<PAGE> 1
EXHIBIT 5
GARY M. SMITH
ATTORNEY AT LAW
P.O. BOX 5249
LOUISVILLE, KY 40205
TELEPHONE: (502) 454-4850
August 17, 2000
Daugherty Resources, Inc.
120 Prosperous Place
Suite 201
Lexington, KY 40509
Re: Form S-8 Registration Statement;
Commission File No. 0-12185
Gentlemen:
I have acted as counsel for Daugherty Resources, Inc. (the "Company")
in connection with the registration by the Company of 148,225 shares of its
common stock, without par value per share (the "Securities"), as contemplated by
the Company's Registration Statement on Form S-8 filed on the date hereof with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended.
In connection therewith, I have examined, among other things, the
Memorandum and Articles of Association, as amended, of the Company, the
corporate proceedings of the Company with respect to the issuance and
registration of the Securities, the Registration Statement, certificates of
public officials, statutes and other instruments and documents, as a basis for
the opinions expressed herein.
Based upon and subject to the foregoing, and upon such other matters
as I have determined to be relevant, I am of the opinion that:
1. The Company is a corporation duly organized, validly existing,
and in good standing under the laws of the Province of British
Columbia.
2. All of the Securities, upon issuance and delivery thereof,
will be validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement.
Very truly yours,
/s/ Gary M. Smith
-----------------
Gary M. Smith
<PAGE> 2
DAUGHERTY RESOURCES, INC.
DOCUMENTS CONSTITUTING A SECTION 10(a) PROSPECTUS
PURSUANT TO A FORM S-8 REGISTRATION STATEMENT
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
In connection with the Registration Statement on Form S-8 (the
"Registration Statement") filed by Daugherty Resources, Inc. (the "Company")
with the Securities and Exchange Commission, the following shall constitute a
prospectus that meets the requirements of Section 10(a) of the Securities Act of
1933:
1. General Plan Information.
(a) The Following letter agreements (the "Letter
Agreements") between the Company and Norman T. Reynolds,
Esq., Gary M. Smith, Esq., and Everett G. Titus III (the
"Participants") with respect to the payment of fees and
expenses and the shares of the Company's common stock,
without par value per share (the "Securities"), and the
price per share at which the Securities are to be issued
to the Participant in payment of his fees and expenses
is more fully described in Exhibit "A" attached hereto
and incorporated herein by reference for all purposes:
<TABLE>
<CAPTION>
Name Fees and Expenses Price per Share Number of Shares
---- ----------------- --------------- ----------------
<S> <C> <C> <C>
Gary M. Smith $17,069.75 $1.25 13,655
Everett G. Titus III $40,000.00 $2.00 20,000
Norman T. Reynolds $31,425.00 $2.50 12,570
---------- ------
Total $88,494.75 46,225
</TABLE>
(b) In addition to the Plan Participant described in
Paragraph 1(a) above, various officers, directors and
employees of the Company are also Plan Participants.
Pursuant to resolutions passed by the Board of Directors
of the Company, these persons have been granted bonuses
to be payable in Securities of the Company, at a price
per share equal to $1.25, in the following amounts:
Name of the Employee Number of Shares
-------------------- ----------------
William S. Daugherty 25,000
William G. Barr III 25,000
D. Michael Wallen 25,000
Charles L. Cotterell 3,000
James K. Klyman 3,000
Clarence R. Smith 5,000
Kathy Cornelison 2,500
Joseph M. Wallen 1,000
1
<PAGE> 3
Elloise Gibson 1,000
Ronnie H. Meeks 2,500
Jerry S. Higgins 1,000
Donald L. Brown 2,500
Timothy B. Smith 1,500
Charles Cash 2,500
Garrett Killion 500
Rickey Smith 500
Johnny Jones 500
----------------------
Total 102,000
(c) The Letter Agreement and the minutes containing the
resolutions of the Board of Directors of the Company
granting the bonuses to the employees described herein
constitute and employee benefit plan as described in
Rule 405 promulgated under the Securities Act of 1933
(the "Plan"). The Securities will be offered pursuant to
the Plan.
(d) The general nature and purpose of the Plan is to allow
for the payment of fees and bonuses due and owing by the
Company to the Participants in the form of the Company's
registered Securities. The Plan will terminate as soon
after September 30, 2000 as the Securities called for in
the Plan have been issued to the Participants, which
date will not exceed September 30, 2000. It is not
contemplated that the Plan will be subject to
modification or extension.
(e) The Plan does not have any administrators. However, the
participants may contact the Company at the address or
telephone number described in Paragraph 11 below to
obtain additional information about the Plan.
(f) The Plan is not subject to the Employee Retirement
Income Security Act of 1974. All of the Participants are
employees, consultants or advisors who have provided
bona fide services to the Company, none of such services
being in connection with the offer or sale of Securities
of the Company in a capital-raising transaction.
2. SECURITIES TO BE OFFERED. The Securities to be offered
pursuant to the Plan are shares of the Company's common stock,
without par value per share. The common stock of the Company
has been registered under Section 12 of the Securities
Exchange Act of 1934.
3. EMPLOYEES WHO MAY PARTICIPATE IN THE PLAN. Only the
Participants described above may participate.
4. PURCHASE OF SECURITIES PURSUANT TO THE PLAN AND PAYMENT FOR
SECURITIES OFFERED.
(a) Each Participant may participate in the Plan only for so
long as it takes to file the Registration Statement and
issue the Securities to the Participants as called
2
<PAGE> 4
for herein. Thereafter, no Participant shall have any
further interest in the Plan. The only Securities to be
purchased by a Participant are described herein or in a
Participant's particular Letter Agreement. The purchase
price per share of the Company's Securities for each of
the Participants is as set forth above.
(b) Payment for the Securities to be purchased by any of the
Participants pursuant to the Plan will be the
extinguishments of any further liability by the Company
to any such Participant with respect to the obligations
described herein.
(c) There will be no reports delivered to the Participants
as to the amounts and status of their accounts.
(d) The Securities will be issued to the Participants, who
may sell the Securities in the open market. The Company
will receive no fees or other compensation for the
Securities other than the extinguishments of the debts
to the Participants as described herein.
5. RESALE RESTRICTIONS. There will be no restrictions on the resale
of the Securities by the Participants.
6. TAX EFFECTS OF PLAN PARTICIPATION. The receipt of the Securities
by the Participants will be the receipt of ordinary income since
the Securities will have been received by the Participants in
exchange for services. Consequently, the Participants will be
taxed currently for the value of the Securities pursuant to
Section 61 of the Internal Revenue Code of 1986, as amended.
7. INVESTMENT OF FUNDS. There is no provision under the Plan whereby
the Participants may direct the investment of all or any part of
the assets in the Plan.
8. WITHDRAWAL FROM THE PLAN; ASSIGNMENT OF INTEREST: No Participant
will be able to withdraw from, terminate, or assign its interest
in the Plan.
9. FORFEITURES AND PENALTIES: There is no event, which could, under
the Plan result in forfeiture by, or a penalty held under the
Plan.
10. CHANGES AND DEDUCTIONS, AND LIENS THEREFORE. There are no changes
and deductions that may be made against the Participants, the
Securities, or assets of the Plan, or the creation of any lien on
any funds, securities, or other property held under the Plan.
11. INFORMATION CONTAINED IN THE REGISTRATION STATEMENT. The Company
shall furnish to the Participants, without charge, upon written
or oral request, the documents incorporated by reference in Item
3 of Part II of the Registration Statement, all of such documents
being incorporated by reference in this Section 10(a) Prospectus.
The Company shall also furnish to the Participants, without
charge, upon written or oral request, any other documents
required to be delivered to employees of the
3
<PAGE> 5
Company pursuant to Rule 428(b) promulgated under the
Securities Act of 1933. Any such request should be
directed to the Company at 120 Prosperous Place, Suite
201, Lexington, Kentucky 40509, telephone (859)
263-3948, and telecopier (859) 263-4228.
12. INFORMATION CURRENTLY FURNISHED. Each Participant has
been furnished with a copy of the Company's Form 10-KSB
for the fiscal year ended December 31, 1999.
13. Information to be Furnished in the Future. The Company
shall deliver to each Participant copies of all reports,
proxy statements and other communications distributed to
its security-holders generally, and such material shall
be sent or delivered no later than the time that it is
sent to security-holders of the Company.
Attachments:
Exhibit "A-1, A-2 and A-3 "- The Letter Agreements
4
<PAGE> 6
NORMAN T. REYNOLDS
ATTORNEY AT LAW
POST OFFICE BOX 131326
HOUSTON, TEXAS 77219-1326
TELEPHONE: (713) 752-4512
TELECOPIER: (713) 752-4221
E MAIL: [email protected]
August 18, 2000
Mr. William S. Daugherty
Daugherty Petroleum, Inc
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
Re: Invoices of Norman T. Reynolds and Form S-8 Registration Statement
Dear Bill:
As we discussed, I agree to take shares of the common stock of
Daugherty Resources, Inc., in payment of all fees and expenses due and owing to
me through August 17, 2000, which total $31,425.00, and which will be registered
pursuant to Form S-8 Registration Statement. It is understood that the stock I
will receive will be valued at $2.50 per share and, as a result, I will receive
12,570 shares. It is further understood that the Form S-8 Registration Statement
will be filed immediately and that the shares of the stock will be issued
immediately upon the effectiveness of the Registration Statement, and all other
applicable laws and regulations.
Very truly yours,
/s/ Norman T. Reynolds
----------------------
Norman T. Reynolds
EXHIBIT A-1
<PAGE> 7
GARY M. SMITH
ATTORNEY AT LAW
P.O. BOX 5249
LOUISVILLE, KY 40205
TELEPHONE: (502) 454-4850
August 17, 2000
Mr. William S. Daugherty
Daugherty Resources, Inc.
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
Re: Invoices of Gary M. Smith and Form S-8
Dear Bill:
As discussed, I agree to take shares of common stock of Daugherty Resources,
Inc. in payment of fees and expenses due and owing to me for certain
professional services rendered through August 15, 2000, in the amount of
$17,069.75 and which will be registered pursuant to a Form S-8 Registration
Statement. It is understood that the stock I will receive will be valued at
$1.25 per share and, as a result, I will receive 13,655 shares. It is further
understood that the Form S-8 Registration Statement will be filed immediately
and that my shares will be issued upon the effectiveness of the Registration
Statement, and all other applicable laws and regulations.
Very truly yours,
/s/Gary M. Smith
----------------
Gary M. Smith
Attorney at Law
EXHIBIT A-2
<PAGE> 8
TNC INCORPORATED
32 Hogback Road - Pittstown, NJ 08867
Telephone: (908) 730-7882 - Fax: (908) 730-8191
--------------------------------------------------------------------------------
July 18, 2000
Mr. William S. Daugherty
Daugherty Resources, Inc.
120 Prosperous Place
Suite 201
Lexington, KY 40509
Re: Engagement of TNC Incorporated
Dear Sirs:
Representatives of TNC Incorporated ("TNC") and Daugherty Resources, Inc.
(the "Company"), have discussed on a confidential basis, the Company's
short-term and long-term financial and business objectives, and goals and needs
(collectively, "Services") which TNC can provide to the Company. In general, the
Company has requested that TNC assist the Company with respect to (i) potential
acquisitions of oil and gas properties; and (ii) potential acquisitions of or
mergers or joint ventures with other oil and gas companies.
Accordingly, the purpose of this letter (this "Agreement") is to confirm
and set forth the following terms and conditions under which TNC will render
Services to the Company based on its understanding of the Company's current
intentions and needs:
1. ENGAGEMENT The Company will engage TNC as its non-exclusive advisor
for the purpose of providing such services as the officers of the
Company may reasonably request. For purposes hereof the term
"Company" shall include any subsidiary or affiliate of the Company.
2. Compensation Upon the signing of this Agreement, the Company agrees
to assign to TNC as an initial advisory fee 20,000 shares of its
common stock. Such initial financial advisory fee shall be credited
as $40,000 (U.S.) against other fees earned by TNC hereunder.
Additional fees shall be determined as follows:
2.1 The amount payable to TNC as a transaction fee shall be determined on
a case by case basis through agreement between the Company and TNC.
2.2 The Company also agrees to reimburse TNC for it's our of pocket
expenses, provided, however, that all such expenses in excess of
$100.00 (U.S.) shall be approved by the Company prior to being
incurred.
3. INTRODUCTION TO IDENTIFIED PARTIES In connection with providing its
services hereunder, TNC will contact and may introduce the Company to
various individuals who may act independently or as a representative
of a company or institution and who are (i) candidates for possible
merger or acquisition by the Company; or (ii) possible sellers of oil
and gas; (each an "Identified Party"). Before or within thirty (30)
days after introduction of an Identified Party, TNC will send to the
<PAGE> 9
Daugherty Resources, Inc.
July 18, 2000
Page 2
Company a letter confirming the identification of such party to the
Company at which time such party shall become an Identified Party,
subject to the terms of this Agreement, and TNC shall be entitled to
a fee calculated in accordance with paragraph 2 above with respect
to any transaction entered into between the Company and such
Identified Party within one (1) year of the termination of this
Agreement.
4. This engagement will commence as of August 1, 2000 and terminate on
July 31, 2001, unless extended in writing by the parties hereto or
earlier terminated by wither party hereto.
5. EARLIER TERMINATION OF AGREEMENT The Services may be terminated with
or without cause by the Company or TNC at any time, without
liability or continuing obligation by either party to the other
(other than as provided in paragraph 3 above or for any fees or
other compensation earned and expenses incurred by TNC up to the
date of any such termination.
6. SUBSEQUENT AGREEMENT At the time the scope of TNC's Services become
definitive with respect to a given project, the Company and TNC and
the Company covering such given project. Neither the foregoing
sentence nor any such additional agreement shall affect TNC's rights
hereunder or the enforceability of this letter agreement.
7. DISAVOWAL OF AGENCY In no event shall TNC or any of its principals
or employees be deemed an agent or employee of the Company and shall
not hold themselves our as such.
8. CONFIDENTIAL Except as otherwise agreed to by the Company or as is
required by law or is necessary to complete this engagement
hereunder, TNC will keep confidential all information which is
supplied by the Company and which has not previously entered the
public domain, and will not use any such information for its own
benefit except in connection with the matters undertaken pursuant to
the terms of this engagement. At the termination of this agreement,
upon the request of the Company, TNC shall return all information,
and copies thereof, furnished by the Company.
9. RELIANCE UPON INFORMATION TNC has and will rely without independent
verification on all information supplied by the Company.
10. INDEMNIFICATION The parties agree to indemnify and hold the other
harmless against and from any and all losses, claims, damages or
liabilities, joint or several, to which they may become subject in
connection with the transactions referred to herein under any of the
federal securities laws, under any other statute, at common law or
otherwise, and to reimburse the other for any legal or other
expenses (including the cost of any investigation and preparation)
incurred and arising our of or in connection with any action or
claim in connection therewith, whether or not resulting in any
liability; provided, however, that neither party shall be liable in
any such a case to the extent that any such loss, claim, damage or
liability is found in a final judgment by a court to have resulted
from the other party's gross negligence, willful misconduct or bad
faith in performing such services. The indemnity agreement in this
paragraph shall extend upon the same terms and conditions to the
officers, directors, employees and agents of parties.
11. GOVERNING LAW This Agreement and the engagement resulting herefrom
shall be governed by and construed under the laws of the
Commonwealth of Kentucky.
<PAGE> 10
Daugherty Resources, Inc.
July 18, 2000
Page 3
12. PAYMENT IN COMPANY'S STOCK TNC agrees to accept 20,000 shares of
freely trading common stock in Daugherty Resources, Inc. in payment
of the initial advisory fee setforth in paragraph 2 above. Daugherty
Resources, Inc. will cause to be prepared and will file the required
Form S-8 to accomplish the issuance of the common stock. The parties
agree that the stock to be issued will be valued at $2.00 (U.S. per
share).
12.1. It is agreed that TNC's willingness in the future to accept freely
trading stock of Daugherty Resources, Inc., in exchange for services
to be rendered by TNC shall continue only for so long as there is a
market being made in such stock and such stock can be readily sold
on the open market. If no such market exists, then TNC shall be paid
in cash for my services.
If the foregoing meets with your approval, please sign and date a copy of
this letter, and return to me. I understand that the agreement contained herein
is subject to ratification by the Board of Directors of Daugherty Resources,
Inc. Please notify me when such ratification has been obtained.
Sincerely,
TNC INCORPORATED
By: /s/ Everett G. Titus III
Everett G. Titus III
President
The foregoing instrument is accepted and agreed to this the 18th day of
July 2000.
DAUGHERTY RESOURCES, INC.
By: /s/ William S. Daugherty
William S. Daugherty
President
<PAGE> 11
EXHIBIT 5
GARY M. SMITH
ATTORNEY AT LAW
P.O. BOX 5249
LOUISVILLE, KY 40205
TELEPHONE: (502) 454-4850
August 18, 2000
Daugherty Resources, Inc.
120 Prosperous Place
Suite 201
Lexington, Kentucky 40509
Re: Form S-8 Registration Statement; Commission File No. 0-12185
Gentlemen:
I have acted as counsel for Daugherty Resources, Inc. (the "Company")
in connection with the registration by the Company of 148,225 shares of its
common stock, without par value per share (the "Securities"), as contemplated by
the Company's Registration Statement on Form S-8 filed on the date hereof with
the Securities and Exchange Commission (the "Commission") under the Securities
Act of 1933, as amended.
In connection therewith, I have examined, among other things, the
Memorandum and Articles of Association, as amended, of the Company, the
corporate proceedings of the Company with respect to the issuance and
registration of the Securities, the Registration Statement, certificates of
public officials, statutes and other instruments and documents, as a basis for
the opinions expressed herein.
Based upon and subject to the foregoing, and upon such other matters as
I have determined to be relevant, I am of the opinion that:
1. The Company is a corporation duly organized, validly existing, and
in good standing under the laws of the Province of British Columbia.
2. All of the Securities, upon issuance and delivery thereof, will be
validly issued, fully paid and nonassessable.
I hereby consent to the filing of this opinion with the Commission as
an exhibit to the Registration Statement.
Very truly yours,
/s/ Gary M. Smith
-----------------
Gary M. Smith
Attorney at Law
