OF AUDITORS
[ ] FOR [ ] AGAINST [ ] ABSTAIN
Ratification of BDO Seidman, LLP as Hanover's independent auditor
for the year ending December 31, 1999 and any interim period.
DATED: , 1999
---------------------------
Signature of Shareholder
---------------------------
Additional Signature, if Jointly Owned
Please sign your name exectly as it
appears to the left on the address
label. Persons signing in a
fiduciary capacity should so
indicate.
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.
</page>
