SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<Table>
[ ] 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 Section 240.14a-11c or Section 240.14a-12
</Table>
Daugherty Resources, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(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.:
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(3) Filing Party:
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(4) Date Filed:
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DAUGHERTY RESOURCES, INC.
120 PROSPEROUS PLACE, SUITE 201
LEXINGTON, KY 40509
PROXY STATEMENT AND INFORMATION CIRCULAR
MAY 15, 2003
DAUGHERTY RESOURCES, INC.
120 PROSPEROUS PLACE, SUITE 201
LEXINGTON, KENTUCKY 40509
To Our Shareholders:
You are cordially invited to attend the 2003 Annual General Meeting of
the Shareholders (the "Meeting") of Daugherty Resources, Inc. to be held at 625
Howe Street, Suite 700, Vancouver, British Columbia, Canada V6C 2T6, on June 26,
2003 at 10:00 a.m., Vancouver, British Columbia time.
Your approval is requested in (i) fixing the number of directors of
Daugherty Resources for the coming year, (ii) electing directors to serve for
the coming year, and (iii) ratifying, affirming and approving the appointment of
an auditor for Daugherty Resources for the fiscal year ending December 31, 2003.
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 Daugherty Resources, Inc.
Sincerely,
William S. Daugherty
Chairman of the Board and President
On Behalf of the Board of Directors
Lexington, Kentucky
May 15, 2003
DAUGHERTY RESOURCES, INC.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 26, 2003
The 2003 Annual General Meeting of Shareholders (the "Meeting") of
Daugherty Resources, Inc., a British Columbia corporation, will be held at 625
Howe Street, Suite 700, Vancouver, British Columbia, Canada V6C 2T6, on June 26,
2003, at the hour of 10:00 a.m. (local time), for the following purposes:
1. To receive and consider the audited financial statements of
Daugherty Resources for the fiscal year ended December 31, 2002,
together with the auditors' report thereon.
2. To receive and consider the report of the directors of Daugherty
Resources.
3. To fix the number of directors for the ensuing year.
4. To elect directors for the ensuing year.
5. To consider the ratification of the appointment of Kraft, Berger,
Grill, Schwartz, Cohen & March LLP as auditor of Daugherty
Resources for the fiscal year ending December 31, 2003.
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
Shareholders registered as holders of Daugherty Resources' common
shares (the "Common Stock") who are deemed to hold such shares as of the close
of business on May 14, 2003 (the "Record Date") are entitled to Notice of the
Meeting. A list of the shareholders will be available for inspection for at
least 10 days prior to the Meeting during normal business hours at the offices
of Daugherty Resources.
Shareholders are cordially invited to attend the Meeting in person.
Those who do not attend and who wish their shares to be voted are requested to
sign, date, and mail promptly the enclosed proxy, for which a return envelope is
provided.
Only holders of the Common Stock are entitled to vote on all matters to
be considered at the Meeting. If any shareholder transfers his shares after the
Record Date and the transferee, at least 48 hours prior to the Meeting, produces
properly endorsed share certificates to the Secretary or transfer agent of
Daugherty Resources, or otherwise establishes ownership of the shares, the
transferee may vote those shares. The transfer register will not be closed at
any time prior to the Meeting.
The Board of Directors has by resolution fixed the close of business on
the second business day preceding the day of the Meeting (excluding Saturdays,
Sundays and holidays) and any adjournments thereof as the time before which
proxies to be used or acted upon at the Meeting or any adjournments thereof
shall be deposited with Daugherty Resources or its transfer agent.
Shareholders, whether or not able to attend the Meeting in person, are
requested to date and sign the enclosed form of proxy and to return it to
Daugherty Resources' Transfer Agent, Pacific Corporate Trust Company, 625 Howe
Street, 10th Floor, Vancouver, British Columbia, Canada V6C 3B8, not less than
48 hours (excluding Saturdays, Sundays, and holidays) before the meeting to be
held at 10:00 a.m. (Vancouver, British Columbia time) on June 26, 2002.
1
FOR FULL INFORMATION, THIS NOTICE MUST BE READ IN CONJUNCTION WITH THE
ACCOMPANYING PROXY STATEMENT.
By Order of the Board of Directors,
William S. Daugherty
Chairman of the Board and President
Lexington, Kentucky
May 15, 2003
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE SIGN, DATE, AND RETURN YOUR
PROXY AS PROMPTLY AS POSSIBLE. AN ENVELOPE IS ENCLOSED FOR THIS PURPOSE.
2
PROXY STATEMENT
SOLICITATION OF PROXIES
The Proxy Statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Daugherty Resources, Inc.,
a British Columbia corporation, for the 2003 Annual General Meeting of
Shareholders (the "Meeting") to be held on June 26, 2003, at 625 Howe Street,
Suite 700, Vancouver, British Columbia, Canada V6C 2T6, at 10:00 a.m. local
time, in order to:
- Receive and consider the audited financial statements of
Daugherty Resources for the fiscal year ended December 31, 2002,
together with the auditors' report thereon.
- Receive and consider the report of the directors of Daugherty
Resources.
- Fix the number of directors to serve for the coming year at
three.
- Elect the candidates nominated by the Board of Directors to serve
as directors for the coming year.
- Ratify the appointment of Kraft, Berger, Grill, Schwartz, Cohen &
March LLP as auditor of Daugherty Resources for the fiscal year
ending December 31, 2003.
- Transact such other business as may properly come before the
Meeting.
The Annual Report of Daugherty Resources on Form 10-KSB, including
financial statements for the year ended December 31, 2002, and the Quarterly
Report of Daugherty Resources on Form 10-QSB for the period ended March 31, 2003
are enclosed with this Proxy Statement.
This Proxy Statement and the enclosed Proxy are first being sent or
given to shareholders on or about May 20, 2003. All associated costs relating to
this proxy solicitation will be borne by Daugherty Resources. Advance notice of
the Meeting was published in the Vancouver Province in Vancouver, British
Columbia on April 28, 2003. In addition to solicitation by mail, certain of the
directors, officers and employees of Daugherty Resources 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 Daugherty Resources for postage and clerical expenses.
Shares represented by properly executed proxies will be voted as
specified. IF NO SPECIFICATIONS HAVE BEEN GIVEN IN PROXIES WHICH ARE RETURNED,
THE SHARES REPRESENTED THEREBY WILL BE VOTED FOR THE FIXING OF THE NUMBER OF
DIRECTORS FOR THE ENSUING YEAR AT THREE, FOR THE ELECTION OF THE NOMINEES LISTED
HEREIN AS DIRECTORS FOR THE ENSUING YEAR, FOR THE RATIFICATION OF KRAFT, BERGER,
GRILL, SCHWARTZ, COHEN & MARCH LLP AS AUDITOR FOR THE FISCAL YEAR ENDING
DECEMBER 31, 2003, AND IN THE DISCRETION OF THE PERSONS NAMED IN THE PROXY ON
ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING, OR ANY ADJOURNMENTS
THEREOF. At the time of the printing of this Proxy Statement, management knows
of no such other matters to come before the Meeting other than the matters
referred to in the Notice of Meeting.
A form of proxy will not be valid unless it is completed and delivered
to Pacific Corporate Trust Company, 625 Howe Street, 10th Floor, Vancouver,
British Columbia, Canada V6C 3B8, not less than 48 hours (excluding Saturdays,
Sundays and holidays) before the Meeting.
APPOINTMENT AND REVOCATION OF PROXIES
The solicitation of proxies is being made on behalf of the Board of
Directors of Daugherty Resources. The individuals named in the accompanying form
of proxy are the President and a director of Daugherty Resources. A shareholder
wishing to appoint some other person (who need not be a shareholder of Daugherty
Resources) 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 the
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 Daugherty Resources is 120 Prosperous Place, Suite 201,
Lexington, Kentucky 40509.
3
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
Daugherty Resources' principal executive office.
VOTING OF SECURITIES
The securities that can be voted at the Meeting consist of shares of
common stock of the Company (the "Common Stock"). Shareholders of record at the
close of business on May 14, 2003 (the "Record Date") are entitled to notice of
and to vote at the Meeting. As of the Record Date, 6,345,772 shares of the
Common Stock were issued and outstanding fully paid and non-assessable. Each
share of the Common Stock is entitled to one vote. 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 sufficient shares are not
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 Daugherty Resources. Proxies given 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 "BCCA"),
- 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.
- 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 the ratification of Kraft, Berger,
Grill, Schwartz, Cohen & March LLP as auditor for the fiscal year
ending December 31, 2003 (Item 3).
Under British Columbia law, abstentions are treated as presented 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.
PROPOSAL 1: DETERMINATION OF THE NUMBER OF DIRECTORS
Management proposes to fix the number of directors of Daugherty
Resources 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 Daugherty Resources at three for the
ensuing year. For the purpose of such determination, abstentions will have the
same effect as votes cast against the approval of fixing the number of directors
at three, and broker non-votes will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FIXING OF THE NUMBER
OF DIRECTORS AT THREE FOR THE ENSUING YEAR.
PROPOSAL 2: ELECTION OF DIRECTORS
The Board of Directors is currently composed of three members. It is
intended that the number of directors will be three for the ensuing year.
TERM OF OFFICE
The term of office of each of the current directors expires at the
Meeting. The persons named below have been nominated to stand for election at
the Meeting by the Board of Directors. Each director elected will hold office
until the next annual general meeting of the shareholders of Daugherty Resources
or until his successor is elected or appointed, unless his office is earlier
vacated in accordance with the Memorandum and Articles of Daugherty Resources or
the provisions of the BCCA.
4
NOMINEES
The following persons will be nominated at the Meeting for the
available positions on the Board of Directors of Daugherty Resources:
- William S. Daugherty, age 48, has been a director since September
1993. Mr. Daugherty has served as - President and Chief Operating
Officer of Daugherty Resources since September 1993. Mr.
Daugherty has served as President of Daugherty Petroleum, Inc.
since 1984. In 1995, Mr. Daugherty was elected as Chairman of the
Board of Daugherty Resources.
- James K. Klyman, age 48, has been a director since May 1992. For
the past eight years, Mr. Klyman has been a computer software
designer and programmer specializing in applied information
technology.
- Charles L. Cotterell, age 78, 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 past Vice President of Konal Engineering Co. Ltd., is a
past director of Mariner Mines, Ltd., Nordustrial, Ltd., Goliath
Boat Co., and Dominion Power Press Mines, Equipment Co., Ltd.,
and is the past President of Smith Press Automation Co., Ltd.
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
During fiscal year 2002, the Board of Directors held fifteen (15)
meetings and approved actions on twenty (20) separate matters by unanimous
consent without formal meetings. The Board of Directors has established an Audit
Committee and Nominating Committee to oversee specific matters affecting
Daugherty Resources.
COMMITTEES.
THE AUDIT COMMITTEE.
Daugherty Resources is required to have an Audit Committee of which the
current members are William S. Daugherty, James K. Klyman and Charles L.
Cotterell. As required by the Marketplace Rules of the National Association of
Securities Dealers ("NASD"), the majority of the members of the Audit Committee
are independent. The Audit Committee held four meetings during fiscal 2002.
Daugherty Resources adopted an Audit Committee Charter on June 14, 2000.
AUDIT COMMITTEE REPORT.
The Audit Committee meets with Daugherty Resources' auditor to review
those matters contained in SAS 61, including but not limited to, Daugherty
Resources' accounting policies, internal controls and other accounting and
auditing matters; makes recommendations to the Board as to the engagement of a
firm of independent accountants as auditor; 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 auditor; reviews Daugherty
Resources' annual and quarterly reports; reviews the written disclosures and
letters from the auditors and discusses with the auditors the independence of
the auditors and accountants; and, based upon the foregoing, recommends to the
Board of Directors the inclusion of the audited financial statements in the
annual report.
Submitted by the Audit Committee of the
Board of Directors
William S. Daugherty
James K. Klyman
Charles L. Cotterell
AUDIT FEES.
The total aggregate fees billed for auditing and accounting of
Daugherty Resources and its wholly owned subsidiaries in 2002 was $125,589 of
which $75,546 was billed for the auditing and accounting services of Daugherty
Resources.
5
ALL OTHER FEES.
No fees were billed for non-audit services in 2002, which, in the
opinion of the Audit Committee, is compatible with maintaining auditor
independence.
THE NOMINATING COMMITTEE.
The Nominating Committee, currently composed of William S. Daugherty
and Charles L. Cotterell, held one meeting during fiscal 2002. 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 Daugherty Resources. Any such recommendation for the 2004 Annual
General Meeting of Shareholders should be provided to the Corporate Secretary of
Daugherty Resources by March 1, 2004.
THE COMPENSATION COMMITTEE.
Daugherty Resources does not have a Compensation Committee.
During the fiscal year ended December 31, 2002, each director attended
all meetings of Daugherty Resources' Board of Directors and the respective
Committees on which he served.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION. Daugherty
Resources 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
Daugherty Resources' executive officers were effective in attracting and
retaining key executives responsible for the success of Daugherty Resources and
were administered in an appropriate fashion in the long-term best interest of
Daugherty Resources and its shareholders. In that regard, the Board of Directors
sought to align total compensation for Daugherty Resources' executive officers
with the performance of Daugherty Resources and the individual performance of
each executive officer in assisting Daugherty Resources in accomplishing its
goals.
Unless otherwise indicated, all references to dollars throughout this
Proxy Statement shall mean United States dollars.
All actions of the Board with respect to Mr. Daugherty's compensation
are taken without his involvement. Mr. Daugherty and Mr. Cotterell, one of the
directors of Daugherty Resources, participated in deliberations concerning other
officers 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 2002 base salaries for
executive officers was generally to keep them at appropriate levels in light of
what was customary in the industry.
STOCK OPTIONS. The Board of Directors believes that to achieve
Daugherty Resources' long-term growth objectives and to align management and its
shareholders' interests, it is in the best interest of Daugherty Resources 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, and the
shareholders later approved, a Stock Option Plan under Section 422 of the
Internal Revenue Code of 1986, as amended. The 1997 Stock Option Plan is
administered by a Committee appointed by the Board of Directors to serve as Plan
Administrator, the members of which are to be "Non-Employee Directors" as
defined in Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The members of the Committee are James K. Klyman and Charles L.
Cotterell. The 1997 Stock Option Plan provides for the issuance of stock options
for 600,000 shares of the Common Stock, 400,000 of which are reserved for Mr.
Daugherty, and the remaining 200,000 reserved for other employees of Daugherty
Resources as may be determined by the Committee. At the annual meeting held on
June 25, 2001, the shareholders of Daugherty Resources, approved the 2001 Stock
Option Plan. The 2001 Stock Option Plan provides for the issuance of stock
options for up to three million shares of the Common Stock and contains the same
or similar provisions as the 1997 Stock Option Plan. The 2001 Stock Option Plan
is administered by a Committee appointed by the Board of Directors to serve as
Plan Administrator.
6
VOTE REQUIRED
The three nominees receiving the greatest number of votes cast by the
holders of the Common Stock will be elected as directors. For the purpose of
such determination, abstentions will have the same effect as withholding a vote
for the nominees, and broker non-votes will have no effect on the outcome of the
vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF WILLIAM S.
DAUGHERTY, JAMES K. KLYMAN, AND CHARLES L. COTTERELL AS DIRECTORS OF DAUGHERTY
RESOURCES.
PROPOSAL 3: RATIFICATION OF THE APPOINTMENT OF INDEPENDENT ACCOUNTANTS
Subject to shareholder ratification, the Board of Directors has
appointed Kraft, Berger, Grill, Schwartz, Cohen & March LLP, a Toronto, Ontario
based accounting firm, as Daugherty Resources' auditor for the fiscal year
ending December 31, 2003. Kraft, Berger, Grill, Schwartz, Cohen & March LLP has
served as Daugherty Resources' independent public accountant since 1992.
Representatives of Kraft, Berger, Grill, Schwartz, Cohen & March LLP are not
expected to be present at the Meeting.
VOTE REQUIRED
The affirmative vote of a majority of the total shares of the Common
Stock present in person or represented by proxy at the Meeting is required to
approve the ratification of Kraft, Berger, Grill, Schwartz, Cohen & March LLP as
Daugherty Resources' independent public accountants. For the purpose of such
determination, abstentions will have the same effect as votes cast against the
approval of the ratification of Kraft, Berger, Grill, Schwartz, Cohen & March
LLP as Daugherty Resources' independent public accountants, and broker non-votes
will have no effect on the outcome of the vote.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF KRAFT, BERGER, GRILL, SCHWARTZ, COHEN & MARCH LLP AS DAUGHERTY
RESOURCES' INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER
31, 2003.
DIRECTORS AND EXECUTIVE OFFICERS OF DAUGHERTY RESOURCES
Set forth below are the directors and executive officers of Daugherty
Resources, together with their ages as of the date of this Report. Each director
is elected for a one-year term and serves until his successor is elected and
qualified.
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
William S. Daugherty 48 Chairman of the Board, President and September 1993
Chief Executive Officer
D. Michael Wallen 48 Vice President and Secretary N/A
Michael P. Windisch 28 Chief Financial Officer N/A
James K. Klyman 48 Director May 1992
Charles L. Cotterell 78 Director June 1994
A description of the business experience during the past several years
for each of the directors and executive officers of Daugherty Resources and
certain significant employees of Daugherty Resources is set forth below.
WILLIAM S. DAUGHERTY, age 48, has served as Director, President and
Chief Operating Officer of Daugherty Resources since September 1993. Mr.
Daugherty has served as President of Daugherty Petroleum since 1984. In 1995,
Mr. Daugherty was elected as Chairman of the Board of Daugherty Resources. Mr.
Daugherty is past president of the Kentucky Oil and Gas Association, the
Kentucky Independent Petroleum Producers Association, and also serves as the
Governor's Official Representative to the Interstate Oil and Gas Compact
Commission and as a member of the Kentucky Energy Council. Mr. Daugherty spends
approximately 10 days per year in these voluntary leadership roles. Mr.
Daugherty holds a B. S. Degree from Berea College, Berea, Kentucky.
7
D. MICHAEL WALLEN, age 48, joined Daugherty Petroleum in March 1995 as
Vice President of Engineering and was elected a Vice President of Daugherty
Resources in March 1997. Prior to joining Daugherty Resources, 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. Mr. Wallen currently serves
as President of the Kentucky Oil and Gas Association, a statewide trade
association. Mr. Wallen spends approximately 12 days per year in this voluntary
leadership role. He is currently president of the Kentucky Oil & Gas
Association, having served on the Board of Directors and as Vice President. Mr.
Wallen also serves as the Governor's Official Representative to the Interstate
Oil and Gas Compact Commission. Mr. Wallen holds a B. S. Degree from Morehead
State University, Morehead, Kentucky.
MICHAEL P. WINDISCH, age 28, joined Daugherty Resources in September
2002 as Chief Financial Officer. Prior to joining Daugherty Resources, Mr.
Windisch spent five years with PricewaterhouseCoopers LLP, in the public
accounting firms' audit practice. He is a member of the American Institute of
Certified Public Accountants. Mr. Windisch holds a B. S. Degree from Miami
University.
JAMES K. KLYMAN, age 48, has been a director since May 1992. For the
past eight years, Mr. Klyman has been a computer software designer and
programmer specializing in applied information technology.
CHARLES L. COTTERELL, age 78, 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 past 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.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange of 1934 (the "Exchange Act")
requires Daugherty Resources' directors and executive officers, and persons who
own more than 10 percent of a registered class of Daugherty Resources' equity
securities, to file with the Securities and Exchange Commission (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 Daugherty Resources. Directors, officers and greater than 10 percent
shareholders are required by the Commission's regulations to furnish Daugherty
Resources with copies of all Section 16(a) forms they file. Based solely upon a
review of Forms 3 and 4 and amendments thereto furnished to Daugherty Resources,
Inc. under Rule 16a-3(b) during 2002, and Forms 5 and amendments thereto
furnished to Daugherty Resources with respect to 2002, Daugherty Resources is
not aware of any director, officer, or beneficial owner of more than ten percent
of any class of equity securities of Daugherty Resources registered pursuant to
Section 12 of the Exchange Act that failed to file on a timely basis, as
disclosed in the above forms, reports required by Section 16(a) of the Exchange
Act during such year.
EXECUTIVE COMPENSATION
The following table sets forth information regarding annual and long-term
compensation with respect to the fiscal years ended December 31, 2002, 2001, and
2000 for services in all capacities rendered to Daugherty Resources by William
S. Daugherty, the Chief Executive Officer of Daugherty Resources, and D. Michael
Wallen, Vice President and Secretary of Daugherty Resources. There was no other
person serving as an executive officer of Daugherty Resources at December 31,
2002 whose total annual compensation exceeded $100,000.
8
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION LONG TERM
COMPENSATION
Name and Principal Position Year Salary Bonus Other Annual Securities Underlying
--------------------------- ---- ------ ------ ------------- ---------------------
Compensation Options (#)
------------ -----------
William S. Daugherty 2002 $144,616 $12,600 (1) $3,890 (4) 0
Chairman and President 2001 $131,250 $56,250 (2) $3,030 (4) 0
2000 $ 98,077 $56,250 (3) $2,995 (4) 100,000 (5)
D. Michael Wallen 2002 $100,000 $12,600 (6) $1,211 (9)
Vice President 2001 $77,110 $56,250 (7) $974 (9) 0
2000 $64,377 $46,250 (8) $1,786 (9) 100,000 (10)
- -----------------
(1) The bonus was in the form of 20,000 shares of the Common Stock valued at
$0.63 (U.S.) per share.
(2) The bonus was in the form of 37,500 shares of the Common Stock valued at
$1.50 (U.S.) per share.
(3) The bonus was in the form of 25,000 and 25,000 shares of the Common Stock
valued at $1.00 and $1.25 (U.S.) per share, respectively.
(4) Mr. Daugherty is indebted to Daugherty Resources on five promissory notes
bearing an interest rate of 6% per annum and certain non-interest bearing,
unsecured loans (See footnote 1 of Table of Indebtedness of Directors,
Officers and Employees). Assuming a market rate of 4.75% per annum for
comparable loans, Mr. Daugherty received $3,890 and $3,030 in additional
benefit during 2002 and 2001, respectively, while in 2000, when it was
assumed that 9% per annum was the market rate, he received $2,995 in
additional benefit.
(5) These options were approved on April 28, 2000, by the Board of Directors
pursuant to the Alaska Apollo Resources Inc. 1997 Stock Option Plan, are
exercisable at $1.25 (U.S.) per share and expire five years from the date
granted.
(6) The bonus was in the form of 20,000 shares of the Common Stock valued at
$0.63 (US) per share.
(7) The bonus was in the form of 37,500 shares of the Common Stock valued at
$1.50 (US) per share.
(8) The bonus was in the form of 15,000 and 25,000 shares of the Common Stock
valued at $1.00 and $1.25 (U.S.) per share, respectively.
(9) Mr. Wallen is indebted to Daugherty Resources on five Promissory Notes
bearing an interest rate of 6% per annum and certain non-interest bearing,
unsecured loans (See footnote 2 of Table of Indebtedness of Directors,
Officers and Employees). Assuming a market rate of 4.75% per annum for
comparable loans, Mr. Wallen received $1,211 and $974 in additional benefit
during 2002 and 2001, respectively, while in 2000, when it was assumed that
9% per annum was the market rate, he received $1,786 in additional benefit.
(10) These options were approved on April 28, 2000, by the Board of Directors
pursuant to the Alaska Apollo Resources, Inc. 1997 Stock Option Plan, are
exercisable at $1.25 (U.S.) per share and expire five years from the date
granted.
While the officers of Daugherty Resources receive benefits in the form
of certain perquisites, the individuals identified in the foregoing table have
not received perquisites that exceed in value the lesser of $50,000 or 10
percent of such officer's salary and bonus.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
Daugherty Resources does not maintain a Long-Term Incentive Plan as
that term is defined in Item 402(a)(6)(iii) of Regulation S-B.
STOCK OPTIONS
Daugherty Resources did not grant stock options to officers during
2002. The following table shows the number of shares of the Common Stock
underlying all exercisable and non-exercisable stock options held by William S.
Daugherty and D. Michael Wallen as of December 31, 2002.
AGGREGATED FISCAL YEAR-END OPTION EXERCISES AND VALUES
NAME SHARES VALUE NUMBER OF SECURITIES VALUE OF UNEXERCISED
- ---- ------ ------ --------------------- --------------------
ACQUIRED REALIZED ($) UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS AT
-------- ------------ ---------------------- -----------------------
ON OPTIONS AT FISCAL YEAR- FISCAL YEAR-END ($)
-- ----------------------- -------------------
EXERCISE END (#) EXERCISABLE/UNEXERCISABLE
-------- ------- -------------------------
(#) EXERCISABLE/UNEXERCISABLE
--- -------------------------
William S. Daugherty 0 0 140,000/0 $0/$0
D. Michael Wallen 0 0 115,000/0 $0/$0
The following is a summary of options that have been granted by
Daugherty Resources to William S. Daugherty and D. Michael Wallen during the
course of their employment. In all instances, the number of shares has
9
been reduced and the exercise price increased to reflect the effect of the one
for five consolidation of the Common Stock, which was effective June 29, 1998.
Mr. Daugherty received options to purchase 40,000 shares of the Common
Stock in 1994 exercisable at $9.50 per share in increments of 10,000 shares each
on December 10, 1994, 1995, 1996, and 1997. These options expired December 10,
1998. In February 1995, the Company granted Mr. Daugherty incentive stock
options covering 40,000 shares of the Common Stock vesting in 10,000 share
increments on February 27, 1995, 1996, 1997, and 1998. As of December 31, 2002,
a portion of these options covering 30,000 shares had expired. Additionally, on
December 27, 1995, the Company granted Mr. Daugherty incentive stock options
covering 40,000 shares of the Common Stock vesting in 10,000 share increments on
December 27, 1995, 1996, 1997, and 1998. As of December 31, 2002, a portion of
these options covering 30,000 shares had expired. All options granted to Mr.
Daugherty in 1995 are exercisable at $5.00 per share, expire five years from the
date of vesting and are contingent upon Mr. Daugherty's employment at the time
of vesting. In June 1996, the Company granted Mr. Daugherty incentive stock
options covering 40,000 shares of the Common Stock vesting in 10,000 share
increments on June 28, 1996, 1997, 1998 and 1999. All options granted to Mr.
Daugherty in 1996 are exercisable at $5.00 per share, expire five years from the
date of vesting and are contingent upon Mr. Daugherty's employment on the
vesting date. As of December 31, 2002, a portion of these options covering
20,000 shares had expired. 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 400,000 shares of the Common Stock exercisable at
$1.546875 per share. Options for 71,111 shares vested on March 7, 1997, with
71,111 shares vesting on January 1, 1998, 1999, 2000, and 2001, and the
remaining 44,445 shares vesting on January 1, 2002. These options, which expired
on March 7, 2002, were contingent upon Mr. Daugherty's employment with the
Company on the vesting dates. Pursuant to the 1997 stock option plan of Alaska
Apollo Resources, Inc., on April 28, 2000, the Board of Directors authorized a
grant of options to purchase 100,000 shares of common stock to Mr. Daugherty
vesting immediately, exercisable at $1.25 per share and expiring five years from
the date granted.
On December 27, 1995, the Company granted Mr. Wallen incentive stock
options covering 20,000 shares of the Common Stock vesting in 5,000 share
increments on December 27, 1995, 1996, 1997, and 1998. All options granted to
Mr. Wallen in 1995 are exercisable at $5.00 per share, expire five years from
the date of vesting and are contingent upon Mr. Wallen's employment at the time
of vesting. As of December 31, 2002, a portion of these options covering 15,000
shares had expired. In June 1996, the Company granted Mr. Wallen incentive stock
options covering 20,000 shares of the Common Stock vesting in 5,000 share
increments on June 28, 1996, 1997, 1998 and 1999. All options authorized in
favor of Mr. Wallen in 1996 are exercisable at $5.00 per share, expire five
years from the date of vesting and are contingent upon Mr. Wallen's employment
on the vesting date. As of December 31, 2002, a portion of these options
covering 10,000 shares had expired. In June 1997, the Company granted Mr. Wallen
incentive stock options covering 10,000 shares of common stock, exercisable at
$3.25 per share and expiring five years from the date granted. These options,
which expired during 2002, were contingent upon Mr. Wallen's employment with
Daugherty Resources on the vesting dates. Pursuant to the 1997 stock option plan
of Alaska Apollo Resources, Inc., on April 28, 2000, the Board of Directors
authorized a grant of options to purchase 100,000 shares of common stock to Mr.
Wallen vesting immediately, exercisable at $1.25 per share and expiring five
years from the date granted.
COMPENSATION OF DIRECTORS
Daugherty Resources compensates its non-employee directors for their
services to Daugherty Resources in the form of shares of the Common Stock
registered pursuant to Form S-8 promulgated by the Commission. Daugherty
Resources also reimburses its directors for expenses incurred in attending board
meetings. Daugherty Resources paid the non-employee directors the following
amounts during fiscal year 2002: Charles L. Cotterell and James Klyman each
received 3,000 shares of the Common Stock valued at $0.63 (U.S.) per share.
The following is a summary of options, which have been granted by
Daugherty Resources to the non-employee directors during the course of their
respective tenures. In all instances the number of shares have been reduced and
the exercise price increased to reflect the effect of the one for five
consolidation of the Common Stock, which was effective June 29, 1998.
In 1993, Mr. Klyman was granted options to purchase 2,000 shares of the
Common Stock exercisable at $9.50 per share that expired December 10, 1998. On
June 15, 1994, the Board of Directors approved the reduction of the exercise
price of these options to $5.00. On June 15, 1994, Mr. Cotterell was granted an
option to purchase
10
2,000 shares of the Common Stock in 1994 exercisable at $5.00 per share that
expired December 10, 1998. On February 27, 1995, the Board of Directors approved
the grant of options to Messrs. Klyman and Cotterell to purchase 2,000 shares of
the Common Stock each exercisable at $5.00 per share that expired February 27,
2000. On June 28, 1996, the Board of Directors approved the grant of options to
Messrs. Klyman and Cotterell to purchase 2,000 shares of the Common Stock each
exercisable at $5.00 per share that expired June 28, 2001. On June 25, 1997, the
Board of Directors approved the grant of options to Messrs. Klyman and Cotterell
to purchase 2,000 shares of the Common stock each exercisable at $3.25 per share
that expired June 24, 2002. On April 28, 2000, the Board of Directors approved
the grant of options to Mr. Cotterell and Mr. Klyman to purchase 25,000 shares
of Common Stock each exercisable at $1.25 per share and expiring five years from
the date granted.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS
The following table indicates the number of shares of the Common Stock
owned beneficially as of March 26, 2003 by (i) each person known to Daugherty
Resources to beneficially own more than five percent of the outstanding shares
of the Common Stock, (ii) each director, (iii) the officers of Daugherty
Resources, and (iv) 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.
TITLE OF CLASS BENEFICIAL OWNER SHARES OWNED PERCENT OF
-------------- ---------------- ------------ ----------
BENEFICIALLY CLASS
------------ -----
Common Stock William S. Daugherty 667,500 (1) 10.01
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
D. Michael Wallen 398,100 (2) 6.22
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
Michael P. Windisch 80,000 (3) 1.32
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
Charles L. Cotterell 77,540 (4) 1.28
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
James K. Klyman 62,000 (5) 1.02
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
Directors and executive officers as a 1,285,140 (6) 17.64
group (5 persons)
(1) Consists of 437,500 shares of the Common Stock and options to acquire
230,000 shares of the Common Stock, which are currently exercisable.
(2) Consists of 183,100 shares of the Common Stock and options to purchase
215,000 shares of the Common Stock, which are currently exercisable.
(3) Consists of 25,000 shares of the Common Stock, options to purchase 50,000
shares of the Common Stock, which are currently exercisable, and 5,000
shares relating to the Company's convertible 10% unsecured notes due May 1,
2007.
(4) Consists of 27,540 shares of the Common Stock and options to purchase
50,000 shares of Common Stock, which are currently exercisable.
(5) Consists of 12,000 shares of the Common Stock and options to purchase
50,000 shares of Common Stock, which are currently exercisable.
(6) Includes 685,140 shares of the Common Stock, options to purchase 595,000
shares of the Common Stock, which are currently exercisable and 5,000
shares relating to the Company's convertible 10% unsecured notes due May 1,
2007.
11
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEBTEDNESS OF DIRECTORS, OFFICERS AND EMPLOYEES
As of December 31, 2002, the aggregate indebtedness to Daugherty
Resources 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 Daugherty Resources of all present and former directors, officers
and employees of Daugherty Resources was $663,319. Details of the indebtedness
of William S. Daugherty, the Chief Executive Officer of Daugherty Resources, and
D. Michael Wallen, Vice President and Secretary of Daugherty Resources, is set
forth below. There was no other person serving as an executive officer or
director of Daugherty Resources with indebtedness to the Company at December 31,
2002.
NAME AND PRINCIPAL POSITION INVOLVEMENT OF ISSUER OR LARGEST AMOUNT OUTSTANDING DURING AMOUNT OUTSTANDING AS OF
--------------------------- ------------------------- ---------------------------------- ------------------------
SUBSIDIARY LAST COMPLETED FISCAL YEAR DECEMBER 31, 2002
---------- -------------------------- -----------------
William S. Daugherty (1) Lender $273,440 $244,329
President and Chief Executive
Officer
D. Michael Wallen (2) Lender $200,830 $173,361
Vice President
- ------------------
(1) The indebtedness of Mr. Daugherty consists the remaining unpaid balance of
five promissory notes in the original principal amounts of $62,500,
$50,000, $33,333, $27,000 and $21,600, dated January 3, 2002, January 4,
2001, January 4, 2000, January 4, 1999, and January 1, 1998, respectively,
bearing interest at six percent per annum, and secured by Mr. Daugherty's
interest in oil and gas partnerships sponsored by Daugherty Resources'
subsidiary, Daugherty Petroleum. Inc. Additionally, the indebtedness
includes $89,075 of non-interest bearing, unsecured loans owed to Mr.
Daugherty throughout the course of his employment. See footnotes of Summary
Compensation Table above for additional benefits to Mr. Daugherty.
(2) The indebtedness of Mr. Wallen consists of the remaining unpaid balance of
five promissory notes in the original principal amounts of $50,000,
$51,335, $33,333; $27,000 and $21,600 dated January 3, 2002, January 4,
2001, January 4, 2000, January 4, 1999 and January 1, 1998, respectively,
bearing interest at six percent per annum, and secured by Mr. Wallen's
interest in oil and gas partnerships sponsored by the Company's subsidiary,
Daugherty Petroleum, Inc. Additionally, the indebtedness includes $28,000
of non-interest bearing, unsecured loans owed to Mr. Wallen throughout the
course of his employment. See footnotes of Summary Compensation Table above
for additional benefits to Mr. Wallen.
SHAREHOLDER PROPOSALS FOR 2004 ANNUAL MEETING OF SHAREHOLDERS
Daugherty Resources must receive proposals of shareholders intended to
be presented at the 2004 Annual General Meeting of Shareholders by March 1, 2004
to be considered for inclusion in the proxy statement and form of proxy relating
to the 2004 meeting. Proposals received after March 1, 2004 will be considered
untimely.
APPROVAL OF PROXY STATEMENT
The Board of Directors of Daugherty Resources has approved this Proxy
Statement, the enclosed form of proxy and the sending thereof to the
shareholders of Daugherty Resources.
By Order of the Board of Directors,
William S. Daugherty
Chairman of the Board and President
May 15, 2003
12
DAUGHERTY RESOURCES, INC.
120 PROSPEROUS PLACE, SUITE 201
LEXINGTON, KENTUCKY 40509
PROXY
THIS PROXY IS SOLICITED BY THE MANAGEMENT OF DAUGHERTY RESOURCES, INC. (THE
"COMPANY") FOR THE ANNUAL GENERAL MEETING OF ITS SHAREHOLDERS (THE "MEETING") TO
BE HELD ON JUNE 26, 2003.
The undersigned hereby appoints William S. Daugherty, the Chairman of
the Board and President of Daugherty Resources, or failing him, James K. Klyman,
a director of Daugherty Resources, or instead of either of the foregoing,
(insert name) _____________________________, as nominee of the undersigned, with
fill 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 V6C 2T6, on June 26, 2003 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 Please
advise Daugherty Resources of any change of Address: of Directors at three.
____________________________________
2. Election of Directors. Street Address
William S. Daugherty ____________________________________
James K. Klyman City, State, Zip
Charles E. Cotterell
Vote FOR [ ] the election of all nominees listed above (except those whose names
the undersigned has deleted). WITHHOLD [ ] vote.
3. Auditors
Vote FOR [ ] AGAINST [ ] vote on the resolution to appoint Kraft, Berger, Grill,
Schwartz, Cohen & March LLP, Chartered Accountants, as auditors of Daugherty
Resources at the remuneration to be fixed by the Board of Directors.
THE UNDERSIGNED HEREBY REVOKES ANY PRIOR PROXY OR PROXIES.
Dated _________________________, 2003.
______________________________________________________________________________
Signatures 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. 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 SPECIFICATIONS.
RETURN THIS PROXY IMMEDIATELY
ANNUAL MEETING
The Annual Meeting of Shareholder of Daugherty Resources, Inc., will be held on
June 26, 2003 at 10:00 a.m. at 700 Standard Life Building, 625 Howe Street,
Vancouver, British Columbia, Canada
CORPORATE ADDRESS
Daugherty Resources, Inc.
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
COMMON STOCK LISTING
Nasdaq SmallCap
Trading Symbol: NGAS
Newspaper Listing: NGAS
ANALYST INQUIRIES
Security analyst and other investment professionals seeking information about
Daugherty Resources and its subsidiaries should call:
Daugherty Resources, Inc.
William S. Daugherty
President and CEO
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
Office: (859) 263-3948
Fax: (859) 263-4228
E-mail: ngas@ngas.com
SHAREHOLDER INQUIRIES AND SHAREHOLDER ADMINISTRATION
Shareholders with questions about their stock accounts may write Shareholder
Administration at our corporate address or call us Monday through Friday,
anytime between 9:00 a.m. and 5:00 p.m. (Eastern Standard Time).
TRANSFER AGENT AND REGISTRAR
Pacific Corporate Trust Company
625 Howe Street
10th Floor
Vancouver, British Columbia
Canada V6C 3B8
CANADA INDEPENDENT AUDITORS
Kraft, Berger, Grill, Schwartz Cohen & March LLP
3160 Steeles Avenue East
Markham, Ontario
Canada L3R 3Y2
U.S. INDEPENDENT AUDITORS
Hall, Kistler & Company LLP
220 Market Avenue South
Suite 700
Canton, OH 44702-2100
CANADIAN COUNSEL
Ronald Paton, Attorney at Law
Maitland & Company
700 Standard Life Building
625 Howe Street
Vancouver, British Columbia
Canada, V6C 2T6
U.S. COUNSEL
Gary M. Smith
Attorney at Law
1941 Bishop Lane, Suite 1020
Louisville, KY 40218
REGISTERED AND RECORDS OFFICE
Maitland & Company
700 Standard Life Building
625 Howe Street
Vancouver, British Columbia
Canada V6C 2T6
ADDITIONAL INFORMATION
Daugherty Resources, Inc., will provide, without charge, a copy of the following
items:
2002-SEC Form 10-KSB and Subsequent 10-QSB Filings.
Request for these items should be made in writing Daugherty Resources, Inc. at
its corporation address.
Daugherty Resources can be reached through its website at: WWW.NGAS.COM.