1
EXHIBIT 10(b)
INCENTIVE STOCK OPTION AGREEMENT
ALASKA APOLLO RESOURCES INC.
1997 STOCK OPTION PLAN
THIS AGREEMENT, made effective as of this 7th day of March 1997, by and
between Alaska Apollo Resources Inc., a Province of British Columbia corporation
(the "Company"), and William S. Daugherty ("Optionee").
WITNESSETH:
WHEREAS, Optionee on the date hereof is a key employee or officer of
the Company or one of its Subsidiaries; and
WHEREAS, the Company wishes to grant an incentive stock option to
Optionee to purchase shares of the Company's Common Stock pursuant to the
Company's 1997 Stock Option Plan (the "Plan"); and
WHEREAS, the Administrator of the Plan has authorized the grant of an
incentive stock option to Optionee and has determined that, as of the effective
date of this Agreement, the fair market value of the Company's Common Stock is
$0.28125 per share.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants to Optionee on the date
set forth above (the "Date of Grant"), the right and option (the "Option") to
purchase all or portions of an aggregate two million (2,000,000) shares of
Common Stock at a per share price of $0.309375 on the terms and conditions set
forth herein, and subject to adjustment pursuant to Section 11 of the Plan. This
Option is intended to be an incentive stock option within the meaning of Section
422, or any successor provision, of the Internal Revenue Code of 1986, as
amended (the "Code"), and the regulations thereunder.
2. DURATION AND EXERCISABILITY.
(a) TERM. The term during which this Option may be exercised
shall terminate on March 6, 2002 except as otherwise provided in Paragraphs 2(b)
through 2(d) below. This Option shall become exercisable according to the
following schedule:
Exercise Date Number Of Shares
------------- ----------------
March 7, 1997 355,555
January 1, 1998 355,555
January 1, 1999 355,555
January 1, 2000 355,555
January 1, 2001 355,555
January 1, 2002 222,225
Once the Option becomes exercisable to the extent of 100 percent of the
aggregate number of shares specified in Paragraph 1, Optionee may continue to
exercise this Option under the terms and conditions of this Agreement until the
termination of the Option as provided herein. If Optionee does not purchase upon
an exercise of this Option the full number of shares which Optionee is then
entitled to purchase, Optionee may purchase upon any subsequent exercise prior
to this Option's termination such previously unpurchased shares in addition to
those Optionee is otherwise entitled to purchase.
1
2
(b) TERMINATION OF EMPLOYMENT (OTHER THAN CHANGE OF CONTROL OR
DEATH). If Optionee's employment with the Company or any Subsidiary is
terminated for any reason other than because of a "change of control
transaction" (as defined in Paragraph 2(c)) or because of death, this Option
shall be exercisable only to the extent the Option was exercisable on the
vesting date immediately preceding such termination of employment, but had not
previously been exercised, and shall expire on the earlier of (i) the close of
business on the three-month anniversary date of such termination of employment,
and (ii) the expiration date of this Option stated in Paragraph 2(a) above. To
the extent this Option was not exercisable upon such termination of employment,
or if Optionee does not exercise the Option within the time specified in this
Paragraph 2(b), all rights of Optionee under this Option shall be forfeited.
(c) CHANGE OF CONTROL. If Optionee's employment with the
Company or any Subsidiary is terminated within twelve months after a "change of
control transaction," this Option shall immediately become fully exercisable and
shall expire on the earlier of (i) the close of business on the three-month
anniversary date of the Optionee's termination of employment, and (ii) the
expiration date of this Option stated in Paragraph 2(a) above. If Optionee does
not exercise the Option within the time specified in this Paragraph 2(c), all
rights of Optionee under this Option shall be forfeited. For purposes of this
Paragraph 2(c), a "change of control transaction" has the same definition as
provided in the Plan.
(d) DEATH. In the event of Optionee's death, this Option shall
be exercisable by the person or persons to whom Optionee's rights under this
Option shall have passed by Optionee's will or by the laws of descent and
distribution only to the extent the Option was exercisable on the vesting date
immediately preceding the date of Optionee's death, but had not previously been
exercised, and shall expire on the earlier of (i) the close of business on the
six-month anniversary date of the date of Optionee's death, and (ii) the
expiration date of this Option stated in Paragraph 2(a) above. To the extent
this Option was not exercisable upon the date of Optionee's death, or if such
person or persons do not exercise this Option within the time specified in this
Paragraph 2(c), all rights under this Option shall be forfeited.
3. MANNER OF EXERCISE.
(a) GENERAL. The Option may be exercised only by Optionee (or
other proper party in the event of death or incapacity), subject to the
conditions of the Plan and subject to such other administrative rules as the
Administrator may deem advisable, by delivering within the Option Period written
notice of exercise to the Company at its principal office. The notice shall
state the number of shares as to which the Option is being exercised and shall
be accompanied by payment in full of the Option price for all shares designated
in the notice. The exercise of the Option shall be deemed effective upon receipt
of such notice by the Company and upon payment that complies with the terms of
the Plan and this Agreement. The Option may be exercised with respect to any
number or all of the shares as to which it can then be exercised and, if
partially exercised, may be so exercised as to the unexercised shares any number
of times during the Option period as provided herein.
(b) FORM OF PAYMENT. Subject to approval by the Administrator,
payment of the Option price by Optionee shall be in the form of cash, personal
check, certified check or previously acquired shares of Common Stock of the
Company, Appreciation Currency or any combination thereof.
As used herein "Appreciation Currency" shall mean: the consideration
given by the surrender of Options for Common Stock. The number of shares of
Common Stock to which the Optionee shall be entitled in exchange for such
Appreciation Currency shall be determined by multiplying the number of shares of
Common Stock that would be received if the Options were then exercised for cash,
by the fraction, the numerator of which shall be the difference between (i) the
Fair Market Value, as that term is used in the Plan, of one share of Common
Stock measured at the date of exercise, and (ii) the then exercise price of the
Option, and the denominator of which shall be the Fair Market Value (at the same
date) of one share of Common Stock. In the event the Options are adjusted so as
to become exercisable for securities other than the Company's Common Shares
("Other Securities"), the definition of Appreciation Currency shall apply to the
exercise of Options for such Other Securities by substituting in the place of
shares of Common Stock, each such Other Security.
(c) STOCK TRANSFER RECORDS. As soon as practicable after the
effective exercise of all or any part of the Option, Optionee shall be recorded
on the stock transfer books of the Company as the owner of the shares
2
3
purchased, and the Company shall deliver to Optionee one or more duly issued
stock certificates evidencing such ownership. All requisite original issue or
transfer documentary stamp taxes shall be paid by the Company.
4. MISCELLANEOUS.
(a) EMPLOYMENT RIGHTS AS SHAREHOLDER. This Agreement shall not
confer on Optionee any right with respect to continuance of employment by the
Company or any of its Subsidiaries, nor will it interfere in any way with the
right of the Company to terminate such employment. Optionee shall have no rights
as a shareholder with respect to shares subject to this Option until such shares
have been issued to Optionee upon exercise of this Option. No adjustment shall
be made for dividends (ordinary or extra-ordinary, whether in cash, securities
or other property), distributions or other rights for which the record date is
prior to the date such shares are issued, except as provided in Section 12 of
the Plan.
(b) SECURITIES LAW COMPLIANCE. The exercise of all or any
parts of this Option shall only be effective at such time as counsel to the
Company shall have determined that the issuance and delivery of Common Stock
pursuant to such exercise will not violate any state or federal securities or
other laws. Optionee may be required by the Company, as a condition of the
effectiveness of any exercise of this Option, to agree in writing that all
Common Stock to be acquired pursuant to such exercise shall be held, until such
time that such Common Stock is registered and freely tradable under applicable
state and federal securities laws, for Optionee's own account without a view to
any further distribution thereof, that the certificates for such shares shall
bear an appropriate legend to that effect and that such shares will be not
transferred or disposed of except in compliance with applicable state and
federal securities laws.
(c) MERGERS, RECAPITALIZATION, STOCK SPLITS, ETC. Pursuant and
subject to Section 11 of the Plan, certain changes in the number or character of
the Common Stock of the Company (through sale, merger, consolidation, exchange,
reorganization, divestiture (including a spin-off), liquidation,
recapitalization, stock split, stock dividend or otherwise) shall result in an
adjustment, reduction or enlargement, as appropriate, in Optionee's rights with
respect to any unexercised portion of the Option (Optionee shall have such
"anti-dilution" Rights under the Option with respect to such events, but shall
not have "preemptive" rights).
(d) SHARES RESERVED. The Company shall at all times during
the option period reserve and keep available such number of shares as will be
sufficient to satisfy the requirements of this Agreement.
(e) WITHHOLDING TAXES ON DISQUALIFYING DISPOSITION. In the
event of a disqualifying disposition of the shares acquired through the exercise
of this Option, Optionee hereby agrees to inform the Company of such
disposition. Upon notice of a disqualifying disposition, the Company may take
such action as it deems appropriate to insure that, if necessary to comply with
all applicable federal or state income tax laws or regulations, all applicable
federal and state payroll, income or other taxes are withheld from any amounts
payable by the Company to Optionee. If the Company is unable to withhold such
federal and state taxes, for whatever reason, Optionee hereby agrees to pay to
the Company an amount equal to the amount the Company would otherwise be
required to withhold under federal or state law. Optionee may, subject to the
approval and discretion of the Administrator or such administrative rules it may
deem advisable, elect to have all or a portion of such tax withholding
obligations satisfied by delivering shares of the Company's Common Stock having
a fair market value equal to such obligations.
(f) NONTRANSFERABILITY. During the lifetime of Optionee, the
accrued Option shall be exercisable only by Optionee or by the Optionee's
guardian or other legal representative, and shall not be assignable or
transferable by Optionee, in whole or in part, other than by will or by the laws
of descent and distribution.
(g) 1997 STOCK OPTION PLAN. The Option evidenced by this
Agreement is granted pursuant to the Plan, a copy of which Plan has been made
available to Optionee and is hereby incorporated into this Agreement. This
Agreement is subject to and in all respects limited and conditioned as provided
in the Plan. The Plan governs this Option and, in the event of any questions as
to the construction of this Agreement or in the event of a conflict between the
Plan and this Agreement, the Plan shall govern, except as the Plan otherwise
provides.
(h) ACCOUNTING COMPLIANCE. Optionee agrees that, in the
event of a "transaction" (as defined in Section 12 of the Plan) is treated as a
"pooling of interests" under generally accepted accounting principles and
3
4
Optionee is an "affiliate" of the Company or any Subsidiary (as defined in
applicable legal and accounting principles) at the time of such change of
control transaction, Optionee will comply with all requirements of Rule 145 of
the Securities Act of 1933, as amended, and the requirements of such other legal
or accounting principles, and will execute any documents necessary to ensure
such compliance.
(i) STOCK LEGEND. The Administrator may require that the
certificates for any shares of Common Stock purchased by Optionee (or, in the
case of death, Optionee's successors) bear an appropriate legend to reflect the
restrictions of Paragraphs 4(b) and 4(h), of this Agreement.
(j) SCOPE OF AGREEMENT. This Agreement shall bind and inure to
the benefit of the Company and its successors and assigns and Optionee and any
successor or successors of Optionee permitted by Paragraph 2 or Paragraph 4(f)
above.
(k) ARBITRATION. Any dispute arising out of or relating to
this Agreement or the alleged breach of it, or the making of this Agreement,
including claims of fraud in the inducement, shall be discussed between the
disputing parties in a good faith effort to arrive at a mutual settlement of any
such controversy. If, notwithstanding, such dispute cannot be resolved, such
dispute shall be settled by binding arbitration. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction
thereof. The arbitrator shall be a retired state or federal judge or an attorney
who has practiced securities or business litigation for at least 10 years. If
the parties cannot agree on an arbitrator within 20 days, any party may request
that the chief judge of the District Court for Fayette County, Kentucky, select
an arbitrator. Arbitration will be conducted pursuant to the provisions of this
Agreement, and the commercial arbitration rules of the American Arbitration
Association, unless such rules are inconsistent with the provisions of this
Agreement. Limited civil discovery shall be permitted for the production of
documents and taking of depositions. Unresolved discovery disputes may be
brought to the attention of the arbitrator who may dispose of such dispute. The
arbitrator shall have the authority to award any remedy or relief that a court
of this state could order or grant; provided, however, that punitive or
exemplary damages shall not be awarded. The arbitrator may award to the
prevailing party, if any, as determined by the arbitrator, all of its costs and
fees, including the arbitrator's fees, administrative fees, travel expenses,
out-of pocket expenses and reasonable attorneys' fees.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on the day and year first above written.
ALASKA APOLLO RESOURCES INC.
By
--------------------------------------
-------------,
OPTIONEE
----------------------------------------
WILLIAM S. DAUGHERTY
4