<PAGE> 1
================================================================================
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [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 Rule 14a-11(c) or Rule 14a-12.
</TABLE>
DAUGHERTY RESOURCES, INC.
(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
DAUGHERTY RESOURCES, INC.
120 PROSPEROUS PLACE, SUITE 201
LEXINGTON, KY 40509
PROXY STATEMENT AND INFORMATION CIRCULAR
AS AT JUNE 2, 2000
<PAGE> 3
DAUGHERTY RESOURCES, INC.
120 PROSPEROUS PLACE, SUITE 201
LEXINGTON, KENTUCKY 40509
To Our Shareholders:
You are cordially invited to attend the 2000 Annual General Meeting of
the Shareholders of Daugherty Resources, Inc. (the "Meeting") to be held at 625
Howe Street, Suite 700, Vancouver, British Columbia, Canada, on June 29, 2000 at
10:00 a.m., Vancouver, British Columbia time.
Your approval is requested in fixing the number of directors of the
Company for the coming year, electing directors to serve for the coming year,
ratifying the appointment of an auditor for the Company for the fiscal year
ending December 31, 2000, and ratifying, affirming and approving the issuance of
options to purchase shares of the Company's Common Stock.
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.
Very truly yours,
/s/ William S. Daugherty
William S. Daugherty
Chairman of the Board and President
On Behalf of the Board of Directors
Lexington, Kentucky
June 2, 2000
<PAGE> 4
DAUGHERTY RESOURCES, INC.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD JUNE 29, 2000
The 2000 Annual General Meeting of Shareholders (the "Meeting") of
Daugherty Resources, Inc., a British Columbia corporation (the "Company"), will
be held at 625 Howe Street, Suite 700, British Columbia, Canada, on June 29,
2000, at the hour of 10:00 a.m. (local time), for the following purposes:
1. To receive and consider the audited financial statements of the
Company for the fiscal year ended December 31, 1999, together with
the auditors' report thereon.
2. To receive and consider the report of the directors of the Company.
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 the Company for the
fiscal year ending December 31, 2000.
6. To ratify, affirm and approve the November 3, 1997 Option Agreement
and the August 20, 1999 Option Certificate by and between, the
Company, and Environmental Energy, Inc. ("EEI"), for the issuance of
options to acquire 1,120,000 shares of the Company's Common Stock at
the price of US$1.00 per share.
7. To transact such other business as may properly come before the
Meeting on any adjournments thereof.
Shareholders registered as holders of the Company's common shares (the
"Common Stock") who are deemed to hold such shares as of the close of business
on May 12, 2000 (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 the Company.
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 the
Company, 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 the Company 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 the
Company's Transfer Agent, Pacific Corporate Trust Company, 625 Howe Street,
Suite 830, Vancouver, British Columbia, V6C 3B8, by not later than 10:00 a.m.
(Vancouver, British Columbia time) on June 27, 2000.
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<PAGE> 5
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
June 2, 2000
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.
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<PAGE> 6
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 (the "Company"), for the 2000 Annual General
Meeting of Shareholders (the "Meeting") in order to:
- 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 the Company for the fiscal year ending
December 31, 2000.
- To ratify, affirm, and approve the November 3, 1997 Option Agreement
and the August 20, 1999 Option Certificate by and between the
Company and Environmental Energy, Inc. ("EEI"), for the issuance of
options to acquire 1,120,000 shares of Common Stock at the price of
US$1.00 per share.
- Transact such other business as may properly come before the
Meeting.
The Annual Report of the Company on Form 10-KSB, including financial
statements for the year ended December 31, 1999, and the Quarterly Report of the
Company on Form 10-QSB for the period ended March 31, 2000 are enclosed with
this Proxy Statement.
This Proxy Statement and the enclosed proxy card were first sent or
given to shareholders on or about June 2, 2000. All associated costs relating to
this proxy solicitation will be borne by the Company. Advance notice of the
Meeting was published in the Vancouver Province in Vancouver, British Columbia
on May 2, 2000. In addition to solicitation by mail, certain of the directors,
officers and 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.
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, 2000, FOR THE RATIFICATION, AFFIRMATION AND APPROVAL OF THE OPTION
AGREEMENT AND THE UNDERLYING OPTION CERTIFICATE, AND IN THE DISCRETION OF THE
PERSONS NAMED IN THE PROXY ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE
THE MEETING. 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. However, if any other matters which are
not now known to management should properly come before the Meeting or any
adjournments thereof, the proxies will be voted on such matters in accordance
with the best judgment of the proxies named therein.
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,
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 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 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
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<PAGE> 7
office and mailing address of the Company is 120 Prosperous Place, Suite 201,
Lexington, Kentucky 40509. 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 OF SECURITIES
Shareholders of record at the close of business on May 12, 2000 (the
"Record Date") are entitled to notice of the Meeting. As of the Record Date,
2,616,486 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. No other
voting stock of the Company is issued and outstanding. 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 the Company. 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), the ratification of Kraft, Berger, Grill,
Schwartz, Cohen & March LLP as auditor for the fiscal year ending
December 31, 2000 (Item 3), and the approval of the Option Agreement
and underlying Option Certificate to purchase Common Stock (Item 4).
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.
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 share 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 ENSUING YEAR AT THREE.
ITEM 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 the Company or
until his successor is elected or appointed, unless his office is earlier
vacated in accordance with the Memorandum and Articles of the Company or the
provisions of the BCCA.
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<PAGE> 8
NOMINEES
The following persons will be nominated at the Meeting for the
available positions on the Board of Directors of the Company:
- William S. Daugherty, age 45, 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 the Common Shares in exchange for all of his
common stock in 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 45, 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 75, 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 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 1999, the Board of Directors held six meetings and
approved actions on six 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 1999. The Audit Committee meets with
the Company's auditor 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 a firm of independent accountants as auditor; 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 auditor.
The Nominating Committee, currently composed of William S. Daugherty
and Charles L. Cotterell, held one meeting during fiscal 1999. 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 2001 Annual General
Meeting of Shareholders should be provided to the Corporate Secretary of the
Company by March 1, 2001.
During the fiscal year ended December 31, 1999, 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 interest 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.
Unless otherwise indicated, all references to dollars throughout this
Proxy Statement shall mean United States dollars.
3
<PAGE> 9
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 1999 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 changed since September 1996.
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, as amended (the "Exchange Act"). The members of
the Committee are James K. Klyman and Charles L. Cotterell. The Stock Option
Plan provides that 600,000 shares of the Common Stock are to be the subject of
stock options, 400,000 of which are reserved for Mr. Daugherty, and the
remaining 200,000 reserved for other employees of the Company as may be
determined by the Committee.
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 ELECTION OF WILLIAM S.
DAUGHERTY, JAMES K. KLYMAN, AND CHARLES L. COTTERELL AS DIRECTORS OF THE
COMPANY.
ITEM 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 the Company's auditor for the fiscal year ending
December 31, 2000. Kraft, Berger, Grill, Schwartz, Cohen & March LLP has served
as the Company's 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
the Company's independent public accountants.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION OF THE
SELECTION OF KRAFT, BERGER, GRILL, SCHWARTZ, COHEN & MARCH LLP AS THE COMPANY'S
INDEPENDENT PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING DECEMBER 31, 2000.
ITEM 4. RATIFICATION, AFFIRMATION AND APPROVAL OF OPTION AGREEMENT, AND
UNDERLYING OPTIONS, BETWEEN THE COMPANY AND ENVIRONMENTAL ENERGY, INC.
On November 3, 1997 pursuant to a Letter Agreement (the "Letter
Agreement") of the same date, the Company executed an Option Agreement that
granted Environmental Energy, Inc., subject to earning the options by
participating in oil and gas drilling ventures pursuant to the terms and
conditions of the Letter Agreement, the option to purchase up to 1,200,000
shares of the Company's Common Stock. On October 21, 1999, pursuant to the
Option Agreement and the Letter Agreement, the Company delivered an Option
Certificate dated August 20, 1999 to Environmental Energy, Inc. granting it
options to purchase 1,120,000 shares of the Company's Common Stock at an initial
exercise price of One Dollar (US $1.00) per share. Copies of the Option
Agreement and Option Certificate have been filed as Exhibits to a Form 8-K filed
by the Company on May 22, 2000.
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<PAGE> 10
PURPOSE FOR APPROVAL
The options to be approved will satisfy the Company's contractual
obligation to Environmental Energy, Inc. to issue options for shares of its
Common Stock in exchange for Environmental having participated in the drilling
of natural gas wells with the Company's subsidiary, Daugherty Petroleum, Inc.
The Company's management believes that the value recommended by virtue of
Environmental's participation in the natural gas wells was reasonable and
represents a fair value for the options to be approved.
POTENTIAL DILUTION
The issuance of the Option Agreement and the underlying Option
Certificate may have a dilutive effect on the present owners of the Common
Stock. Due to the exercise price being US$1.00 per share, below both the current
market and book value of the stock, if the holders of the Options elect to
exercise them and purchase Common Stock the shares of Common Stock issued will
cause a dilution of interest of the present shareholders of the Company. The
extent of the potential dilution cannot be reasonably anticipated at this time
and will depend upon a number of factors, including the number of shares
purchased and the book value of the Common Stock at the time of the purchase.
VOTE REQUIRED
Rule 4310 of the Marketplace Rules of The Nasdaq Stock Market ("Rule
4310") requires the Company to obtain shareholder approval of a transaction
involving the issuance of securities where, as in this case, the issuance by the
Company of Common Stock (or securities convertible into or exercisable for
Common Stock) equal to 20% or more of the Common Stock at a price less than the
greater of book or market value of the stock. The Company has determined that in
order to comply with Rule 4310 it is necessary to submit the Option Agreement
and Option Certificate to the shareholders for their ratification, affirmation
and approval.
The affirmative vote of a majority of the total shares of the Common
Stock present in person or presented by proxy at the meeting is required to
approve the ratification, affirmation and approval of the November 3, 1997
Option Agreement and the underlying August 20, 1999 Option Certificate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR RATIFICATION, AFFIRMATION
AND APPROVAL OF THE NOVEMBER 3, 1997 OPTION AGREEMENT AND THE UNDERLYING AUGUST
20, 1999 OPTION CERTIFICATE.
MANAGEMENT
Set forth below are the directors and executive officers of the
Company, together with their ages as of the date of this Proxy Statement. Each
director is elected for a one-year term and serves until his successor is
elected and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION DIRECTOR SINCE
---- --- -------- --------------
<S> <C> <C> <C>
William S. Daugherty 45 Chairman of the Board, President and September 1993
Chief Executive Officer
James K. Klyman 45 Director May 1992
Charles L. Cotterell 75 Director June 1994
D. Michael Wallen 45 Vice President and Secretary N/A
</TABLE>
A description of the business experience during the past several years
for each of the directors and executive officers of the Company and certain
significant employees of the Company is set forth below.
William S. Daugherty, age 45, has served as Director, President and
Chief Operating Officer of the Company 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 the Company. 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. Mr. Daugherty
holds a B. S. Degree from Berea College, Berea, Kentucky.
James K. Klyman, age 45, has been a director since May 1992. For the
past seven years Mr. Klyman has been a computer software designer and programmer
specializing in applied information technology.
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<PAGE> 11
Charles L. Cotterell, age 75, 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.
D. Michael Wallen, age 45, 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. Mr. Wallen holds a B. S. Degree from
Morehead State University, Morehead, Kentucky.
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 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 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. The Company has not received any forms required by 16(a) from
Environmental Energy, Inc., Environmental Energy Partners I, Ltd., Environmental
Energy Partners II, Ltd., Environmental Holding Company, LLC and Environmental
Operating Partners, Ltd., which previously became beneficial owners.
EXECUTIVE COMPENSATION
The following table sets forth information regarding annual and
long-term compensation with respect to the fiscal years ended December 31, 1999,
1998 and 1997 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, 1999,
whose total annual salary and bonus exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS ($) OPTIONS #
- --------------------------- ---- ------ --------- ---------
<S> <C> <C> <C> <C>
William S. Daugherty 1999 $ 75,000 $ 12,500 (1) 0
Chairman and President 1998 $ 75,000 $ 12,500 (2) 0
1997 $ 75,000 $ 12,500 (3) 400,000 (4)
</TABLE>
- -----------------
(1) The bonus was in the form of 12,500 shares of the Common Stock valued at
$1.00(U.S.) per share.
(2) The bonus was in the form of 12,500 shares of the Common Stock valued at
$1.00(U.S.) per share.
(3) The bonus was in the form of 25,000 shares of the Common Stock valued at
$0.50(U.S.) per share. The shares represent bonuses approved by the Board
of Directors on June 25, 1997. The shares were issued June 27, 1997.
(4) 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 $1.546875 (U.S.) per share after giving effect to the one
for five consolidation of Common Shares that was effective June 29, 1998.
The options vest over a five-year period with 71,111 vesting during 1997
through 2001 and 44,445 vesting in 2002. The options expire on March 6,
2002. Vesting is subject to Mr. Daugherty's continued employment.
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 $50,000 or 10 percent
of such officer's salary and bonus.
STOCK OPTIONS
No stock options were granted to officers by the Company during 1999.
The following table shows the number of shares of the Common Stock underlying
all exercisable and non-exercisable stock options held by William S. Daugherty
and D. Michael Wallen as of December 31, 1999.
6
<PAGE> 12
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NAME NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
---- OPTIONS AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END ($)
------------------------------ ------------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
------------------------- -----------------------------
<S> <C> <C>
William S. Daugherty 404,444/115,556 0
D. Michael Wallen 50,000/0 0
</TABLE>
- ---------------------
(1) The closing market price for the shares of Common Stock at December 31,
1999, was $1.375. None of the options granted to Mr. Daugherty were in the
money as of the end of the fiscal year 1999.
The following is a summary of options that have been granted by the
Company to William S. Daugherty and D. Michael Wallen during the course of their
employment. 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.
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 Board of Directors of the Company authorized the
granting of incentive stock options covering 40,000 shares of the Common Stock
for Mr. Daugherty vesting and exercisable in 10,000 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 40,000 shares of the Common Stock for Mr. Daugherty vesting and
exercisable in 10,000 share increments on December 27, 1995, 1996, 1997, and
1998. All options authorized in favor of 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. As detailed
above, on June 28, 1996, the Board of Directors authorized the granting of
incentive stock options to Mr. Daugherty covering 40,000 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
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 are contingent upon Mr. Daugherty's employment
with the Company on the vesting dates. They expire on March 7, 2002. On June 25,
1997 the Shareholders approved the Alaska Apollo Resources Inc. 1997 Stock
Option Plan.
Mr. Wallen received options to purchase 20,000 shares of the Common
Stock on December 27, 1995 exercisable at $5.00 and vesting and becoming
exercisable in 5,000 share increments on December 27, 1995, 1996, 1997 and 1998.
The options expire five years from the date of vesting and were contingent upon
Mr. Wallen's employment at the time of vesting. Additionally, on June 28, 1996
the Board of Directors approved 20,000 options to purchase the Company's Common
Stock. These options are exercisable at $5.00 per share, vested in 5,000 share
increments on June 28, 1996, 1997, 1998 and 1999, and expire five years from the
date of vesting. Further, on June 25, 1997 the Board of Directors approved the
issuance of 10,000 incentive stock options pursuant to the terms and conditions
of the Alaska Apollo Resources Inc. 1997 Stock Option Plan exercisable at $3.25
per share. The options expire five years from the date of the grant.
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
Form S-8 promulgated by the Commission. 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 1999:
Charles L. Cotterell and James Klyman (formerly Klyman-Mowczan) each received
2,000 shares of the Common Stock valued at $1.00 (U.S.) per share.
7
<PAGE> 13
AGGREGATED FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NAME NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN-THE-MONEY
---- OPTIONS AT FISCAL YEAR-END (#) OPTIONS AT FISCAL YEAR-END ($)
------------------------------ ------------------------------
EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE (1)
------------------------- -----------------------------
<S> <C> <C>
James K. Klyman 6,000/0 0
Charles L. Cotterell 6,000/0 0
</TABLE>
- -------------------
(1) The market price for the shares of the Common Stock at December 31, 1999,
was below the option price for each share of the Common Stock.
The following is a summary of options that have been granted by the
Company 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 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
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 2,000
shares of the Common Stock each exercisable at $5.00 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 2,000 shares of the Common stock
each exercisable at $3.25 (U.S.) per share and expiring June 24, 2002.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates the number of shares of the Common Stock
owned beneficially as of May 12, 2000, by (i) each person known to the Company
to beneficially own more than five percent of the outstanding shares of the
Common Stock, (ii) each director, (iii) the officers of the Company, 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.
<TABLE>
<CAPTION>
TITLE OF CLASS BENEFICIAL OWNER SHARES OWNED PERCENT OF
-------------- ---------------- ------------ ----------
BENEFICIALLY CLASS
------------ -----
<S> <C> <C> <C>
Common Stock William S. Daugherty 733,244 (1) 24.2
121 Prosperous Place, Suite 201
Lexington, Kentucky 40509
Trio Growth Trust 400,000 (2) 13.3
18 York Valley Crescent
Willowdale, Ontario M2P 1A7
Grace Church Securities Ltd. 160,600 6.1
21 Abbotsbury House, Abbotsbury Road
London W14 8EN, England
Alaska Investments Limited 202,669 7.7
5 Old Street
Ospery House
St. Helier, Jersey, Channel Islands, U.K.
Exergon Capital S.A. 200,000 (3) 7.4
Dufourstrasse 101
</TABLE>
8
<PAGE> 14
<TABLE>
<S> <C> <C> <C>
Zurich 8008, Switzerland
Jayhead Investments 218,880 (4) 8.1
18 York Valley Crescent
Willowdale, Ontario H2P 1A7
Canada
D. Michael Wallen 100,600 (5) 3.8
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
Charles L. Cotterell 21,540 (6) .8
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
James K. Klyman 6,000 (7) .2
120 Prosperous Place, Suite 201
Lexington, Kentucky 40509
Environmental Energy, Inc. 1,572,665 (8) 37.9
8001 Irvine Center Drive
Suite 1040
Irvine, California 92618
Ken-Tex Oil & Gas, Inc. 158,399 (9) 6.1
130 Fieldcrest Dr.
Marion, AR 72364
Directors and executive officers as a group 861,384 (10) 27.8
(4 persons)
</TABLE>
- -------------
* Represents ownership of less than one percent.
(1) Includes 315,000 shares of the Common Stock, warrants to purchase 23,800
shares of the Common Stock and options to acquire 404,444 shares of the
Common Stock, which are currently exercisable.
(2) Consists of warrants to purchase 400,000 shares of the Common Stock, which
are currently exercisable.
(3) Includes 100,000 shares of the Common Stock and warrants to purchase
100,000 shares of the Common Stock, which are currently exercisable.
(4) Includes 50,000 shares of Common Stock and 68,880 shares of Common Stock
owned through Jayhead's interest in Alaska Investments Limited and warrants
to 100,000 shares of common stock, which are currently exercisable.
(5) Includes 50,600 shares of Common Stock and options to purchase 50,000
shares of Common Stock, which are currently exercisable.
(6) Includes 15,540 shares of the Common Stock and options to purchase 6,000
shares of the Common Stock, which are currently exercisable.
(7) Consists of options to purchase 6,000 shares of the Common Stock, which are
currently exercisable.
(8) Includes 40,000 shares of the Common Stock, options to purchase 1,520,000
shares of the Common Stock, which are currently exercisable, 5,106 shares
of preferred stock, which may be converted to common shares on a one for
one basis, and warrants to purchase 7,559 shares of Common Stock which are
currently exercisable.
(9) Consists of 158,399 shares of Common Stock.
(10) Includes 381,140 shares of the Common Stock, options to purchase 466,444
shares of the Common Stock, which are currently exercisable, and warrants
to purchase 23,800 shares of the Common Stock, which are currently
exercisable.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEBTEDNESS OF DIRECTORS, OFFICERS AND EMPLOYEES
As of March 31, 2000, 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
$299,616.
9
<PAGE> 15
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION INVOLVEMENT OF ISSUER OR LARGEST AMOUNT OUTSTANDING AMOUNT OUTSTANDING AS
--------------------------- ------------------------- --------------------------- ---------------------
SUBSIDIARY DURING LAST COMPLETED FISCAL YEAR OF MARCH 31, 1999
---------- --------------------------------- -----------------
<S> <C> <C> <C>
William S. Daugherty (1) Lender $81,933 $80,970
President and Chief Executive
Officer
D. Michael Wallen Lender $81,933 $80,970
Vice President
</TABLE>
- ------------------
(1) The indebtedness of Mr. Daugherty consists primarily of three promissory
notes in the principal amount of $33,333, $27,000 and $21,600, dated
January 1, 2000, January 4, 1999, and January 1, 1998, bearing interest at
the rate of six percent per annum. The notes are secured by Mr. Daugherty's
interest in oil and gas partnerships sponsored by the Company's subsidiary,
Daugherty Petroleum. Inc.
(2) The indebtedness of Mr. Wallen consists of three promissory notes in the
principal amounts of $33,333, $26,250 and $21,600 dated January 1, 2000,
January 4, 1999 and January 1, 1998, respectively, each bearing interest at
the rate of 6 percent per annum. The note is secured by Mr. Wallen's
interest in oil and gas partnerships sponsored by the Company's subsidiary,
Daugherty Petroleum, Inc.
INDEBTEDNESS OF THE COMPANY TO A SHAREHOLDER
Daugherty Petroleum, Inc., is indebted to Jayhead Investments Limited,
an affiliate of Alaska Investments Limited. The 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, 2001.
OTHER MATTERS
The Board of Directors knows of no other matter to be presented at the
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.
OTHER INFORMATION
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 2001 ANNUAL MEETING OF SHAREHOLDERS
The Company must receive proposals of shareholders intended to be
presented at the 2001 Annual General Meeting of Shareholders by March 1, 2001 to
be considered for inclusion in the proxy statement and form of proxy relating to
the 2001 meeting.
APPROVAL OF PROXY STATEMENT
The Board of Directors of the Company has approved this Proxy
Statement, the enclosed form of proxy and the sending thereof to the
shareholders of the Company.
By Order of the Board of Directors,
/s/ William S. Daugherty
William S. Daugherty
Chairman of the Board and President
June 2, 2000
10
<PAGE> 16
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 29, 2000.
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 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, on
June 29, 2000 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:
<TABLE>
<S> <C>
1. Fixing the Number of Directors.
4. Ratification, Affirmation and Approval of Environmental
Vote FOR [_] AGAINST [_] the resolution fixing the Energy, Inc. Option Agreement and Option Certificate
size of the Board of Directors at three.
2. Election of Directors. Vote FOR [_] AGAINST [_] the resolution ratifying, affirming and
approving the November 3, 1997 Option Agreement and the
William S. Daugherty underlying August 20, 1999 Option Certificate.
James K. Klyman
Charles E. Cotterell 5. Upon any other matter that property comes before the
Meeting
Vote FOR [_] the election of all nominees listed
above (except those whose names the undersigned has
deleted). WITHHOLD [_] vote.
Please advise Company of any change of Address:
3. Auditors
-----------------------------------------------------
Vote FOR [_] WITHHOLD [_] vote on the resolution to appoint Street Address
Kraft, Berger, Grill, Schwartz, Cohen & March LLP, Chartered
Accountants, as auditors of the Company at the remuneration to -----------------------------------------------------
be fixed by the Board of Directors. City, State, Zip
THE UNDERSIGNED HEREBY REVOKES ANY PRIOR PROXY OR PROXIES.
Dated _________________________, 2000.
- ------------------------------------------------------------------------------------
Signatures of Shareholder
- ------------------------------------------------------------------------------------
Printed Name of Shareholder
</TABLE>
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.
<PAGE> 17
DAUGHERTY RESOURCES, INC.
120 Prosperous Place
Suite 201
Lexington, KY 40509
U.S.A.
DAUGHERTY RESOURCES, INC.
120 Prosperous Place - Suite 201 - Lexington, KY 40509
In accordance with National Policy Statement No. 41 of the Canadian
Securities Administrators, beneficial shareholders may elect ANNUALLY to have
their name added to the Company's supplemental mailing list in order to receive
interim financial statements. If you wish to receive such statements please
complete and return this card.
Name:___________________________________________________________________________
Postal Address:_________________________________________________________________
___________________________Postal Code:_________________________________________
I certify that I am the owner of shares of Daugherty Resources, Inc.
Signature:______________________________________________________________________
Proxy Card
