<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14a)
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 [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
ALASKA APOLLO
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
================================================================================
<PAGE> 2
ALASKA APOLLO RESOURCES INC.
131 PROSPEROUS PLACE, SUITE 17-A
LEXINGTON, KENTUCKY 40509-1844
PROXY STATEMENT AND INFORMATION CIRCULAR
AS AT MAY 20, 1998
<PAGE> 3
ALASKA APOLLO RESOURCES INC.
131 PROSPEROUS PLACE, SUITE 17-A
LEXINGTON, KENTUCKY 40509-1844
May 20, 1998
To Our Shareholders:
You are cordially invited to attend the 1998 Annual General Meeting
of the Shareholders of Alaska Apollo Resources Inc. (the "Meeting") to be held
at 625 Howe Street, Suite 700, Vancouver, British Columbia, Canada, on June 22,
1998 at 10:00 a.m., Vancouver, British Columbia time.
At the Meeting, we will report on the progress of the Company, elect
directors for the upcoming year, decide the appointment of independent public
accountants for the Company, comment on other matters of interest and respond to
your questions. In addition, the Board of Directors will ask the shareholders to
pass the following special resolutions:
1. CHANGE OF NAME AND CHANGE IN THE CAPITAL STRUCTURE. The
shareholders will be asked to approve a resolution authorizing and approving the
filing of an amendment to the Company's Memorandum and Articles (the "Company
Articles") which would change the name of the Company and expand the Company's
present equity structure (the "Amendment"). The Amendment would serve to (a)
change the name of the Company to "Daugherty Resources, Inc."; (b) increase the
authorized number of shares of the common stock of the Company, without par
value per share (the "Common Stock") from 20,000,000 to 50,000,000 shares; and
(c) authorize a class of preferred stock, consisting of 6,000,000 shares,
without par value per share (the "Preferred Stock"). Management plans to utilize
the flexibility created by the Amendment to issue a combination of warrants for
the purchase of the Common Stock and additionally issue 6,000,000 shares of the
Preferred Stock in connection with a proposed acquisition of certain assets from
Environmental Energy, Inc. ("EEI"). No final agreement has been reached with
EEI, but pursuant to the terms of a letter of intent dated November 3, 1997, it
is it clear that the Company will need more authorized shares of the Common
Stock as well as shares of the Preferred Stock in order for any agreement to be
signed with EEI. Even if no final agreement is reached with EEI, the Board of
Directors believes that the change in the Company's name and the proposed
adjustments to the capital structure will create additional benefits to the
Company, including enabling the Company to be more closely identified with its
primary operating subsidiary, Daugherty Petroleum, Inc., and to package more
attractive securities offerings through the use of common and preferred stock,
which are expected to provide the Company with the opportunity to finance
selected commercial transactions without having to deplete working capital.
If the Amendment is approved by three-quarters of the total number of
shares of the Common Stock present and entitled to vote on the matter at the
Meeting, then an amendment to the Company Articles will be filed by the proper
officers of the Company.
2. SHARE CONSOLIDATION. The shareholders will be asked to approve a
resolution, subject to requisite regulatory approval, authorizing and approving
the filing of an amendment to the Company Articles which would effect a
consolidation of the authorized, issued and outstanding shares of the Common
Stock and the Preferred Stock (a "reverse split"), as of a date to be determined
by the Board of Directors following the Meeting, on the basis of one share of
post-consolidation Common Stock for each five shares of pre-consolidation Common
Stock and one share of post-consolidation Preferred Stock for each five shares
of pre-consolidation Preferred Stock (the "Consolidation").
The Board of Directors believes that the Consolidation is in the best
interests of the shareholders because the shares of the Common Stock currently
trade on The Nasdaq Stock Market in the United States, which has a minimum per
share price requirement of $1.00 per share. If the market value per share of the
Company's Common Stock remains below $1.00 per share, the shares of the Common
Stock will no longer be eligible for trading on The Nasdaq Stock Market. As of
May 7, 1998, the high and low bids with respect to the price per share of the
Common Stock were both $0.406. The Nasdaq Stock Market quotations represent
interdealer prices, without mark-ups, commissions, etc., and they may not
necessarily be indicative of actual sales prices. The Consolidation will assist
in insuring that the Company
1
<PAGE> 4
will continue to meet the per share minimum value requirement. If the resolution
relating to the Consolidation is approved at the Meeting, shareholders will be
required to surrender their current certificates representing pre-Consolidation
Common Stock or pre-Consolidation Preferred Stock at such time as they desire to
effect a transfer of same in exchange for certificates representing
post-Consolidation Common Stock or post-Consolidation Preferred Stock, as the
case may be. The Company may require the shareholders to surrender their old
certificates for new certificates, and if it does, the Company will provide
appropriate transmittal forms to the shareholders for this purpose.
If the Consolidation is approved by three-quarters of the total
number of shares of the Common Stock present and entitled to vote on the matter,
an amendment to the Company Articles will be filed by the proper officers of the
Company.
THE PROXY STATEMENT PROVIDES A DETAILED DESCRIPTION OF THE AMENDMENT, THE
CONSOLIDATION, AND OTHER INFORMATION TO ASSIST YOU IN CONSIDERING THE MATTERS ON
WHICH A VOTE IS REQUESTED. WE URGE YOU TO REVIEW THIS INFORMATION CAREFULLY AND,
IF YOU REQUIRE ASSISTANCE, TO CONSULT WITH YOUR FINANCIAL, TAX OR OTHER
PROFESSIONAL ADVISERS.
FOR THE REASONS SET FORTH IN THE PROXY STATEMENT, YOUR BOARD OF DIRECTORS
UNANIMOUSLY BELIEVES THAT THE PROPOSED AMENDMENT AND CONSOLIDATION ARE IN THE
BEST INTERESTS OF THE COMPANY AND ALL OF ITS SHAREHOLDERS. WE THEREFORE STRONGLY
URGE YOU TO VOTE "FOR" THE CONSOLIDATION AND THE AMENDMENT.
Whether or not you plan to attend the Meeting, we ask that you
indicate the manner in which you wish your shares to be voted and sign and
return your proxy as promptly as possible in the enclosed envelope so that your
vote may be recorded. You may vote your shares in person if you attend the
Meeting, even if you send in your proxy.
We appreciate your continued interest in Alaska Apollo Resources Inc.
Very truly yours,
/s/ William S. Daugherty
William S. Daugherty,
Chairman of the Board and President
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<PAGE> 5
ALASKA APOLLO RESOURCES INC.
131 PROSPEROUS PLACE, SUITE 17-A
LEXINGTON, KENTUCKY 40509-1844
NOTICE OF ANNUAL GENERAL MEETING OF THE SHAREHOLDERS
TO BE HELD ON JUNE 22, 1998
To the shareholders of Alaska Apollo Resources Inc.:
Notice is hereby given that the 1998 Annual General Meeting of the
Shareholders (the "Meeting") of Alaska Apollo Resources Inc. (the "Company")
will be held at 625 Howe Street, Suite 700, Vancouver, British Columbia, Canada,
on June 22, 1998 at 10:00 a.m., Vancouver, British Columbia time, for the
following purposes:
1. To receive and consider the audited financial statements of the
Company for the fiscal year ended December 31, 1997, together with the auditors'
report thereon.
2. To receive the report of the directors of the Company.
3. To fix the number of directors for the ensuing year at three.
4. To elect three directors for the ensuing year.
5. Ratification of the appointment of Kraft, Rothman, Berger, Grill,
Schwartz & Cohen, Chartered Accountants, as independent auditors of the Company
for 1998.
6. To consider and pass a special resolution authorizing and
approving an amendment to the Memorandum and Articles of the Company which shall
change the name of the Company to Daugherty Resources, Inc., and effect an
increase in the number of the authorized shares of the common stock, without par
value per share, (the "Common Stock") from 20,000,000 to 50,000,000 shares, and
provide for the creation of 6,000,000 shares of preferred stock, without par
value per share (the "Preferred Stock").
7. To consider and pass a special resolution authorizing and
approving a consolidation of the Common Stock and the Preferred Stock on the
basis of one post-consolidation share of the Common Share for each five
pre-consolidation shares of the Common Stock, and one post-consolidation share
of the Preferred Share for each five pre-consolidation shares of the Preferred
Stock.
8. To consider amendments to or variations of any matter identified
in this Notice.
9. To transact such other business as may properly come before the
Meeting or any adjournments thereof.
The 1997 Annual Report of the Company to its shareholders, including
financial statements for the year ended December 31, 1997 and the Quarterly
Report of the Company on Form 10-QSB for the period ended March 31, 1998 are
enclosed with this Notice.
The Board of Directors has fixed the close of business on May 11,
1998, as the record date for determining the shareholders of the Company
entitled to receive notice of and to vote at the Meeting or any adjournments
thereof. A list of such shareholders will be available for inspection for at
least 10 days prior to the Meeting during normal business hours at the offices
of the Company.
Shareholders are cordially invited to attend the Meeting in person.
Those who do not plan to attend and who wish their shares voted are requested to
sign, date, and mail promptly the enclosed proxy, for which a return envelope is
provided.
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FOR FULL INFORMATION, THIS NOTICE MUST BE READ IN CONJUNCTION WITH THE PROXY
STATEMENT ACCOMPANYING THIS NOTICE.
By order of the Board of Directors,
/s/ William S. Daugherty
William S. Daugherty,
Chairman of the Board and President
Lexington, Kentucky
May 20, 1998
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<PAGE> 7
PROXY STATEMENT
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Alaska Apollo Resources Inc., a British
Columbia corporation (the "Company"), to be voted at the 1998 Annual General
Meeting of Shareholders (the "Meeting") to be held at 625 Howe Street, Suite
700, Vancouver, British Columbia, Canada, on June 22,1998 at 10:00 a.m.,
Vancouver, British Columbia time, and at any and all adjournments thereof. The
information contained in this Proxy Statement is given as of May 11, 1998,
unless otherwise specified.
The 1997 Annual Report to Shareholders, including financial
statements for the year ended December 31, 1997, and the Quarterly Report of the
Company on Form 10-QSB for the period ended March 31, 1998 are enclosed with
this Proxy Statement. Solicitation of proxies by mail is expected to commence on
May 28, 1998. The Company is directly responsible for the payment of all costs
associated with the solicitation of proxies hereunder. Advance notice of the
Meeting was published in the Vancouver Province in Vancouver, British Columbia
on April 14, 1998. In addition to such solicitation by mail, certain of the
directors, officers and regular employees of the Company may, without extra
compensation, solicit proxies by telephone, telegraph and personal interview.
Arrangements will be made with brokerage houses, custodians, nominees and other
fiduciaries to send proxy materials to their principals, and they will be
reimbursed by the Company for postage and clerical expenses. Unless otherwise
specified herein, all references to dollars shall mean United States dollars.
SHARES REPRESENTED BY PROPERLY EXECUTED PROXIES WILL BE VOTED AS
SPECIFIED. IF NO SPECIFICATIONS HAVE BEEN GIVEN IN A PROXY, THE SHARES
REPRESENTED THEREBY WILL BE VOTED FOR THE FIXING OF THE NUMBER OF DIRECTORS FOR
THE ENSUING YEAR AT THREE (ITEM 1), FOR THE ELECTION OF THE NOMINEES LISTED
HEREIN AS DIRECTORS (ITEM 2), FOR THE CHANGE IN THE NAME OF THE COMPANY TO
DAUGHERTY RESOURCES, INC. AND THE AUTHORIZATION OF ADDITIONAL COMMON STOCK AND
THE CREATION OF A CLASS OF PREFERRED STOCK (ITEM 3), FOR THE CONSOLIDATION OF
THE COMPANY'S COMMON STOCK AND PREFERRED STOCK (ITEM 4), AND FOR THE
RATIFICATION OF KRAFT, ROTHMAN, BERGER, GRILL, SCHWARTZ & COHEN AS INDEPENDENT
PUBLIC ACCOUNTANTS FOR 1998 (ITEM 5), and, in the discretion of the persons
named in the proxy, on any other business that may properly come before the
Meeting. A form of proxy will not be valid unless it is completed and delivered
to Pacific Corporate Trust Company, 625 Howe Street, Suite 830, Vancouver,
British Columbia V6C 3B8, Canada, not less than 48 hours (excluding Saturdays
and holidays) before the Meeting at which the person named therein purports to
vote in respect thereof.
THIS SOLICITATION OF PROXIES IS BEING MADE ON BEHALF OF THE
MANAGEMENT OF THE COMPANY. THE INDIVIDUALS NAMED IN THE ACCOMPANYING FORM OF
PROXY ARE THE PRESIDENT AND A DIRECTOR OF THE COMPANY. A SHAREHOLDER WISHING TO
APPOINT SOME OTHER PERSON (WHO NEEDS NOT BE A SHAREHOLDER OF THE COMPANY) TO
REPRESENT HIM AT THE MEETING HAS THE RIGHT TO DO SO, EITHER BY INSERTING SUCH
PERSON'S NAME IN THE BLANK SPACE PROVIDED IN THE FORM OF PROXY OR BY COMPLETING
ANOTHER FORM OF PROXY.
Proxies may be revoked at any time before the commencement of the
Meeting by delivering to the Chairman of the Meeting a written revocation or a
duly executed proxy bearing a later date. The principal executive office and
mailing address of the Company is 131 Prosperous Place, Suite 17-A, Lexington,
Kentucky 40509-1844. For a period of at least 10 days prior to the Meeting, a
complete list of shareholders entitled to vote at the Meeting will be available
for inspection by shareholders of record during ordinary business hours for
proper purposes at the Company's principal executive office.
VOTING SECURITIES
Shareholders of record at the close of business on May 11, 1998 (the
"Record Date"), are entitled to notice of and to vote at the Meeting and at any
adjournments thereof. On the Record Date, the authorized capital stock of the
Company consisted of 20,000,000 shares of common stock, without par value per
share (the "Common Stock"), each of which shares is entitled to one vote, of
which there were 9,821,754 shares issued and outstanding, fully paid and
non-assessable. The quorum for the transaction of business at the Meeting
consists of two persons present and being, or representing by proxy,
shareholders holding not less than one-tenth of the outstanding shares of the
Common Stock. If there are not sufficient shares represented in person or by
proxy at the Meeting to constitute a quorum, the Meeting may be postponed or
adjourned in order to permit further solicitations of proxies by the Company.
Proxies given
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pursuant to this solicitation and not revoked will be voted at any postponement
or adjournment of the Meeting in the manner set forth above.
Under the Company Act of British Columbia, the three nominees
receiving the greatest number of votes cast by the holders of the Common Stock
will be elected as directors (Item 2). There will be no cumulative voting in the
election of directors. Approval of the amendment to the Memorandum and Articles
of the Company (the "Company Articles") effecting a change in the name of the
Company and an increase in the number of authorized shares of the Common Stock
and creating a class of preferred stock, without par value per share (the
"Preferred Stock") requires an affirmative vote of three-quarters of the votes
cast at the Meeting (Item 3). Subject to certain conditions and applicable law,
holders of at least three-quarters of the Common Stock voting in person or by
proxy at the Meeting must vote in favor of the Consolidation of the Company's
issued and outstanding Common Stock and Preferred Stock in order for the
resolution to be approved (Item 4). A simple majority of the votes cast at the
Meeting is required to approve the fixing of the number of directors for the
ensuing year at three (Item 1) and for the ratification of Kraft, Rothman,
Berger, Grill, Schwartz & Cohen as independent auditors for 1998 (Item 5).
Under British Columbia law, abstentions are treated as present and
entitled to vote and thus will be counted in determining whether a quorum is
present and will have the effect of a vote against a matter, except the election
of directors as to which they will have no effect. A broker non-vote (i.e.,
shares held by brokers or nominees as to which instructions have not been
received from the beneficial owners or persons entitled to vote and the broker
or nominee does not have discretionary power to vote on a particular matter) is
counted for purposes of determining the existence of a quorum and will have no
effect on the outcome of the vote on any of the proposals.
ITEM 1, DETERMINATION OF THE NUMBER OF DIRECTORS
Management proposes to fix the number of directors of the Company at
three for the ensuing year.
VOTE REQUIRED
The affirmative vote of a majority of the total number of shares of
the Common Stock present in person or represented by proxy at the Meeting is
required to fix the number of directors of the Company at three for the ensuing
year.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FIXING OF THE NUMBER
OF DIRECTORS FOR THE ENSUING YEAR AT THREE.
ITEM 2, ELECTION OF DIRECTORS
The total number of persons currently permitted to serve as members
of the Board of Directors is set at three. It is intended that the number of
directors will be three for the ensuing year.
TERM OF OFFICE
The term of office for each of the current directors expires on the
date of the Meeting. The persons named below will be nominated for election at
the Meeting as management's nominees. Each director elected will hold office
until the next annual general meeting of the shareholders of the Company or
until his successor is elected or appointed, unless his office is earlier
vacated in accordance with the Company Articles or the provisions of the Company
Act of British Columbia.
NOMINEES
The following sets forth certain information with respect to the
business experience of each nominee during the past five years and certain other
directorships held by each nominee. William S. Daugherty, age 43, has been a
director since September 1993. Mr. Daugherty has served as President and Chief
Operating Officer of the Company since September 1993 when he acquired 1,250,000
shares of
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the Common Stock in exchange for all of his common stock in Daugherty Petroleum,
Inc., a Kentucky corporation and the Company's wholly-owned subsidiary
("Daugherty Petroleum, Inc."). Mr. Daugherty has served as President of
Daugherty Petroleum, Inc. since 1984. In 1995, Mr. Daugherty was elected as
Chairman of the Board of the Company.
James K. Klyman, age 43, has been a director since May 1992. For the
past five years Mr. Klyman has been a computer software designer and programmer
specializing in applied information technology.
Charles L. Cotterell, age 73, has been a director since June 1994.
Mr. Cotterell has been involved in the resources industry and has participated
in the natural gas and oil industries in Western Canada and the United States,
particularly in Kentucky. He is a Vice President of Konal Engineering Co., Ltd.,
is a past director of Mariner Mines, Ltd., Nordustrial, Ltd., Goliath Boat Co.,
and Dominion Power Press Equipment Co., Ltd., and the past President of Smith
Press Automation Co., Ltd.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During fiscal 1997, the Board of Directors held two meetings and
approved actions on five separate occasions by unanimous consent without formal
meetings. The Board of Directors has established an Audit Committee and
Nominating Committee to oversee specific matters affecting the Company.
Committees. The Company does not have an Executive Committee. The
Company is required to have an Audit Committee of which the current members are
William S. Daugherty, James K. Klyman and Charles L. Cotterell. The Audit
Committee held one meeting during fiscal 1997. The Audit Committee meets with
the Company's independent accountants to review the Company's accounting
policies, internal controls and other accounting and auditing matters; makes
recommendations to the Board as to the engagement of independent accountants;
and reviews the letter of engagement and statement of fees relating to the scope
of the annual audit and special audit work which may be recommended or required
by the independent accountants.
The Nominating Committee, currently composed of William S. Daugherty
and Charles L. Cotterell, held one meeting during fiscal 1997. The functions
performed by the Nominating Committee include selecting candidates to fill
vacancies on the Board of Directors, reviewing the structure and composition of
the Board, and considering qualifications requisite for continuing Board
service. The Nominating Committee will consider candidates recommended by a
shareholder of the Company. Any such recommendation for the 1999 Annual General
Meeting of Shareholders should be provided to the Corporate Secretary of the
Company by February 22, 1999.
During the fiscal year ended December 31, 1997, each director
attended all meetings of the Company's Board of Directors and the respective
Committees on which he served.
Compensation Committee Interlocks and Insider Participation. The
Company does not have a Compensation Committee or other Board committee
performing an equivalent function. In establishing compensation levels, the
Board of Directors has endeavored to ensure the compensation programs for the
Company's executive officers were effective in attracting and retaining key
executives responsible for the success of the Company and were administered in
an appropriate fashion in the long-term best interests of the Company and its
shareholders. In that regard, the Board of Directors sought to align total
compensation for the Company's executive officers with the performance of the
Company and the individual performance of each executive officer in assisting
the Company in accomplishing its goals.
All actions of the Board with respect to Mr. Daugherty's compensation
are taken without his involvement. Mr. Daugherty and Charles L. Cotterell, one
of the directors of the Company, participated in deliberations concerning other
officer and key employee base compensation, while bonuses and incentive stock
options are authorized by the action of the entire Board of Directors.
Base Salary. The Board's policy with respect to 1997 base salaries
for executive officers was generally to keep them at appropriate levels in light
of what was customary in the industry. Mr. Daugherty's base compensation has not
been increased since September 1993. In 1996, Mr. Daugherty's annual salary was
reduced to $75,000.
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Stock Options. The Board of Directors believes that to achieve the
Company's long-term growth objectives and to align management and its
shareholders' interests, it is in the best interest of the Company from time to
time to grant stock options to key members of its management and staff.
Consequently, on March 7, 1997, the Board of Directors adopted, subject to the
approval of the shareholders of the Company, a Stock Option Plan under Section
422 of the Internal Revenue Code of 1986, as amended. The Stock Option Plan is
administered by a Committee appointed by the Board of Directors, the members of
which are to be "Non-Employee Directors" as defined in Rule 16b-3 of the
Securities Exchange Act of 1934. The initial members of the Committee are James
K. Klyman and Charles L. Cotterell. The Stock Option Plan provides that
3,000,000 shares of the Common Stock are to be the subject of stock options,
2,000,000 of which are reserved for Mr. Daugherty, and the remaining 1,000,000
reserved for other employees of the Company as may be determined by the
Committee.
LEGAL PROCEEDINGS
From time to time, the Company is involved in litigation relating to
claims arising out of its operations in the normal course of its business. The
Company maintains insurance coverage against potential claims in an amount which
it believes to be adequate. The Company believes that it is not presently a
party to any litigation the outcome of which would have a material adverse
effect on its results of operations or financial condition.
EXECUTIVE OFFICERS
Set forth below are executive officers of the Company, together with
their ages as of the date of this Proxy Statement. Also indicated is the date
when each such person commenced serving as an executive officer of the Company.
<TABLE>
<CAPTION>
DATE BECAME
NAME AGE POSITION EXECUTIVE OFFICER
---- --- -------- -----------------
<S> <C> <C> <C>
William S. Daugherty 43 Chairman of the Board, President
and Chief Executive Officer September 1993
D. Michael Wallen 43 Vice President and Secretary January 1997
Daryl J. Greattinger 43 Chief Financial Officer June 1997
</TABLE>
A description of the business experience during the past several
years for Messrs. Wallen and Greattinger is set forth below. Information with
respect to Mr. Daugherty is provided elsewhere. See "Nominees."
D. Michael Wallen joined Daugherty Petroleum, Inc. in March 1995 as
Vice President of Engineering and was elected a Vice President of the Company in
March 1997. Prior to joining the Company, Mr. Wallen served as the Director of
the Kentucky Division of Oil and Gas for six years. Prior to serving as Director
of the Kentucky Division of Oil and Gas, he worked as well drilling and
completion specialist and as a gas production engineer in the Appalachian Basin
for various operating companies.
Daryl Greattinger joined the Company and has served as Chief
Financial Officer since June 1997, on a part-time basis. For the past 15 years,
Mr. Greattinger, a certified public accountant, has been an owner of Greattinger
& Crowley, an accounting practice located in Monticello, Kentucky. Previously,
Mr. Greattinger held accounting positions at Petro 7, Inc., an independent oil
and gas company, and International Harvester, Inc.
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EXECUTIVE COMPENSATION
The following table sets forth information regarding annual and
long-term compensation with respect to the fiscal years ended December 31, 1997,
1996 and 1995 for services in all capacities rendered to the Company by William
S. Daugherty, the Chief Executive Officer of the Company. There was no other
person serving as an executive officer of the Company at December 31, 1997,
whose total annual salary and bonus exceeded $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------- ----------------------
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS #
- --------------------------- ---- ---------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
William S. Daugherty, 1997 75,000 12,500 (1) 200,000 (3)
Chairman and President 1996 86,538 -0- 200,000 (4)
1995 100,000 19,000 (2) 400,000 (5)
<FN>
__________________________
(1) The bonus was in the form of 25,000 shares of the Common Stock valued at
$0.50 per share. The shares represent bonuses approved by the Board
of Directors on June 25, 1997. The shares were issued June 27, 1997.
(2) The bonus was in the form of 50,000 shares of the Common Stock valued at
$0.38 per share. The shares represent bonuses approved by the Board of
Directors in February and December 1995 for the years 1994 and 1995. The
shares were issued July 18, 1996.
(3) These options were approved on March 7, 1997 by the Board of Directors
pursuant to the Alaska Apollo Resources Inc. 1997 Stock Option Plan, are
exercisable at $0.309375 per share and vest over a five year period with
355,555 vesting during 1997. The options expire on March 6, 2002.
Vesting is subject to Mr. Daugherty's continued employment.
(4) These options were approved on June 28, 1996 by the Board of Directors and
are exercisable at $1.00 per share. The options vest over a four year
period and expire five years from the date of vesting. Vesting is subject
to Mr. Daugherty's continued employment.
(5) These options were approved on December 27, 1995 by the Board of Directors
and are exercisable at $1.00 per share. The options vest over a four year
period and expire five years from the date of vesting. Vesting is subject
to Mr. Daugherty's continued employment.
</TABLE>
While the officers of the Company receive benefits in the form of
certain perquisites, the individual identified in the foregoing table has not
received perquisites which exceed in value the lesser of $50,000 or 10 percent
of such officer's salary and bonus.
OPTION GRANTS IN 1997
The following table provides details regarding the stock options
indicated in the Summary Compensation Table as having been granted to the named
executive officer in 1997. In addition, in accordance with the rules of the
Securities and Exchange Commission (the "Commission"), there are shown
hypothetical gains or "option spreads" that could be realized for the respective
options, based on arbitrarily assumed rates of annual compound stock price
appreciation of five percent and 10 percent from the date the options were
granted over the full five-year term of the options. No gain to the optionees is
possible without an increase in the stock price which will benefit all
shareholders proportionately.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT ASSUMED
ANNUAL RATES OF STOCK PRICE
APPRECIATION FOR OPTION TERMS (1)
- ------------------------------------------------------------------------- --------------------------------------
NUMBER OF PERCENT OF
SHARES TOTAL EXERCISE
UNDERLYING OPTIONS OR BASE
OPTIONS GRANTED TO PRICE
GRANTED EMPLOYEES ($ PER EXPIRATION 5% 10%
NAME (#) IN 1997 SHARE) DATE ($) ($)
---- ---------- ---------- -------- ---------- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C>
W. S. Daugherty (2) 200,000 93.02% $0.309375 12-31-2007 $180,202 $389,429
__________
</TABLE>
5
<PAGE> 12
(1) These amounts represent certain assumed rates of appreciation only. Actual
gains, if any, on stock option exercises or stock holdings are dependent
on the future performance of the shares of the Common Stock and overall
stock market conditions. There can be no assurance that the amounts
reflected in this table will be achieved.
(2) On June 25, 1997, the Board of Directors of the Company authorized the
granting of incentive stock options covering 2,000,000 shares of the
Common Stock for Mr. Daugherty vesting and exercisable in increments of
355,555 shares on March 7, 1997 and January 1, 1998, 1999, 2000, and 2001,
with a final increment of 222,225 shares on January 1, 2002. All options
authorized in favor of Mr. Daugherty in 1997 are exercisable at $0.309375
per share, expire five years from the date of vesting and are contingent
upon Mr. Daugherty's employment at the time of vesting. As of May 20,
1998, these options have not been issued; however, the Company is
obligated to issue them to Mr. Daugherty.
The following table shows the number of shares of the Common Stock
underlying all exercisable and non-exercisable stock options held by the named
executive officers as of December 31, 1996.
<TABLE>
<CAPTION>
AGGREGATED FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END ($)
------------------------------ ------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
---- ------------------------- -----------------------------
<S> <C> <C>
William S. Daugherty 805,555/1,994,445 $1,289/$5,961
<FN>
(1) The closing market price for the shares of the Common Stock at December 31, 1997 was $0.313. Only
the options granted in 1997 to Mr. Daugherty were in-the-money as of the end of the fiscal year.
</TABLE>
Mr. Daugherty received options to purchase 200,000 shares of the
Common Stock in 1994 exercisable at $1.90 per share in increments of 50,000
shares each on December 10, 1994, 1995, 1996, and 1997. These options expire
December 10, 1998. In February 1995, the Board of Directors of the Company
authorized the granting of incentive stock options covering 200,000 shares of
the Common Stock for Mr. Daugherty vesting and exercisable in 50,000 share
increments on February 27, 1995, 1996, 1997 and 1998. Additionally, on December
27, 1995, the Board of Directors of the Company authorized the granting of
incentive stock options covering 200,000 shares of the Common Stock for Mr.
Daugherty vesting and exercisable in 50,000 share increments on December 27,
1995, 1996, 1997 and 1998. All options authorized in favor of Mr. Daugherty in
1995 are exercisable at $1.00 per share, expire five years from the date of
vesting and are contingent upon Mr. Daugherty's employment at the time of
vesting. As detailed above, on June 28, 1996, the Board of Directors authorized
the granting of incentive stock options to Mr. Daugherty covering 200,000 shares
of the Common Stock. On March 7, 1997, pursuant to an Incentive Stock Option
Agreement between the Company and Mr. Daugherty, the Administrative Committee of
the Alaska Apollo Resources Inc. 1997 Stock Option Plan granted Mr. Daugherty
options to purchase 2,000,000 shares of the Common Stock exercisable at
$0.309375 per share. Options for 355,555 shares vested on March 7, 1997, with
355,555 shares vesting on January 1, 1998, 1999, 2000, and 2001, and the
remaining 222,225 shares vesting on January 1, 2002. These options are
contingent upon Mr. Daugherty's employment with the Company on the vesting
dates. They expire on March 7, 2002.
6
<PAGE> 13
COMPENSATION OF DIRECTORS
The Company compensates its non-employee directors for their services
to the Company in the form of shares of the Common Stock registered pursuant to
a registration statement on Form S-8. The Company also reimburses its directors
for expenses incurred in attending board meetings. The Company paid the
non-employee directors the following amounts during fiscal year 1997: Charles L.
Cotterell and James Klyman each received 5,000 shares of the Common stock valued
at $0.50 per share. Further, the Company has granted options to acquire shares
of the Common Stock to the following current directors of the Company, other
than Mr. Daugherty: Charles L. Cotterell and James Klyman each received options
for 10,000 shares of the Common Stock exercisable at $0.65 per share which
vested on June 25, 1997 and expire on June 24, 2002.
<TABLE>
<CAPTION>
AGGREGATED FISCAL YEAR-END OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
OPTIONS AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END ($)
------------------------------ ------------------------------
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
---- ------------------------- -----------------------------
<S> <C> <C>
James K. Klyman 40,000/0 -0-
Charles L. Cotterell 40,000/0 -0-
<FN>
___________________
(1) The market price for the shares of the Common Stock at December 31, 1997 was below the option price
for each share of the Common Stock.
</TABLE>
In 1993, Mr. Klyman was granted options to purchase 10,000 shares of
the Common Stock exercisable at $1.90 per share and expiring December 10, 1998.
On June 15, 1994, the Board of Directors approved the reduction of the exercise
price of these options to $1.00. On June 15, 1994, Mr. Cotterell was granted an
option to purchase 10,000 shares of the Common Stock in 1994 exercisable at
$1.00 per share expiring December 10, 1998. On February 27, 1995, the Board of
Directors approved the grant of options to Messrs. Klyman and Cotterell to
purchase 10,000 shares of the Common Stock each exercisable at $1.00 per share
and expiring February 27, 2000. On June 28, 1996, the Board of Directors
approved the grant of options to Messrs. Klyman and Cotterell to purchase 10,000
shares of the Common Stock each exercisable at $1.00 per share and expiring June
28, 2001. On June 25, 1997, the Board of Directors approved the grant of options
to Messrs. Klyman and Cotterell to purchase 10,000 shares of the Common stock
each exercisable at $0.65 per share and expiring June 24, 2002.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange of 1934 (the "Exchange Act")
requires the Company's directors and executive officers, and persons who own
more than 10 percent of a registered class of the Company's equity securities,
to file with the Commission and The Nasdaq Stock Market initial reports of
ownership and reports of changes in ownership of the Common Stock and other
equity securities of the Company. Directors, officers and greater than 10
percent shareholders are required by the Commission's regulations to furnish the
Company with copies of all Section 16(a) forms they file. All such persons have
filed all required reports for the fiscal year ended December 31, 1997.
7
<PAGE> 14
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEBTEDNESS OF DIRECTORS, OFFICERS AND EMPLOYEES
As of March 31, 1998, the aggregate indebtedness to the Company and
to any other person which is the subject of a guarantee, support agreement,
letter of credit or other similar arrangement or understanding provided by the
Company of all present and former directors, officers and employees of the
Company was $68,536.00.
<TABLE>
<CAPTION>
LARGEST AMOUNT
NAME AND INVOLVEMENT OF OUTSTANDING DURING AMOUNT OUTSTANDING
PRINCIPAL POSITION ISSUER OR SUBSIDIARY LAST COMPLETED FISCAL YEAR AS OF MARCH 31, 1998
------------------ -------------------- -------------------------- --------------------
<S> <C> <C> <C>
William S. Daugherty (1) Lender $47,923 $43,657
President and Chief
Executive Officer
<FN>
_______________
(1) Part of the indebtedness of Mr. Daugherty to the Company is evidenced by
a promissory note dated September 23, 1993 in the principal amount of
$50,000. The debt was incurred to assist Mr. Daugherty in the payment of
his legal expenses resulting from the acquisition by the Company of
Daugherty Petroleum, Inc. By the terms of the note, the unpaid principal
bears interest at the rate of six percent per annum and is repayable in
monthly installments of not less than $1,000 per month. Repayment
commenced in November 1993. As of December 31, 1997, the unpaid principal
balance due on the note was $6,554. The note was originally due on
December 31, 1997, has been extended until June 30, 1998. The note is
unsecured. As of March 31, 1998, the unpaid principal balance of the
indebtedness was $43,657. As of December 31, 1997, and March 31, 1998,
Renfro Valley Broadcasting, Inc., a company wholly-owned by Mr. Daugherty
was indebted to Daugherty Petroleum, Inc. in the amount of $17,556.
</TABLE>
LEASE OBLIGATION OF THE COMPANY
As of December 31, 1997, the Company was a tenant in a building owned
by a partnership in which William S. Daugherty, a director and the Chief
Executive Officer of the Company and Timothy F. Guthrie, a former officer of the
Company, each owned a 50 percent interest. The rent was $2,600 per month. Mr.
Daugherty has sold his interest in the partnership as of December 31, 1997. The
Company has plans to move its offices in the near future. At present the Company
is on a month-to-month lease in its current lease space.
INDEBTEDNESS OF THE COMPANY TO A SHAREHOLDER
Niagara Oil, Inc., a subsidiary of Daugherty Petroleum, Inc., is
indebted to Jayhead Investments Limited., an affiliate of Alaska Investments
Limited. The remaining balance of the indebtedness is $64,779.00 and bears
interest at a rate of 10 percent beginning April 1, 1995. Payment terms are
based on quarterly payments of interest only with the total principal and
interest, if any, due in full June 1, 1998. This indebtedness is secured by the
assets of Niagara Oil, Inc., as well as the corporate guarantee of Daugherty
Petroleum, Inc.
FINANCING COMMITMENTS
On January 6, 1997, Trio Growth Trust agreed to act as the
underwriter in a private placement of up to $1,000,000 for the Company's
wholly-owned subsidiary, Red River Hardwoods, Inc. In consideration for such
underwriting, the Company agreed to issue to Trio Growth Trust immediately
exercisable warrants for the purchase of 1,500,000 shares of the Common Stock,
such warrants having an exercise price of $0.125 per share pursuant to a Warrant
Agreement dated March 7, 1997 between the Company and Trio Growth Trust. As a
result of the underwriting agreement, Trio Growth Trust acquired a beneficial
ownership of 11.93 percent of the Common Stock of the Company. In addition to
the underwriting commitment of Trio Growth Trust, Exergon Capital S.A. agreed to
participate in the underwriting of Red River Hardwoods, Inc., and in
consideration thereof received immediately exercisable warrants for the purchase
of 500,000 shares of the Common Stock, such warrants having an exercise price of
$0.125 per share, pursuant to a Warrant Agreement dated March 7, 1997 between
the Company and Exergon Capital S.A. As a result of said Warrant Agreement,
Exergon Capital S.A. is the beneficial owner of 5.97 percent of the Common Stock
of the Company.
8
<PAGE> 15
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates the number of shares of the Common
Stock owned beneficially as of March 31, 1998 by (a) each person known to the
Company to beneficially own more than five percent of the outstanding shares of
the Common Stock, (b) each director, (c) the officers of the Company, and (d)
all directors and executive officers as a group. Except to the extent indicated
in the footnotes to the following table, each of the persons or entities listed
therein has sole voting and sole investment power with respect to the shares of
the Common Stock which are deemed beneficially owned by such person or entity.
<TABLE>
<CAPTION>
SHARES OWNED PERCENT
TITLE OF CLASS BENEFICIAL OWNER BENEFICIALLY OF CLASS
-------------- ---------------- ------------ --------
<S> <C> <C> <C>
Common Stock............................. William S. Daugherty 2,349,555 (1) 14.02
131 Prosperous Place, Suite 17-A
Lexington, Kentucky 40509
Trio Growth Trust 2,000,000 (2) 11.93
18 York Valley Crescent
Willowdale, Ontario M2P 1A7
GraceChurch Securities Ltd. 803,000 4.79
21 Abbotsbury House, Abbotsbury Road
London W14 8EN, England
Alaska Investments Limited 1,013,334 6.04
Ospery House, 5 Old Street
St. Helier, Jersey, Channel Islands, U.K.
Exergon Capital S.A. 1,000,000 (3) 5.97
Dufourstrasse 101
Zurich 8008, Switzerland
Jayhead Investments Limited 500,000 (4) 2.98
18 York Valley Crescent
Willowdale, Ontario M2P 1A7
Charles L. Cotterell 84,200 (5) *
James K. Klyman 40,000 (6) *
Environmental Energy, Inc. 2,000,000 (7) 11.93
Directors and executive officers as a group
(5 persons) 2,753,255 (8) 16.42
<FN>
_________________
* Represents ownership of less than one percent.
(1) Includes 1,325,000 shares of the Common Stock, warrants to purchase 119,000 shares of the Common Stock and options to acquire
905,555 shares of the Common Stock which are currently exercisable.
(2) Consists of warrants to purchase 2,000,000 shares of the Common Stock which are currently exercisable.
(3) Includes 500,000 shares of the Common Stock and warrants to purchase 500,000
shares of the Common Stock which are currently exercisable.
(4) Consists of warrants to purchase 500,000 shares of the Common Stock which are currently exercisable.
(5) Includes 44,200 shares of the Common stock and options to purchase 40,000 shares of the Common Stock which are currently
exercisable.
(6) Consists of options to purchase 40,000 shares of the Common Stock which are currently exercisable.
(7) Includes 1,423,700 shares of the Common Stock, options to purchase 1,085,555 shares of the Common Stock which are currently
exercisable, options to purchase 125,000 shares of the Common Stock which are exercisable within 60 days, and warrants to
purchase 119,000 shares of the Common Stock which are currently exercisable.
</TABLE>
VOTE REQUIRED
The three nominees receiving the greatest number of votes cast by the
holders of the Common Stock will be elected as directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR
DIRECTORS.
ITEM 3, AMENDMENTS TO COMPANY ARTICLES
The Board of Directors has adopted, subject to the approval of the
shareholders of the Company, an amendment to the Company Articles (the
"Amendment"), a copy of which is attached hereto as Exhibit A. The following
description of the Amendment is qualified by reference to the full text of the
Amendment.
The effect of the Amendment is to change the name of the Company to
Daugherty Resources, Inc. and to expand the Company's present equity structure.
The Amendment would increase the number of shares of the Common
9
<PAGE> 16
Stock authorized and available for issuance by the Company from 20,000,000 to
50,000,000 shares. The additional authorized shares of the Common Stock would be
of the same class and possess the same rights as those shares presently issued
and outstanding.
In addition to expanding the existing class of the shares of the
Common Stock, the Amendment would authorize 6,000,000 shares of the Preferred
Stock. The powers, preferences, rights, qualifications and limitations
associated with the Preferred Stock have been conditionally established by
management in connection with the transaction discussed below.
Preliminary Agreement. On November 3, 1997, management and
Environmental Energy, Inc. ("EEI") executed an Agreement for the Acquisition of
Certain Oil and Gas Interests (the "Preliminary Agreement"), in which the
Company manifested its intent to purchase certain oil and gas interests and
related assets (the "Assets") owned by EEI and its affiliates. The final terms
of the proposed asset transaction described in the Preliminary Agreement,
including the identification of specific oil and gas interests, the valuation of
such interests, the terms of purchase, have yet to be negotiated by management
and EEI.
As consideration for the transfer of the Assets to the Company
pursuant to the Preliminary Agreement, management proposes to offer and issue a
combination of warrants for the purchase of shares of the Common Stock and
shares of the Preferred Stock to EEI. If the parties are unable to reach a final
agreement with regard to the contemplated transaction, the securities authorized
by the Amendment will be available for issuance in future offerings at the
discretion of the Board of Directors. It is also understood, that any shares of
the Common Stock or shares of the Preferred Stock which may be issued to EEI
will be subject to the Consolidation described herein, even if the transaction
with EEI should be consummated after the Consolidation.
Characteristics of the Preferred Stock. The terms of the Preliminary
Agreement provide for the issuance of 6,000,000 shares of the Preferred Stock.
The Preferred Stock will have the following general characteristics: (a)
non-voting; (b) eligible for non-cumulative, ordinary dividends prior and in
preference to shares of the Common Stock, when and if properly declared by the
Board of Directors of the Company; (c) non-interest bearing; (d) liquidation
preference in the event of any liquidation, dissolution or winding up of the
Company; (e) subject to adjustment in the event of a stock split, reverse stock
split, or similar capital restructuring; and (f) no preemptive rights with
regard to the Preferred Stock or any other securities of the Company.
Subject to certain conditions, the Preferred Stock may be converted
at the election of EEI into shares of the Common Stock on a share for share
basis at any time within a period of two years from the date of issuance. The
Company may initiate a conversion of the Preferred Stock if the last sales price
of the Common Stock equals or exceeds $2.00 for at least 20 trading days and
proper notice of conversion has been provided to the holder. In the event the
Company takes action to effect a conversion, EEI will receive a Conversion Bonus
of shares of the Common Stock equal to one half of one percent per month of the
number of shares of the Preferred Stock which are converted, times the number of
months from issuance of the Preferred Stock to the date of conversion.
Upon the expiration of the two year period, all shares of the
Preferred Stock which remain outstanding will automatically convert into shares
of the Common Stock. In addition, EEI will receive a Conversion Bonus of shares
of the Common Stock equal to 12 percent of the number of the Proposed Shares
unconverted on the second anniversary date.
Offering; Restricted Securities. Management expects to offer the
warrants for the purchase of the shares of the Common Stock, the Preferred
Stock, and/or any rights relating thereto to EEI in one or more private
transactions exempt from registration under applicable securities laws. The
warrants for the purchase of the of the shares of the Common Stock and the
Preferred Stock (and any shares of the Common Stock issued in conversion
thereof) will be deemed restricted securities and will bear an appropriate
legend indicating the same. While the Company is under no obligation to register
the Preferred Stock or any shares of the Common Stock which may be issued upon
the exercise of any warrant or the conversion of the Preferred Stock, in the
event the Company files a registration statement during the period when the
securities are restricted, the securities will have certain "piggyback" rights
to participate in the registration.
10
<PAGE> 17
Foreign Ownership of Securities. As of the date of this proxy
statement, and except as provided in the Investment Canada Act, there are no
limitations under the laws of Canada, the Province of British Columbia or in the
charter or any of the constituent documents of the Company on the right of
foreigners to hold and/or vote shares of the Common Stock or the Preferred
Stock.
The Investment Canada Act essentially requires a non-Canadian making
an investment to acquire control of a Canadian business which exceeds
$150,000,000 to file an application for review with Investment Canada, the
Canadian federal agency created by the Investment Canada Act. Where the
acquisition of control is indirect and made by a non-Canadian (other than an
American, as defined) (for example by the purchase of shares in a controlling
parent corporation which has a Canadian business subsidiary) the threshold is
$500,000,000. For Americans, there is no review of such indirect acquisitions.
The proposed investment, if above the threshold, may not proceed unless
Investment Canada and its responsible minister are satisfied that the investment
will be of benefit to Canada.
A "Canadian business" is defined in the Investment Canada Act as a
business carried on in Canada that has a place of business in Canada, an
individual or individuals in Canada who are employed or self-employed in
connection with the business, and assets in Canada used in carrying on the
business. An "American," as defined in the Investment Canada Act, includes an
individual who is a United States citizen or a lawful permanent resident of the
United States, a government or governmental agency of the United States, an
American-controlled entity, corporation or limited partnership, and a
corporation, limited partnership or trust of which two-thirds of its directors,
general partners or trustees, as the case may be, are Americans.
The acquisitions of certain Canadian businesses are excluded from the
$150,000,000 threshold and remain subject to review in any event. These excluded
businesses are oil, gas, uranium, financial services (except insurance),
transportation services and cultural and broadcast media services (i.e., the
publication, distribution or sale of books, magazines, periodicals, other than
printing or typesetting businesses, television and radio services).
Exchange Controls and Other Limitations. There are no governmental
laws, decrees or regulations in Canada relating to restrictions on the
import/export of capital or affecting the remittance of interest, dividends or
other payments to non-resident holders of the Common Stock or the Preferred
Stock. Any such remittances to United States residents, however, are subject to
a 15 percent withholding tax pursuant to Article X of the reciprocal tax treaty
between Canada and the United States.
Taxation. Generally, dividends paid by Canadian corporations to
non-resident shareholders are subject to a withholding tax of 25 percent of the
gross amount of such dividends. However, Article X of the reciprocal tax treaty
between Canada and the United States reduces to 15 percent the withholding tax
on the gross amount of dividends paid to residents of the United States. A
further five percent reduction in the withholding rate on the gross amount of
dividends is applicable when a United States corporation owns at least 10
percent of the voting stock of the Canadian corporation paying the dividends.
A non-resident of Canada who holds shares of the Common Stock or the
Preferred Stock as capital property will not be subject to tax on capital gains
realized on the disposition of such shares unless such shares are "taxable
Canadian property" within the meaning of the Canadian Income Tax Act and no
relief is afforded under any applicable tax treaty. The shares of the Common
Stock or the Preferred Stock would be "taxable Canadian property" of a
non-resident if at any time during the five year period immediately preceding a
disposition by the non-resident of such shares not less than 25 percent of the
issued shares of any class of the Company belonged to the non-resident, the
person with whom the non-resident did not deal at arm's length, or to the
non-resident and any person with whom the non-resident did not deal at arm's
length.
Reasons for and Effect of the Amendment. Management believes that the
change in the name of the Company and the authorization of additional shares of
the Common Stock and the creation of the Preferred Stock will serve the best
interests of the Company. First, the major activity of the Company is conducted
through its wholly-owned subsidiary, Daugherty Petroleum, Inc., a Kentucky
corporation. In the opinion of management, the public knows of the Company as a
result of the activities of Daugherty Petroleum, Inc. and not Alaska Apollo
Resources Inc. Consequently, it is felt that a change in the name of the Company
will eliminate unnecessary confusion. Second, by increasing the
11
<PAGE> 18
number of securities available for issuance, the Company has the opportunity to
raise additional capital through selected equity financings. Third, the Company
can explore more flexible approaches to equity financing by packaging shares of
the Common Stock and shares of the Preferred Stock in offerings for investors.
Fourth, the authorization of additional equity securities provides the Company
greater latitude when engaging in commercial transactions by offering
alternatives method of payment. Specifically, the authorization of additional
shares of the Common Stock and the shares of the Preferred Stock will enable the
Company to provide the agreed upon consideration negotiated by management under
the Preliminary Agreement. By issuing securities, as opposed to making monetary
payment, in consideration for the Assets, services or other property, the
Company can conserve working capital for use in other areas of operation.
Existing shareholders of the Company may not be eligible to
participate in any offering of the shares of the Common Stock or the shares of
the Preferred Stock authorized by the Amendment. In the event that shares of the
Common Stock are issued and existing shareholders are not able or eligible to
purchase a sufficient number of shares to maintain their ownership percentage of
the Company, such shareholders will be diluted. Similarly, in the event
authorized shares of the Preferred Stock with rights of conversion into shares
of the Common Stock are issued, the equity ownership of existing shareholders of
the Common Stock will be diluted upon conversion of the Preferred Stock.
VOTE REQUIRED
The affirmative vote of three-quarters of the total number of shares
of the Common Stock present in person or represented by proxy at the Meeting is
required to approve the Amendment. For the purpose of such determination,
abstentions will have the same effect as votes cast against the approval of the
Amendment, and broker non-votes will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR APPROVAL OF THE
AMENDMENT.
ITEM 4, THE CONSOLIDATION OF SHARES
The Company is asking its shareholders to pass a special resolution
authorizing the filing of an amendment to the Company Articles consolidating the
authorized, issued and outstanding shares of the Common Stock and the Preferred
Stock, as of a date to be determined by the Board of Directors following the
Meeting, on the basis of one post-Consolidation share of the Common Stock for
every five pre-Consolidation shares of the Common Stock, and one
post-Consolidation share of the Preferred Stock for every five pre-Consolidation
shares of the Preferred Stock (the "Consolidation"). The Consolidation would
immediately reduce the authorized shares of the Common Stock and the Preferred
Stock. The post-Consolidation shares of the Common Stock and the Preferred Stock
will be of the same class and possess the same relative rights as those shares
of the Common Stock and the Preferred Stock presently authorized, issued and
outstanding.
The Board of Directors believes that the Consolidation is in the best
interests of the shareholders because over the long-term the Consolidation will
provide the Company will have greater flexibility with respect to future equity
financings which will be necessary to develop the Company's business.
Furthermore, the Company's shares of the Common Stock currently trade on The
Nasdaq Stock Market in the United States, which has minimum per share price
requirement of $1.00 per share. If the market value per share of the Company's
Common Stock remains below $1.00 per share, the shares of the Common Stock will
no longer be eligible for trading on The Nasdaq Stock Market. As of May 7, 1998,
the high and low bids with respect to the price per share of the Common Stock
were both $0.406. The Nasdaq Stock Market quotations represent interdealer
prices, without mark-ups, commissions, etc., and they may not necessarily be
indicative of actual sales prices. The Consolidation will assist in insuring
that the Company will continue to meet the per share minimum value requirement.
The Board of Directors anticipates that an amendment effecting the
Consolidation will be filed shortly after an approval of the Consolidation by
the shareholders. If the resolution relating to the Consolidation is approved at
the Meeting, shareholders will be required to surrender their current
certificates representing pre-Consolidation Common Stock or pre-consolidation
Preferred Stock at such time as they desire to effect a transfer of same in
exchange for certificates representing post-Consolidation Common Stock or
post-Consolidation Preferred Stock, as the case may be. The Company may require
the shareholders to surrender their old certificates for new certificates, and
if it does, the Company will provide appropriate transmittal forms to the
shareholders for this purpose.
12
<PAGE> 19
The special resolutions approving the Consolidation will provide that
any person who, on the date that the Amendment is filed with the Ministry of
Consumer and Commercial Relations to give effect to such resolution, is the
registered holder of a number of shares of the Common Stock or the Preferred
Stock not divisible by five shall not be entitled to receive any fractional
interest in a share of the Common Stock or the Preferred Stock, as the case may
be, following such consolidation. All fractions of post-Consolidation shares of
the Common Stock and the Preferred Stock will be rounded to the nearest whole
number.
Exhibit B to this Proxy Statement contains the text of the special
resolution with respect to the Consolidation to be submitted to the shareholders
at the Meeting. The above description of the Consolidation is qualified by
reference to the full text of the special resolution attached as Exhibit B.
VOTE REQUIRED
The special resolutions relating to the Consolidation will become
effective when passed at the Meeting by at least three-fourths of the votes
cast. Notwithstanding such approval, the Board of Directors may determine not to
proceed with effecting the Consolidation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE CONSOLIDATION.
ITEM 5, RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to shareholder ratification, the Board of Directors has
appointed Kraft, Rothman, Berger, Grill, Schwartz & Cohen to serve as the
Company's independent public accountants for the fiscal year ending December 31,
1997. Kraft, Rothman, Berger, Grill, Schwartz & Cohen has served as the
Company's independent public accountants since 1992. Representatives of Kraft,
Rothman, Berger, Grill, Schwartz & Cohen are not expected to be present at the
Meeting.
VOTE REQUIRED
The affirmative vote of a majority of the total number of shares of
the Common Stock present in person or represented by proxy at the Meeting is
required to approve the ratification of Kraft, Rothman, Berger, Grill, Schwartz
& Cohen as the Company's independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
SELECTION OF KRAFT, ROTHMAN, BERGER, GRILL, SCHWARTZ & COHEN AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 1998.
OTHER MATTERS
The Board of Directors knows of no other matter to be presented at
the 1998 Meeting. If any additional matter should be presented properly, it is
intended that the enclosed proxy will be voted in accordance with the discretion
of the persons named in the proxy.
AVAILABILITY OF INFORMATION
An Annual Report to Shareholders, including financial statements for
the year ended December 31, 1997, and the Quarterly Report of the Company on
Form 10-QSB for the period ended March 31, 1998 are enclosed herewith. The
financial statements reflected in the Annual Report were audited by Kraft,
Rothman, Berger, Grill, Schwartz & Cohen, auditors of the Company. No
disagreement over accounting practices of the Company exists.
A copy of the exhibits to the Annual Report and the Form 10-QSB
submitted to the Commission is available to each shareholder of record, at the
cost of duplication, upon receipt of a written request addressed to the Company
at 131 Prosperous Place, Suite 17-A, Lexington, Kentucky 40509-1844. The Company
will also make these materials available at the same cost to "beneficial owners"
of such securities upon receipt of a similar written request, containing
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<PAGE> 20
a representation that, as of May 11, 1998, such person was a beneficial owner of
shares of the Common Stock of the Company.
All information contained in this Proxy Statement relating to the
occupations and security holdings of directors and officers of the Company is
based upon information received by the Company from such directors and officers.
SHAREHOLDER PROPOSALS FOR 1999 ANNUAL GENERAL MEETING OF SHAREHOLDERS
Proposals of shareholders intended to be presented at the 1999 Annual
General Meeting of Shareholders must be received by the Company by February 22,
1999 to be considered for inclusion in the proxy statement and form of proxy
relating to the 1999 meeting.
By Order of the Board of Directors,
/s/ William S. Daugherty
William S. Daugherty,
Chairman of the Board and President
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<PAGE> 21
EXHIBIT A
SPECIAL RESOLUTION
AUTHORIZATION OF CHANGE OF NAME AND ADDITIONAL COMMON SHARES AND
CREATION OF A CLASS OF PREFERRED SHARES
Set forth below is the text of the resolution to be submitted with
respect to an amendment to the Memorandum and Articles of the Company which
shall change the name of the Company to Daugherty Resources, Inc. and effect an
increase in the number of authorized shares of the Common Stock of the Company,
without par value per share, to 50,000,000, and to provide for the creation of
6,000,000 shares of the Preferred Stock, without par value per share.
NOW THEREFORE BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:
1. The proper officers of the Company be, and they hereby are,
authorized and directed to file an amendment to the Memorandum and Articles of
the Company, and other relevant corporate documents, effecting a change in the
name of the Company to "Daugherty Resources, Inc."
2. The proper officers of the Company be, and they hereby are,
authorized and directed to file an amendment to the Memorandum and Articles of
the Company, other relevant corporate documents, in substantially same form as
follows:
"The authorized capital of the Company consists of
56,000,000 shares, divided into 6,000,000 shares of preferred stock,
without par value per share (the 'Preferred Stock') and 50,000,000
shares of common stock, without par value per share (the 'Common
Stock'). Shares of such stock may be issued for such consideration
and for such corporate purposes as the board of directors may from
time to time determine. No shareholder of the Company shall by reason
of his holding shares of any class have any preemptive or
preferential right to purchase or subscribe to any shares of any
class of the Company now or hereafter to be authorized or any notes,
debentures, bonds, or other securities convertible into or carrying
options or warrants to purchase shares of any class, now or hereafter
to be authorized, whether or not the issuance of any such shares, or
such notes, debentures, bonds or other securities would adversely
affect dividend or voting rights of such stockholder, other than such
rights, if any, as the board of directors in its discretion may fix;
and the board of directors may issue shares of any class of the
Company, or any notes, debentures, bonds, or other securities
convertible into or carrying options or warrants to purchase shares
of any class, without offering any such shares of any class, either
in whole or in part, to the existing shareholders of any class.
"The following is a statement of the designations and the
powers, preferences and rights and the qualifications, limitations or
restrictions, of the classes of the stock of the Company.
"PREFERRED STOCK
"(a) GENERAL; CONVERSION RIGHTS. The Preferred Stock will
initially be authorized as a single series, but may be expanded to
include additional series pursuant to proper shareholder approval.
The Preferred Stock may be converted into shares of the Common Stock
of the Company at the election of the holder thereof at any time
within two years of the date of issue of the Preferred Stock, on a
share for share basis. The Preferred Stock may be converted into
shares of the Common Stock of the Company by the Company at any time
within two years of the date of issue of the Preferred Stock, on a
share for share basis, if the following conditions are met: (i) the
last sales price per share of the Common Stock, as noted on the
Company's principal trading exchange, equals or exceeds US$2.00 for
at least 20 consecutive days, and (ii) proper notice of conversion is
given to the Company by the holder no sooner than one day after, and
no later than 10 days after the expiration of the referenced
20consecutive trading day period. Any Preferred Stock not converted
by the
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Company or the holder before the second anniversary of its issue
shall be automatically be converted by the Company into the Common
Stock on a share for share basis on the second anniversary of issue.
Any Preferred Stock converted automatically by the Company on the
second anniversary of issue, shall receive a conversion bonus of the
Common Stock equal to 12 percent of the number of shares of the
Preferred Stock which remain unconverted on the second anniversary
date. Any shares of the Preferred Stock converted by the Company
prior to the second anniversary date shall receive a conversion bonus
of the Common Stock equal to 0.5 percent per month of the number of
shares of the Preferred Stock which are converted, times the total
number of months elapsed from the date of issuance of the Preferred
Stock to the date of conversion.
"(b) DIVIDENDS. The holders of the Preferred Stock of each
series shall be entitled to receive non-cumulative, ordinary
dividends prior and in preference to the Common Stock, when and as
properly declared by the board of directors of the Company, out of
any funds legally available therefor.
"(c) LIQUIDATION OR DISSOLUTION. In the event of any
liquidation, dissolution or winding up of the affairs of the Company,
then, before any distribution or payment shall be made to the holders
of the Common Stock or any other class of stock of the Company
ranking junior to the Preferred Stock in respect of dividends or
distribution of assets on liquidation, the holders of the Preferred
Stock of the respective series shall be entitled to be paid in full
the respective amounts fixed for such series, plus in each case a sum
equal to accrued and unpaid dividends thereon to the date of payment
thereof. After such payment shall have been made in full to the
holders of the Preferred Stock, the remaining assets and funds of the
Company shall be distributed among the holders of the stock of the
Company ranking junior to the Preferred Stock according to their
respective rights, in the event that the assets of the Company
available for distribution to holders of the Preferred Stock shall
not be sufficient to make the payment herein required to be made in
full, such assets shall be distributed to the holders of the
respective shares of the Preferred Stock pro rata in proportion to
the amounts payable hereunder upon each share thereof.
"(d) STATUS OF STOCK REDEEMED OR RETIRED. Except as
otherwise provided in this Article or in any resolution of the board
of directors providing for the issuance of any particular series of
the Preferred Stock, shares of the Preferred Stock redeemed or
otherwise retired by the Company shall assume the status of
authorized but unissued Preferred Stock and may thereafter, subject
to the provisions of this Memorandum and of any restrictions
contained in any resolution of the board of directors providing for
the issuance of any particular series of the Preferred Stock, be
reissued in the same manner as other authorized but unissued shares
of the Preferred Stock.
"(e) RESTRICTIONS ON CERTAIN CORPORATE ACTION. So long as
any shares of any series of the Preferred Stock are outstanding (i)
the Company shall not, without the consent of the holders of at least
three-quarters of the number of shares of the Preferred Stock at the
time outstanding, given in person or by proxy, either in writing or
by vote at a special meeting called for the purpose, amend, alter or
repeal any of the provisions of this Article (other than provisions
relating exclusively to the shares of the Preferred Stock of a
particular series) so as to affect adversely the rights, powers or
preferences of the Preferred Stock, and shall not, without the
consent of the holders of at least three-quarters of the number of
shares of the Preferred Stock of such series at the time outstanding,
given in person or by proxy, either in writing or by a vote at a
special meeting called for the purpose, amend, alter or repeal any of
the provisions of this Article or of any resolution or resolutions
relating exclusively to the shares of the Preferred Stock of such
series, so as to affect adversely the rights, powers or preferences
of the Preferred Stock of such series; (ii) the Company shall not,
without the consent of the holders of at least three-quarters of the
number of shares of the Preferred Stock at the time outstanding,
given in person or by proxy, either in writing or by vote at a
special meeting called for that purpose, create or authorize any
additional class of stock ranking prior to the Preferred Stock in
respect of dividends or distribution of assets on liquidation or
increase the authorized amount of any additional class of stock
ranking prior to the Preferred Stock in respect of dividends or
distribution of assets on liquidation, or create or authorize any
obligation or security convertible into
A-2
<PAGE> 23
or evidencing the right to purchase shares of stock of any additional
class ranking prior to the Preferred Stock in respect of dividends or
distribution of assets on liquidation; and (iii) the Company shall
not, withhold the consent of the holders of at least three-quarters
of the number of shares of the Preferred Stock at the time
outstanding, given in person or by proxy, either in writing or by
vote at a special meeting called for the purpose, create or authorize
any class of stock ranking on a parity with the Preferred Stock in
respect of dividends or distributions of assets on liquidation, or
increase the authorized amount of the Preferred Stock or of any class
of stock ranking on a parity with the Preferred Stock in respect of
dividends or distribution of assets on liquidation, or create or
authorize any obligation or security convertible into or evidencing
the right to purchase shares of stock of any class ranking on a
parity with the Preferred Stock in respect of dividends or
distribution of assets on liquidation. Any action specified in this
Paragraph (e) as requiring the consent of the holders of at least a
specified proportion of the number of shares of the Preferred Stock
or of any particular series thereof at the time outstanding or
represented at a meeting may be taken with such consent and with such
additional vote or consent, if any, of the shareholders as may be
from time to time required by this Memorandum, as amended from time
to time, or by law.
"(f) VOTING RIGHTS. Except as otherwise provided herein or
by law, the Preferred Stock shall not be entitled to vote on any
matter involving the Company.
"COMMON STOCK
"(a) DIVIDENDS. Subject to the prior and superior rights of
the Preferred Stock with respect to which any such prior and superior
rights are provided in this Article or by the board of directors as
herein authorized, and on the conditions set forth in the foregoing
part of this Memorandum pertaining to the Preferred Stock or in any
resolution of the board of directors providing for the issuance of
any particular series of the Preferred Stock, and not otherwise, such
dividends (payable in cash, stock or otherwise) as may be determined
by the board of directors may be declared and paid on the Common
Stock from time to time out of any funds legally available therefor.
"(b) VOTING RIGHTS. Each holder of the Common Stock shall
be entitled to one vote for each share held and, except as otherwise
provided herein or by law, the Common Stock and the Preferred Stock
having voting rights shall vote together as a class. At each election
for directors every shareholder entitled to vote at such election
shall have the right to vote, in person or by proxy, the number of
shares owned by him for as many persons as there are directors to be
elected and for whose election he has a right to vote. It is
expressly prohibited for any shareholder to cumulate his votes in any
election of directors.
"(c) LIQUIDATION OR DISSOLUTION. After payment shall have
been made in full to the holders of the Preferred Stock in the event
of any liquidation, dissolution or winding up of the affairs of the
Company, the remaining assets and funds of the Company shall be
distributed among the holders of the Common Stock according to their
respective shares."
3. The proper officers of the Company be, and they hereby are,
authorized and directed, for and in the name of and on behalf of the Company, to
execute all such documents, instruments, and certificates under the corporate
seal or otherwise, and to do all such other acts and things, as they may
determine in their sole and absolute discretion to be necessary or advisable in
order to carry out the purpose and intent of the foregoing resolution.
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EXHIBIT B
SPECIAL RESOLUTION
CONSOLIDATION OF SHARES
Set forth below is the text of the resolution to be submitted with
respect to an amendment to the Memorandum and Articles of the Company which
shall effect the Consolidation.
NOW THEREFORE BE IT RESOLVED AS A SPECIAL RESOLUTION THAT:
1. The proper officers of the Company be, and they hereby are,
authorized and directed to file an amendment to the Memorandum and Articles of
the Company, and other relevant corporate documents, effecting a consolidation
of the authorized, issued and outstanding capital of the Company, including all
shares of the Common Stock and the Preferred Stock (the "Share(s)"), on the
basis of one post-consolidation Share for every five pre-consolidation Shares of
the Company's capital (the "Consolidation"). The Consolidation shall not affect
any rights, privileges or obligations with respect to the Shares existing prior
to the Consolidation.
2. On the date that the amendment described herein is filed with the
Ministry of Consumer and Commercial Relations to give effect to such resolution,
any registered holder of a number of shares of the Common Stock or the Preferred
Stock not divisible by five shall not be entitled to receive any fractional
interest in a share of the Common Stock or the Preferred Stock, as the case may
be, following such consolidation. All fractions of post-Consolidation shares of
the Common Stock and the Preferred Stock which are less than .5 of a whole share
will be rounded down to the nearest whole share, and all such fractions which
are .5 or greater of a whole share will be rounded up to the nearest whole
share.
3. The proper officers of the Company be, and they hereby are,
authorized and directed, for and in the name of and on behalf of the Company, to
execute all such documents, instruments, and certificates under the corporate
seal or otherwise, and to do all such other acts and things, as they may
determine in their sole and absolute discretion to be necessary or advisable in
order to carry out the purpose and intent of the foregoing resolution.
B-1
<PAGE> 25
ALASKA APOLLO RESOURCES INC.
131 Prosperous Place, Suite 17-A
Lexington, Kentucky 40509-1844
PROXY
THIS PROXY IS SOLICITED BY THE MANAGEMENT OF ALASKA APOLLO RESOURCES
INC. (THE "COMPANY") FOR THE ANNUAL GENERAL MEETING OF ITS SHAREHOLDERS (THE
"MEETING") TO BE HELD ON JUNE 22, 1998.
The undersigned hereby appoints William S. Daugherty, the Chairman of
the Board and President of the Company, or failing him, James K. Klyman, a
director of the Company, or instead of either of the foregoing, (insert name)
_______________________________, as nominee of the undersigned, with full power
of substitution, to attend and vote on behalf of the undersigned at the Meeting
to be held at 625 Howe Street, Suite 700, Vancouver, British Columbia, Canada,
on June 22, 1998 at 10:00 a.m., Vancouver, British Columbia time, and at any
adjournments thereof, and directs the nominee to vote or abstain from voting the
shares of the undersigned in the manner indicated below:
1. Fixing the Number of Directors.
Vote FOR [ ] AGAINST [ ] the resolution fixing the size of the
Board of Directors at three.
2. Election of Directors.
The nominees proposed by management are:
William S. Daugherty
James K. Klyman
Charles E. Cotterell
Vote FOR [ ] the election of all nominees listed above (EXCEPT THOSE
WHOSE NAMES THE UNDERSIGNED HAS DELETED).
WITHHOLD [ ] vote.
3. Approval of the Amendment to the Company Articles.
Vote FOR [ ] AGAINST [ ] the resolution approving the Amendment to
the Company Articles.
4. Approval of the Consolidation.
Vote FOR [ ] AGAINST [ ] the resolution approving the Consolidation.
5. Auditors.
Vote FOR [ ] WITHHOLD [ ] vote on the resolution to appoint Kraft,
Rothman, Berger, Grill, Schwartz & Cohen, Chartered Accountants, as
auditors of the Company at the remuneration to be fixed by the Board
of Directors.
6. Upon any other matter that properly comes before the Meeting.
[ ]
[ ]
(Please advise the Company of any change of address)
THE UNDERSIGNED HEREBY REVOKES ANY PRIOR
PROXY OR PROXIES.
Dated ___________________________________, 1998.
______________________________________________________
Signature of Shareholder
______________________________________________________
Printed Name of Shareholder
A PROXY WILL NOT BE VALID UNLESS THE FORM OF PROXY IS DATED, DULY EXECUTED AND
DELIVERED TO THE OFFICE OF PACIFIC CORPORATE TRUST COMPANY, 625 HOWE STREET,
SUITE 830, VANCOUVER, BRITISH COLUMBIA V6C 3B8, NOT LESS THAN 48 HOURS
(EXCLUDING SATURDAYS AND HOLIDAYS) BEFORE THE MEETING AT WHICH THE PERSON NAMED
THEREIN PURPORTS TO VOTE IN RESPECT THEREOF.
Joint owners should each sign the proxy and where the proxy is signed by a
corporation either its common seal must be affixed to the proxy or it should be
signed by the corporation under the hand of an officer or attorney duly
authorized in writing, which authorization must accompany the proxy.
THE SHARES REPRESENTED BY THE PROXY WILL BE VOTED OR WITHHELD FROM VOTING IN
ACCORDANCE WITH THE INSTRUCTIONS OF THE SHAREHOLDER ON ANY BALLOT AND WHERE A
CHOICE WITH RESPECT TO ANY MATTER TO BE ACTED UPON IS SPECIFIED, THE SHARES WILL
BE VOTED ON ANY BALLOT IN ACCORDANCE WITH SUCH SPECIFICATION.
RETURN THIS PROXY IMMEDIATELY.
