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                                                                    EXHIBIT 10.3

         VOID AFTER 5:00 P.M., NEW YORK CITY
         TIME, ON SEPTEMBER 5, 2006
         (UNLESS EXTENDED PURSUANT TO SECTION 2 HEREOF)

         THIS WARRANT AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
         NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
         "SECURITIES ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED
         STATES OR ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY MAY
         NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
         REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES
         LAWS UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE
         EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THOSE LAWS.

                                            Right to Purchase _______ Shares of
                                            Common Stock, no par value per share

Date: September 5, 2003

                            DAUGHERTY RESOURCES, INC.
                             STOCK PURCHASE WARRANT

         THIS CERTIFIES THAT, for value received, _________________, or its
registered assigns, is entitled to purchase from Daugherty Resources, Inc., a
corporation organized under the laws of British Columbia, Canada (the
"COMPANY"), at any time or from time to time during the period specified in
Section 2 hereof, ____________________________ (_____) fully paid and
nonassessable shares (the "WARRANT SHARES") of the Company's common stock, no
par value per share (the "COMMON STOCK"), at an exercise price per share (the
"EXERCISE PRICE") equal to $5.11. The number of Warrant Shares and the Exercise
Price are subject to adjustment as provided in Section 4 hereof. The term
"WARRANT" and all references thereto, as used throughout this instrument, shall
mean this instrument as originally executed, or if later amended or
supplemented, then as so amended or supplemented, including all Warrants issued
upon transfer or exchange of this Warrant as provided herein, and the term
"WARRANTS" means this Warrant and the other warrants of the Company issued
pursuant to that certain Securities Purchase Agreement, dated as of September 5,
2003, by and among the Company and the other signatories thereto (the
"SECURITIES PURCHASE AGREEMENT").

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         This Warrant is subject to the following terms, provisions and
conditions:

         1.       Exercise of Warrant.

                  (a)      Subject to the provisions hereof, including, without
limitation, the limitations contained in Section 9 hereof, this Warrant may be
exercised by the holder hereof, in whole or in part, by the surrender of this
Warrant, together with a completed exercise agreement in the form attached
hereto (the "EXERCISE AGREEMENT"), to the Company during normal business hours
on any business day at the Company's principal executive offices (or such other
office or agency of the Company as it may designate by written notice to the
holder hereof), and upon payment to the Company in cash, by certified or
official bank check or by wire transfer for the account of the Company, of the
Exercise Price for the Warrant Shares specified in the Exercise Agreement.

                  (b)      The Warrant Shares purchased upon exercise of this
Warrant in accordance with this Section 1 shall be deemed to be issued to the
holder hereof or the holder's designee, as the record owner of such shares, as
of the close of business on the date on which this Warrant shall have been
surrendered, the completed Exercise Agreement shall have been delivered, and
payment shall have been made for such shares as set forth above or, if such date
is not a business day, on the next succeeding business day. The Warrant Shares
so purchased, representing the aggregate number of shares specified in the
Exercise Agreement, shall be delivered to the holder hereof or the holder's
designee within a reasonable time, not exceeding two business days, after this
Warrant shall have been so exercised (the "DELIVERY PERIOD"). If the Company's
transfer agent is participating in the Depository Trust Company ("DTC") Fast
Automated Securities Transfer program, and so long as the certificates therefor
do not bear a legend (pursuant to the terms of the Securities Purchase
Agreement) and the holder is not obligated to return such certificate for the
placement of a legend thereon (pursuant to the Securities Purchase Agreement),
the Company shall cause its transfer agent to electronically transmit the
Warrant Shares so purchased to the holder or the holder's designee by crediting
the account of the holder or the holder's designee or its respective nominee
with DTC through its Deposit Withdrawal Agent Commission system ("DTC
TRANSFER"). If the aforementioned conditions to a DTC Transfer are not
satisfied, the Company shall deliver to the holder or the holder's designee
physical certificates representing the Warrant Shares so purchased.
Notwithstanding the foregoing, the holder or the holder's designee may instruct
the Company to deliver to the holder or such designee physical certificates
representing the Warrant Shares so purchased in lieu of delivering such shares
by way of DTC Transfer. Any certificates so delivered shall be in such
denominations as may be reasonably requested by the holder hereof or the
holder's designee, shall be registered in the name of the holder or such other
name as shall be designated by the holder and, following the date on which the
Warrant Shares have been registered under the Securities Act pursuant to that
certain Registration Rights Agreement, dated as of September 5, 2003, by and
among the Company and the other signatories thereto (the "REGISTRATION RIGHTS
AGREEMENT") or otherwise may be sold by the holder pursuant to Rule 144
promulgated under the Securities Act (or a successor rule), shall not bear any
restrictive legend. If this Warrant shall have been exercised only in part, then
the Company shall, at its expense, at the time of delivery of such certificates,
deliver to the holder a new Warrant representing the number of shares with
respect to which this Warrant shall not then have been exercised.

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                  (c)      If, at any time, a holder of this Warrant submits
this Warrant, an Exercise Agreement and payment to the Company of the Exercise
Price for each of the Warrant Shares specified in the Exercise Agreement, and
the Company fails for any reason (other than the reasons contemplated by Section
9 hereof) to deliver, on or prior to the fourth business day following the
expiration of the Delivery Period for such exercise, the number of shares of
Common Stock to which the holder is entitled upon such exercise (an "EXERCISE
DEFAULT"), then the Company shall pay to the holder payments ("EXERCISE DEFAULT
PAYMENTS") for an Exercise Default in the amount of (i) (N/365), multiplied by
(ii) the amount by which the Market Price (as defined in Section 10 hereof) of
the Common Stock on the date the Exercise Agreement giving rise to the Exercise
Default is transmitted in accordance with this Section 1 (the "EXERCISE DEFAULT
DATE") exceeds the Exercise Price in respect of such Warrant Shares, multiplied
by (iii) the number of shares of Common Stock the Company failed to so deliver
in such Exercise Default, multiplied by (iv) .24, where N equals the number of
days from the Exercise Default Date to the date that the Company effects the
full exercise of this Warrant which gave rise to the Exercise Default. The
accrued Exercise Default Payment for each calendar month shall be paid in cash
and shall be made to the holder by the fifth day of the month following the
month in which it has accrued. Nothing herein shall limit the holder's right to
pursue actual damages for the Company's failure to maintain a sufficient number
of authorized shares of Common Stock as required pursuant to the terms of
Section 3(b) hereof or to otherwise issue shares of Common Stock upon exercise
of this Warrant in accordance with the terms hereof, and the holder shall have
the right to pursue all remedies available at law or in equity (including a
decree of specific performance and/or injunctive relief).

         2.       Period of Exercise. This Warrant shall be exercisable at any
time or from time to time during the period (the "EXERCISE PERIOD") commencing
on the date of initial issuance of this Warrant (the "ISSUE DATE") and ending at
5:00 p.m., New York City time, on the third anniversary of the Issue Date. The
Exercise Period shall automatically be extended by one day for each day on which
(a) the Company does not have a number of shares of Common Stock reserved for
issuance upon exercise hereof at least equal to the number of shares of Common
Stock issuable upon exercise hereof or otherwise fails to deliver shares of
Common Stock in the names set forth in Section 1 hereof upon exercise hereof, or
(b) the Warrant Shares are not then otherwise registered for resale as required
pursuant to the terms of the Registration Rights Agreement.

         3.       Certain Agreements of the Company. The Company hereby
covenants and agrees as follows:

                  (a)      Shares to be Fully Paid. All Warrant Shares shall,
upon issuance in accordance with the terms of this Warrant, be validly issued,
fully paid and non-assessable and free from all taxes, liens, claims and
encumbrances.

                  (b)      Reservation of Shares. During the Exercise Period,
the Company shall at all times have authorized, and reserved for the purpose of
issuance upon exercise of this Warrant, a sufficient number of shares of Common
Stock to provide for the exercise in full of this Warrant (without giving effect
to the limitations on exercise set forth in Section 9 hereof).

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                  (c)      Listing. The Company shall promptly secure the
listing or quotation of the shares of Common Stock issuable upon exercise of
this Warrant upon each national securities exchange or automated or electronic
quotation system, if any, upon which shares of Common Stock are then listed or
quoted or become listed or quoted (subject to official notice of issuance upon
exercise of this Warrant) and shall maintain, so long as any other shares of
Common Stock shall be so listed or quoted, such listing or quotation of all
shares of Common Stock from time to time issuable upon the exercise of this
Warrant; and the Company shall so list or apply for quotation on each national
securities exchange or automated or electronic quotation system, as the case may
be, and shall maintain such listing or quotation of, any other shares of capital
stock of the Company issuable upon the exercise of this Warrant if and so long
as any shares of the same class shall be listed or quoted on such national
securities exchange or automated or electronic quotation system.

                  (d)      Certain Actions Prohibited. The Company shall not, by
amendment of its charter or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities, or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed by it hereunder, but will at all times in
good faith assist in the carrying out of all the provisions of this Warrant and
in the taking of all such action as may reasonably be requested by the holder of
this Warrant in order to protect the economic benefit inuring to the holder
hereof and the exercise privilege of the holder of this Warrant against dilution
or other impairment, consistent with the tenor and purpose of this Warrant.
Without limiting the generality of the foregoing, the Company (i) shall not
increase the par value of any shares of Common Stock receivable upon the
exercise of this Warrant above the Exercise Price then in effect, and (ii) shall
take all such actions as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock upon the exercise of this Warrant.

                  (e)      Successors and Assigns. This Warrant shall be binding
upon any entity succeeding to the Company by merger, consolidation, or
acquisition of all or substantially all of the Company's assets.

                  (f)      Blue Sky Laws. The Company shall, on or before the
date of issuance of any Warrant Shares, take such actions as the Company shall
reasonably determine are necessary to qualify the Warrant Shares for, or obtain
exemption for the Warrant Shares for, sale to the holder of this Warrant upon
the exercise hereof under applicable securities or "blue sky" laws of the states
of the United States, and shall provide evidence of any such action so taken to
the holder of this Warrant prior to such date; provided, however, that the
Company shall not be required in connection therewith or as a condition thereto
to (i) qualify to do business in any jurisdiction where it would not otherwise
be required to qualify but for this Section 3(f), (ii) subject itself to general
taxation in any such jurisdiction or (iii) file a general consent to service of
process in any such jurisdiction.

         4.       Antidilution Provisions. During the Exercise Period, the
Exercise Price, the Trigger Price (as defined in subsection (e) below) and the
number of Warrant Shares issuable hereunder shall be subject to adjustment from
time to time as provided in this Section 4.

<PAGE>

                  (a)      Stock Splits, Stock Dividends, Etc. If, at any time
during the Exercise Period, the number of outstanding shares of Common Stock is
increased by a stock split, stock dividend, combination, reclassification or
other similar event, the Trigger Price and the Exercise Price in effect
immediately prior to such increase shall be proportionately reduced, or if the
number of outstanding shares of Common Stock is decreased by a reverse stock
split, combination, reclassification or other similar event, the Trigger Price
and the Exercise Price in effect immediately prior to such decrease shall be
proportionately increased.

                  (b)      Merger, Consolidation, Etc. If, at any time during
the Exercise Period, there shall be (i) any reclassification or change of the
outstanding shares of Common Stock (other than a change in par value, or from
par value to no par value, or from no par value to par value, or as a result of
a subdivision or combination), (ii) any consolidation or merger of the Company
with any other entity (other than a merger in which the Company is the surviving
or continuing entity and its capital stock is unchanged), (iii) any sale or
transfer of all or substantially all of the assets of the Company or (iv) any
share exchange or other transasction pursuant to which all of the outstanding
shares of Common Stock are converted into other securities or property (each of
(i) - (iv) above being a "CORPORATE CHANGE"), then the holder hereof shall
thereafter have the right to receive upon exercise of this Warrant, in lieu of
the Warrant Shares otherwise issuable, such shares of stock, securities and/or
other property as would have been issued or payable in such Corporate Change
with respect to or in exchange for the number of Warrant Shares which would have
been issuable upon exercise had such Corporate Change not taken place (without
giving effect to the limitations contained in Section 9), and in any such case,
appropriate provisions (in form and substance reasonably satisfactory to the
holder hereof) shall be made with respect to the rights and interests of the
holder to the end that the economic value of this Warrant is in no way
diminished by such Corporate Change and that the provisions hereof (including,
without limitation, in the case of any such consolidation, merger or sale in
which the successor entity or purchasing entity is not the Company, an immediate
adjustment of the Exercise Price, the Trigger Price and the Warrant Shares so
that the Exercise Price, the Trigger Price and the Warrant Shares immediately
after the Corporate Change reflects the same relative value as compared to the
value of the surviving entity's common stock that existed between the Exercise
Price, the Trigger Price and the Warrant Shares and the value of the Company's
Common Stock immediately prior to such Corporate Change) shall thereafter be
applicable, as nearly as may be practicable in relation to any shares of stock
or securities thereafter deliverable upon the exercise thereof. The Company
shall not effect any Corporate Change unless (A) the holder hereof has received
written notice of such transaction at least 45 days prior thereto, but in no
event later than 15 days prior to the record date for the determination of
stockholders entitled to vote with respect thereto, and (B) the resulting
successor or acquiring entity (if not the Company) assumes by written instrument
(in form and substance reasonable satisfactory to the holder hereof) the
obligations of the Company under this Warrant. The above provisions shall apply
regardless of whether or not there would have been a sufficient number of shares
of Common Stock authorized and available for issuance upon exercise hereof as of
the date of such transaction, and shall similarly apply to successive
reclassifications, consolidations, mergers, sales, transfers or share exchanges.

                  (c)      Distributions. If, at any time during the Exercise
Period, the Company shall declare or make any distribution of its assets (or
rights to acquire its assets) to holders of Common Stock as a partial
liquidating dividend, by way of return of capital or otherwise

<PAGE>

(including any dividend or distribution to the Company's stockholders in cash or
shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a
spin-off)) (a "DISTRIBUTION"), then the holder hereof shall be entitled, upon
any exercise of this Warrant after the date of record for determining
stockholders entitled to such Distribution (or if no such record is taken, the
date on which such Distribution is declared or made), to receive the amount of
such assets which would have been payable to the holder with respect to the
Warrant Shares issuable upon such exercise (without giving effect to the
limitations contained in Section 9) had the holder hereof been the holder of
such Warrant Shares on the record date for the determination of stockholders
entitled to such Distribution (or if no such record is taken, the date on which
such Distribution is declared or made).

                  (d)      Convertible Securities and Purchase Rights. If, at
any time during the Exercise Period, the Company issues any securities or other
instruments which are convertible into or exercisable or exchangeable for Common
Stock ("CONVERTIBLE SECURITIES") or options, warrants or other rights to
purchase or subscribe for Common Stock or Convertible Securities ("PURCHASE
RIGHTS") pro rata to the record holders of any class of Common Stock, whether or
not such Convertible Securities or Purchase Rights are immediately convertible,
exercisable or exchangeable, then the holder hereof shall be entitled, upon any
exercise of this Warrant after the date of record for determining stockholders
entitled to receive such Convertible Securities or Purchase Rights (or if no
such record is taken, the date on which such Convertible Securities or Purchase
Rights are issued), to receive the aggregate number of Convertible Securities or
Purchase Rights which the holder would have received with respect to the Warrant
Shares issuable upon such exercise (without giving effect to the limitations
contained in Section 9) had the holder hereof been the holder of such Warrant
Shares on the record date for the determination of stockholders entitled to
receive such Convertible Securities or Purchase Rights (or if no such record is
taken, the date on which such Convertible Securities or Purchase Rights were
issued). If the right to exercise or convert any such Convertible Securities or
Purchase Rights would expire in accordance with their terms prior to the
exercise of this Warrant, then the terms of such Convertible Securities or
Purchase Rights shall provide that such exercise or convertibility right shall
remain in effect until 30 days after the date the holder receives such
Convertible Securities or Purchase Rights pursuant to the exercise hereof.

                  (e)      Dilutive Issuances.

                           (i)      Adjustment Upon Dilutive Issuance. If, at
any time during the Exercise Period, the Company issues or sells, or in
accordance with subparagraph (ii) of this Section 4(e) is deemed to have issued
or sold, any shares of Common Stock for no consideration or for a consideration
per share less than the Trigger Price in effect on the date of issuance or sale
(or deemed issuance or sale) (a "DILUTIVE ISSUANCE"), then effective immediately
upon the Dilutive Issuance, (1) the Trigger Price shall be adjusted so as to
equal an amount determined by multiplying such Trigger Price by the following
fraction:

                                   N(0) + N(1)
                                ----------------
                                   N(0) + N(2)

<PAGE>

                  where:

                  N(0) = the number of shares of Common Stock outstanding
immediately prior to the issuance, sale or deemed issuance or sale of such
additional shares of Common Stock in such Dilutive Issuance (without taking into
account any shares of Common Stock issuable upon conversion, exchange or
exercise of any Convertible Securities or Purchase Rights, including the Notes
or Warrants);

                  N(1) = the number of shares of Common Stock which the
aggregate consideration, if any, received or receivable by the Company for the
total number of such additional shares of Common Stock so issued, sold or deemed
issued or sold in such Dilutive Issuance (which, in the case of a deemed
issuance or sale, shall be calculated in accordance with subparagraph (ii)
below) would purchase at the Trigger Price in effect immediately prior to such
Dilutive Issuance; and

                  N(2) = the number of such additional shares of Common Stock so
issued, sold or deemed issued or sold in such Dilutive Issuance;

and (2) following such adjustment to the Trigger Price, the Exercise Price in
effect on the date of such Dilutive Issuance shall be adjusted so as to equal an
amount determined by multiplying such Exercise Price by a fraction, the
numerator of which is the Trigger Price as so adjusted and the denominator of
which is the Trigger Price in effect on the date of such Dilutive Issuance prior
to such adjustment. For purposes of this Section 4(e), the "TRIGGER PRICE" shall
initially equal $4.44 per share, but shall be subject to adjustment as provided
in this Section 4. Notwithstanding the foregoing, no adjustment shall be made
pursuant to this Section 4(e) if such adjustment would result in an increase in
either the Trigger Price or the Exercise Price.

                           (ii)     Effect on Trigger Price and Exercise Price
of Certain Events. For purposes of determining the adjusted Trigger Price and
Exercise Price under clause (i) of this Section 4(e), the following will be
applicable:

                                    (1)      Issuance of Purchase Rights. If the
Company issues or sells any Purchase Rights, whether or not immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such Purchase Rights (and the price of any conversion of Convertible
Securities, if applicable) is less than the Trigger Price in effect on the date
of issuance or sale of such Purchase Rights, then the maximum total number of
shares of Common Stock issuable upon the exercise of all such Purchase Rights
(assuming full conversion, exercise or exchange of Convertible Securities, if
applicable) shall, as of the date of the issuance or sale of such Purchase
Rights, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. For purposes of the preceding sentence, the
"price per share for which Common Stock is issuable upon the exercise of such
Purchase Rights" shall be determined by dividing (A) the total amount, if any,
received or receivable by the Company as consideration for the issuance or sale
of all such Purchase Rights, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the exercise of all such
Purchase Rights, plus, in the case of Convertible Securities issuable upon the
exercise of such Purchase Rights, the minimum aggregate amount of additional
consideration payable upon the conversion, exercise or exchange thereof
(determined in accordance with the calculation method

<PAGE>

set forth in clause (ii)(2) of this Section 4(e)) at the time such Convertible
Securities first become convertible, exercisable or exchangeable, by (B) the
maximum total number of shares of Common Stock issuable upon the exercise of all
such Purchase Rights (assuming full conversion, exercise or exchange of
Convertible Securities, if applicable). No further adjustment to the Trigger
Price or the Exercise Price shall be made upon the actual issuance of such
Common Stock upon the exercise of such Purchase Rights or upon the conversion,
exercise or exchange of Convertible Securities issuable upon exercise of such
Purchase Rights.

                                    (2)      Issuance of Convertible Securities.
If the Company issues or sells any Convertible Securities, whether or not
immediately convertible, exercisable or exchangeable, and the price per share
for which Common Stock is issuable upon such conversion, exercise or exchange is
less than the Trigger Price in effect on the date of issuance or sale of such
Convertible Securities, then the maximum total number of shares of Common Stock
issuable upon the conversion, exercise or exchange of all such Convertible
Securities shall, as of the date of the issuance or sale of such Convertible
Securities, be deemed to be outstanding and to have been issued and sold by the
Company for such price per share. If the Convertible Securities so issued or
sold do not have a fluctuating conversion or exercise price or exchange ratio,
then for the purposes of the preceding sentence, the "price per share for which
Common Stock is issuable upon such conversion, exercise or exchange" shall be
determined by dividing (A) the total amount, if any, received or receivable by
the Company as consideration for the issuance or sale of all such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion, exercise or exchange thereof
(determined in accordance with the calculation method set forth in this clause
(ii)(2) of this Section 4(e)) at the time such Convertible Securities first
become convertible, exercisable or exchangeable, by (B) the maximum total number
of shares of Common Stock issuable upon the exercise, conversion or exchange of
all such Convertible Securities. If the Convertible Securities so issued or sold
have a fluctuating conversion or exercise price or exchange ratio (a "VARIABLE
RATE CONVERTIBLE SECURITY"), then for purposes of the next preceding sentence,
the "price per share for which Common Stock is issuable upon such conversion,
exercise or exchange" shall be deemed to be the lowest price per share which
would be applicable (assuming all holding period and other conditions to any
discounts contained in such Variable Rate Convertible Security have been
satisfied) if the conversion price of such Variable Rate Convertible Security on
the date of issuance or sale thereof was seventy-five percent (75%) of the
actual conversion price on such date (the "ASSUMED VARIABLE MARKET PRICE"), and,
further, if the conversion price of such Variable Rate Convertible Security at
any time or times thereafter is less than or equal to the Assumed Variable
Market Price last used for making any adjustment under this Section 4(e) with
respect to any Variable Rate Convertible Security, the Trigger Price and the
Exercise Price in effect at such time shall be readjusted to equal the Trigger
Price and the Exercise Price which would have resulted if the Assumed Variable
Market Price at the time of issuance of the Variable Rate Convertible Security
had been seventy-five percent (75%) of the actual conversion price of such
Variable Rate Convertible Security existing at the time of the adjustment
required by this sentence. No further adjustment to the Trigger Price or the
Exercise Price shall be made upon the actual issuance of such Common Stock upon
conversion, exercise or exchange of such Convertible Securities.

                                    (3)      Change in Option Price or
Conversion Rate. If there is a change at any time in (A) the amount of
additional consideration payable to the Company upon

<PAGE>

the exercise of any Purchase Rights; (B) the amount of additional consideration,
if any, payable to the Company upon the conversion, exercise or exchange of any
Convertible Securities; or (C) the rate at which any Convertible Securities are
convertible into or exercisable or exchangeable for Common Stock (in each such
case, other than under or by reason of provisions designed to protect against
dilution), the Trigger Price and the Exercise Price in effect at the time of
such change shall be readjusted to the Trigger Price and the Exercise Price
which would have been in effect at such time had such Purchase Rights or
Convertible Securities still outstanding provided for such changed additional
consideration or changed conversion, exercise or exchange rate, as the case may
be, at the time initially issued or sold.

                                    (4)      Calculation of Consideration
Received. If any Common Stock, Purchase Rights or Convertible Securities are
issued or sold for cash, the consideration received therefor will be the amount
received by the Company therefor. In case any Common Stock, Purchase Rights or
Convertible Securities are issued or sold for a consideration part or all of
which shall be other than cash, including in the case of a strategic or similar
arrangement in which the other entity will provide services to the Company,
purchase services from the Company or otherwise provide intangible consideration
to the Company, the amount of the consideration other than cash received by the
Company (including the net present value of the consideration expected by the
Company for the provided or purchased services) shall be the fair market value
of such consideration, except where such consideration consists of securities,
in which case the amount of consideration received by the Company will be the
Market Price thereof as of the date of receipt. In case any Common Stock,
Purchase Rights or Convertible Securities are issued in connection with any
merger or consolidation in which the Company is the surviving corporation, the
amount of consideration therefor will be deemed to be the fair market value of
such portion of the net assets and business of the non-surviving corporation as
is attributable to such Common Stock, Purchase Rights or Convertible Securities,
as the case may be. Notwithstanding anything else herein to the contrary, if
Common Stock, Purchase Rights or Convertible Securities are issued or sold in
conjunction with each other as part of a single transaction or in a series of
related transactions, the holder hereof may elect to determine the amount of
consideration deemed to be received by the Company therefor by deducting the
fair value of any type of securities (the "DISREGARDED SECURITIES") issued or
sold in such transaction or series of transactions. If the holder makes an
election pursuant to the immediately preceding sentence, no adjustment to the
Trigger Price or the Exercise Price shall be made pursuant to this Section 4(e)
for the issuance of the Disregarded Securities or upon any conversion, exercise
or exchange thereof. For example, if the Company were to issue convertible notes
having a face value of $1,000,000 and warrants to purchase shares of Common
Stock at an exercise price equal to the Market Price of the Common Stock on the
date of issuance of such warrants in exchange for $1,000,000 of consideration,
the fair value of the warrants would be subtracted from the $1,000,000 of
consideration received by the Company for the purposes of determining whether
the shares of Common Stock issuable upon conversion of the convertible notes
shall be deemed to be issued at a price per share below the Trigger Price and,
if so, for purposes of determining any adjustment to the Trigger Price and the
Exercise Price hereunder as a result of the issuance of the convertible notes.
The Company shall calculate, using standard commercial valuation methods
appropriate for valuing such assets, the fair market value of any consideration
other than cash or securities; provided, however, that if the holder hereof does
not agree to such fair market value calculation within three business days after
receipt thereof from the Company, then such fair market value shall be
determined in good faith by an investment banker or other

<PAGE>

appropriate expert of national reputation selected by the Company and reasonably
acceptable to the holder, with the costs of such appraisal to be borne by the
Company.

                                    (5)      Issuances Pursuant to Existing
Securities. If the Company issues (or becomes obligated to issue) shares of
Common Stock pursuant to any antidilution or similar adjustments (other than as
a result of stock splits, stock dividends and the like) contained in any
Convertible Securities or Purchase Rights outstanding as of the date hereof but
not included in Section 3(c) of the Disclosure Schedule to the Securities
Purchase Agreement, then all shares of Common Stock so issued shall be deemed to
have been issued for no consideration. If the Company issues (or becomes
obligated to issue) shares of Common Stock pursuant to any antidilution or
similar adjustments contained in any Convertible Securities or Purchase Rights
included in Section 3(c) of the Disclosure Schedule to the Securities Purchase
Agreement as a result of the issuance of the Notes or Warrants pursuant to the
Securities Purchase Agreement and the number of shares that the Company issues
(or is obligated to issue) as a result of such initial issuance exceeds the
amount specified in Section 3(c) of the Disclosure Schedule to the Securities
Purchase Agreement, such excess shares shall be deemed to have been issued for
no consideration.

                           (iii)    Limitation on Adjustments for Dilutive
Issuances. Notwithstanding the foregoing or any other provision of this Warrant
to the contrary, in no event shall the Trigger Price or the Exercise Price be
adjusted as a result of a Dilutive Issuance to the extent (but only to the
extent) that such adjustment would result in this Warrant, together with all
other Warrants (including any Warrants that have already been exercised for
Common Stock) and all Notes (including PIK Notes and any portions of any Notes
that have already been converted into Common Stock), being convertible into and
exercisable for more than an aggregate of 1,947,990 shares of Common Stock. In
the event that any Dilutive Issuance would result in an adjustment to the
Trigger Price and the Exercise Price of the Warrants and such adjustment is
limited by operation of this Section 4(e)(iii), such adjustment shall be
allocated pro rata among the Warrants then outstanding. In the event that any
Dilutive Issuance would result in an adjustment to both the Conversion Price of
the Notes and the Trigger Price and the Exercise Price of the Warrants and such
adjustment is limited by operation of this 4(e)(iii), such adjustment shall
first be made to the Conversion Price of the Notes to the maximum extent
possible within the limitations set forth therein, and only if such adjustment
to the Conversion Price of the Notes has been made in full shall any adjustments
be made to the Trigger Price and the Exercise Price of the Warrants (allocated
pro rata in accordance with the foregoing sentence).

                  (f)      Exceptions to Adjustment of Trigger Price and
Exercise Price. Notwithstanding the foregoing, no adjustment to the Trigger
Price or the Exercise Price shall be made upon (i) the issuance of Common Stock
upon the exercise or conversion of any Convertible Securities or Purchase Rights
outstanding on the Issue Date and disclosed in Section 3(c) of the Disclosure
Schedule to the Securities Purchase Agreement in accordance with the terms of
such Convertible Securities and Purchase Rights as of such date; (ii) the grant
of options to purchase Common Stock, with exercise prices not less than the
Market Price of the Common Stock on the date of grant, or the grant of
restricted shares of Common Stock, in each case which are issued to employees,
officers, directors or consultants of the Company for the primary purpose of
soliciting or retaining their employment or service pursuant to an equity
compensation plan approved by the Company's Board of Directors, and the issuance
of shares of

<PAGE>

Common Stock upon the exercise thereof; (iii) the issuance of securities
pursuant to a bona fide underwritten public offering; or (iv) the issuance of
shares of Common Stock upon conversion of the Notes or the exercise of the
Warrants; (v) the issuance of securities in a bona fide business acquisition; or
(vi) the issuance of securities in connection with a strategic business
partnership with an oil and gas company, the primary purpose of which, in the
reasonable judgment of the Company's Board of Directors, is not to raise
additional capital.

                  (g)      Other Action Affecting Trigger Price and Exercise
Price. If, at any time during the Exercise Period, the Company takes any action
affecting the Common Stock that would be covered by Section 4(a) through (e),
but for the manner in which such action is taken or structured, which would in
any way diminish the value of this Warrant, then the Trigger Price and the
Exercise Price shall be adjusted in such manner as the Board of Directors of the
Company shall in good faith determine to be equitable under the circumstances.

                  (h)      Adjustment in Number of Shares. Upon each adjustment
of the Exercise Price pursuant to the provisions of this Section 4, the number
of shares of Common Stock issuable upon exercise of this Warrant at each such
Exercise Price shall be adjusted by multiplying a number equal to the Exercise
Price in effect immediately prior to such adjustment by the number of shares of
Common Stock issuable upon exercise of this Warrant at such Exercise Price
immediately prior to such adjustment and dividing the product so obtained by the
adjusted Exercise Price.

                  (i)      Notice of Adjustment. Upon the occurrence of any
event which requires any adjustment or readjustment of the Trigger Price and/or
the Exercise Price or change in number or type of stock, securities and/or other
property issuable upon exercise of this Warrant, then, and in each such case,
the Company shall give notice thereof to the holder hereof, which notice shall
state the Trigger Price and the Exercise Price resulting from such adjustment or
readjustment and any change in the number of type of stock, securities and/or
other property issuable upon exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. Such calculation shall be certified by the chief financial
officer of the Company.

                  (j)      No Fractional Shares. No fractional shares of Common
Stock are to be issued upon the exercise of this Warrant, but the Company shall
pay a cash adjustment in respect of any fractional share which would otherwise
be issuable in an amount equal to the same fraction of the Market Price of a
share of Common Stock on the date of such exercise.

                  (k)      Other Notices. In case at any time:

                           (i)      the Company shall declare any dividend upon
the Common Stock payable in shares of stock of any class or make any other
distribution (other than dividends or distributions payable in cash out of
retained earnings consistent with the Company's past practices with respect to
declaring dividends and making distributions) to the holders of the Common
Stock;

                           (ii)     the Company shall offer for subscription pro
rata to the holders of the Common Stock any additional shares of stock of any
class or other rights;

<PAGE>

                           (iii)    there shall be any capital reorganization of
the Company, or reclassification of the Common Stock, or consolidation or merger
of the Company with or into, or sale of all or substantially all of its assets
to, another corporation or entity; or

                           (iv)     there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;

then, in each such case, the Company shall give to the holder of this Warrant
(A) notice of the date or estimated date on which the books of the Company shall
close or a record shall be taken for determining the holders of Common Stock
entitled to receive any such dividend, distribution, or subscription rights or
for determining the holders of Common Stock entitled to vote in respect of any
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up and (B) in the case of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding-up, notice of the date (or, if not then known, a reasonable estimate
thereof by the Company) when the same shall take place. Such notice shall also
specify the date on which the holders of Common Stock shall be entitled to
receive such dividend, distribution, or subscription rights or to exchange their
Common Stock for stock or other securities or property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding-up, as the case may be. Such notice shall be given at
least thirty (30) days prior to the record date or the date on which the
Company's books are closed in respect thereto. Failure to give any such notice
or any defect therein shall not affect the validity of the proceedings referred
to in clauses (i), (ii), (iii) and (iv) above. Notwithstanding the foregoing,
the Company shall publicly disclose the substance of any notice delivered
hereunder prior to delivery of such notice to the holder hereof.

         5.       Issue Tax. The issuance of certificates for Warrant Shares
upon the exercise of this Warrant shall be made without charge to the holder of
this Warrant or such shares for any issuance tax or other costs in respect
thereof, provided that the Company shall not be required to pay any tax which
may be payable in respect of any transfer involved in the issuance and delivery
of any certificate in a name other than the holder of this Warrant.

         6.       No Rights or Liabilities as a Shareholder. This Warrant shall
not entitle the holder hereof to any voting rights or other rights as a
stockholder of the Company. No provision of this Warrant, in the absence of
affirmative action by the holder hereof to purchase Warrant Shares, and no mere
enumeration herein of the rights or privileges of the holder hereof, shall give
rise to any liability of such holder for the Exercise Price or as a stockholder
of the Company, whether such liability is asserted by the Company or by
creditors of the Company.

         7.       Transfer, Exchange, Redemption and Replacement of Warrant.

                  (a)      Restriction on Transfer. This Warrant and the rights
granted to the holder hereof are transferable, in whole or in part, upon
surrender of this Warrant, together with a properly executed assignment in the
form attached hereto, at the office or agency of the Company referred to in
Section 7(e) below, provided, however, that any transfer or assignment shall be
subject to the conditions set forth in Sections 7(f) and 9 hereof and to the
provisions of Section 5 of the Securities Purchase Agreement. Until due
presentment for registration of transfer on the books of the Company, the
Company may treat the registered holder hereof as the

<PAGE>

owner and holder hereof for all purposes, and the Company shall not be affected
by any notice to the contrary. Notwithstanding anything to the contrary
contained herein, the registration rights described in Section 8 hereof are
assignable only in accordance with the provisions of the Registration Rights
Agreement.

                  (b)      Warrant Exchangeable for Different Denominations.
This Warrant is exchangeable, upon the surrender hereof by the holder hereof at
the office or agency of the Company referred to in Section 7(e) below, for new
Warrants of like tenor of different denominations representing in the aggregate
the right to purchase the number of shares of Common Stock which may be
purchased hereunder, each of such new Warrants to represent the right to
purchase such number of shares (at the Exercise Price therefor) as shall be
designated by the holder hereof at the time of such surrender.

                  (c)      Replacement of Warrant. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction, or
mutilation of this Warrant and, in the case of any such loss, theft, or
destruction, upon delivery of an indemnity agreement reasonably satisfactory in
form and amount to the Company, or, in the case of any such mutilation, upon
surrender and cancellation of this Warrant, the Company, at its expense, will
execute and deliver, in lieu thereof, a new Warrant of like tenor.

                  (d)      Cancellation; Payment of Expenses. Upon the surrender
of this Warrant in connection with any transfer, exchange, or replacement as
provided in this Section 7, this Warrant shall be promptly canceled by the
Company. The Company shall pay all taxes (other than securities transfer taxes)
and all other expenses (other than legal expenses, if any, incurred by the
holder of this Warrant or transferees) and charges payable in connection with
the preparation, execution, and delivery of Warrants pursuant to this Section 7.
The Company shall indemnify and reimburse the holder of this Warrant for all
losses and damages arising as a result of or related to any breach of the terms
of this Warrant, including costs and expenses (including legal fees) incurred by
such holder in connection with the enforcement of its rights hereunder.

                  (e)      Warrant Register. The Company shall maintain, at its
principal executive offices (or such other office or agency of the Company as it
may designate by notice to the holder hereof), a register for this Warrant, in
which the Company shall record the name and address of the person in whose name
this Warrant has been issued, as well as the name and address of each transferee
and each prior owner of this Warrant.

                  (f)      Transfer or Exchange Without Registration. If, at the
time of the surrender of this Warrant in connection with any transfer or
exchange of this Warrant, this Warrant (or, in the case of any exercise, the
Warrant Shares issuable hereunder) shall not be registered under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such transfer or exchange, (i) that the
holder or transferee of this Warrant, as the case may be, furnish to the Company
a written opinion of counsel (which opinion shall be in form, substance and
scope customary for opinions of counsel in comparable transactions) to the
effect that such transfer or exchange may be made without registration under the
Securities Act and under applicable state securities or blue sky laws (the cost
of which shall be borne by the Company if the Company's counsel renders such an
opinion, and up to $1,000 of such cost shall be borne by the Company if the
holder's counsel is required

<PAGE>

to render such opinion), (ii) that the holder or transferee execute and deliver
to the Company an investment letter in form and substance acceptable to the
Company and (iii) that the transferee be an "ACCREDITED INVESTOR" as defined in
Rule 501(a) promulgated under the Securities Act; provided, however, that no
such opinion, letter, or status as an "accredited investor" shall be required in
connection with a transfer pursuant to Rule 144 under the Securities Act.

         8.       Registration Rights. The initial holder of this Warrant (and
certain assignees thereof) is entitled to the benefit of such registration
rights in respect of the Warrant Shares as are set forth in the Registration
Rights Agreement, including the right to assign such rights to certain
assignees, as set forth therein.

         9.       Additional Restrictions on Exercise and Transfer. In no event
shall the holder hereof have the right to exercise any portion of this Warrant
for shares of Common Stock or to dispose of any portion of this Warrant to the
extent that such right to effect such exercise or disposition would result in
the holder and its affiliates together beneficially owning more than 4.99% of
the outstanding shares of Common Stock. For purposes of this Section 9,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities Exchange Act of 1934, as amended, and Regulation 13D-G thereunder.
The restriction contained in this Section 9 may not be altered, amended, deleted
or changed in any manner whatsoever unless the holders of a majority of the
outstanding shares of Common Stock and the holder hereof shall approve, in
writing, such alteration, amendment, deletion or change.

         10.      Certain Definitions. For purposes of this Warrant, the
following capitalized terms shall have the respective meanings assigned to them:

                  (a)      "BUSINESS DAY" means any day, other than a Saturday
or Sunday or a day on which banking institutions in the State of New York are
authorized or obligated by law, regulation or executive order to close.

                  (b)      "MARKET PRICE" means, for any security as of any
date, the last sales price of such security on the principal trading market
where such security is listed or traded as reported by Bloomberg Financial
Markets (or a comparable reporting service of national reputation selected by
the Company and reasonably acceptable to the holder hereof if Bloomberg
Financial Markets is not then reporting closing bid prices of such security) (in
any case, "BLOOMBERG"), or if the foregoing does not apply, the last reported
sales price of such security on a national exchange or in the over-the-counter
market on the electronic bulletin board for such security as reported by
Bloomberg, or, if no such price is reported for such security by Bloomberg, the
average of the bid prices of all market makers for such security as reported in
the "pink sheets" by the National Quotation Bureau, Inc., in each case for such
date or, if such date was not a trading day for such security, on the next
preceding date which was a trading day. If the Market Price cannot be calculated
for such security as of either of such dates on any of the foregoing bases, the
Market Price of such security on such date shall be the fair market value as
reasonably determined by an investment banking firm selected by the Company and
reasonably acceptable to the holder hereof, with the costs of such appraisal to
be borne by the Company.

                  (c)      "NOTES" shall have the meaning assigned to such term
in the Securities Purchase Agreement.

<PAGE>

                  (d)      "TRADING DAY" means any day on which principal United
States securities exchange or trading market where the Common Stock is then
listed or traded, is open for trading.

         11.      Miscellaneous.

                  (a)      Governing Law; Jurisdiction. This Warrant shall be
governed by and construed in accordance with the laws of the State of Delaware
applicable to contracts made and to be performed in the State of Delaware. The
Company irrevocably consents to the jurisdiction of the United States federal
courts and the state courts located in the County of New Castle, State of
Delaware, in any suit or proceeding based on or arising under this Warrant and
irrevocably agrees that all claims in respect of such suit or proceeding may be
determined in such courts. The Company irrevocably waives the defense of an
inconvenient forum to the maintenance of such suit or proceeding in such forum.
The Company further agrees that service of process upon the Company mailed by
first class mail shall be deemed in every respect effective service of process
upon the Company in any such suit or proceeding. Nothing herein shall affect the
right of the holder to serve process in any other manner permitted by law. The
Company agrees that a final non-appealable judgment in any such suit or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on such judgment or in any other lawful manner.

                  (b)      Construction. Whenever the context requires, the
gender of any word used in this Warrant includes the masculine, feminine or
neuter, and the number of any word includes the singular or plural. Unless the
context otherwise requires, all references to articles and sections refer to
articles and sections of this Warrant, and all references to schedules are to
schedules attached hereto, each of which is made a part hereof for all purposes.
The descriptive headings of the several articles and sections of this Warrant
are inserted for purposes of reference only, and shall not affect the meaning or
construction of any of the provisions hereof.

                  (c)      Severability. If any provision of this Warrant shall
be invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Warrant or the validity or enforceability of this Warrant in
any other jurisdiction.

                  (d)      Entire Agreement; Amendments. This Warrant contains
the entire understanding of the Company and the holder hereof with respect to
the matters covered herein. Subject to any additional express provisions of this
Warrant, no provision of this Warrant may be waived other than by an instrument
in writing signed by the party to be charged with enforcement, and no provision
of this Warrant may be amended other than by an instrument in writing signed by
the Company and the holder.

                  (e)      Notices. Any notices required or permitted to be
given under the terms of this Warrant shall be sent by certified or registered
mail (return receipt requested) or delivered personally, by responsible
overnight carrier or by confirmed facsimile, and shall be effective five days
after being placed in the mail, if mailed, or upon receipt or refusal of
receipt, if delivered personally or by responsible overnight carrier or
confirmed facsimile, in each case addressed to a party. The initial addresses
for such communications shall be as follows, and each party shall provide notice
to the other parties of any change in such party's address:

<PAGE>

                           (i)      If to the Company:

                                    Daugherty Resources, Inc.
                                    120 Prosperous Place, Suite 201
                                    Lexington, Kentucky 40509
                                    Telephone: (859) 263-3948
                                    Facsimile: (859) 263-4228
                                    Attention: William Daugherty, President

                                    with a copy simultaneously transmitted by
                                      like means (which transmittal shall not
                                      constitute notice hereunder) to:

                                    Stahl & Zelmanovitz
                                    767 Third Avenue, Suite 1401
                                    New York, New York 10017
                                    Telephone: (212) 826-6435
                                    Facsimile: (212) 826-6402
                                    Attention: Douglas Stahl, Esq.

                           (ii)     If to the holder, at such address as shall
be set forth in the Warrant Register from time to time.

                  (f)      Successors and Assigns. This Warrant shall be binding
upon and inure to the benefit of the parties and their successors and assigns.
Except as provided herein, the Company shall not assign this Warrant or its
obligations hereunder. The holder hereof may assign or transfer this Warrant and
such holders rights hereunder in accordance with Section 7 hereof.

                  (g)      Equitable Relief. The Company acknowledges that a
breach by it of its obligations hereunder will cause irreparable harm to the
holder by vitiating the intent and purpose of this Warrant. Accordingly, the
Company acknowledges that the remedy at law for a breach of its obligations
hereunder will be inadequate and agrees, in the event of a breach or threatened
breach by the Company of the provisions of this Warrant, that the holder shall
be entitled, in addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic loss and
without any bond or other security being required.

                [REMAINDER OF THIS PAGE LEFT BLANK INTENTIONALLY]

<PAGE>

         IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer.

                                               DAUGHERTY RESOURCES, INC.

                                               By:______________________________
                                               Name:
                                               Title:

                   [SIGNATURE PAGE TO STOCK PURCHASE WARRANT]

<PAGE>

                           FORM OF EXERCISE AGREEMENT

         (TO BE EXECUTED BY THE HOLDER IN ORDER TO EXERCISE THE WARRANT)

To:      Daugherty Resources, Inc.
         120 Prosperous Place, Suite 201
         Lexington, Kentucky 40509
         Facsimile: (859) 263-4228
         Attention: William Daugherty, President

         The undersigned hereby irrevocably exercises the right to purchase
_____________ shares of the Common Stock of Daugherty Resources, Inc., a
corporation organized under the laws of British Columbia, Canada (the
"COMPANY"), evidenced by the attached Warrant, and herewith makes payment of the
Exercise Price with respect to such shares in full, all in accordance with the
conditions and provisions of said Warrant.

         The undersigned agrees not to offer, sell, transfer or otherwise
dispose of any Common Stock obtained on exercise of the Warrant, except under
circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any state securities laws.

                  [ ] The undersigned requests that the Company cause its
                  transfer agent to electronically transmit the Common Stock
                  issuable pursuant to this Exercise Agreement to the account of
                  the undersigned or its nominee (which is _________________)
                  with DTC through its Deposit Withdrawal Agent Commission
                  System ("DTC TRANSFER"), provided that such transfer agent
                  participates in the DTC Fast Automated Securities Transfer
                  program.

                  [ ] In lieu of receiving the shares of Common Stock issuable
                  pursuant to this Exercise Agreement by way of DTC Transfer,
                  the undersigned hereby requests that the Company cause its
                  transfer agent to issue and deliver to the undersigned
                  physical certificates representing such shares of Common
                  Stock.

The undersigned requests that a Warrant representing any unexercised portion
hereof be issued, pursuant to the Warrant, in the name of the Holder and
delivered to the undersigned at the address set forth below:

Dated:_________________                     ____________________________________
                                                       Signature of Holder

                                            ____________________________________
                                                       Name of Holder (Print)

                                                       Address:
                                            ____________________________________
                                            ____________________________________
                                            ____________________________________

<PAGE>

                               FORM OF ASSIGNMENT

         FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers all the rights of the undersigned under the within Warrant, with
respect to the number of shares of Common Stock covered thereby set forth
hereinbelow, to:

Name of Assignee                     Address                       No. of Shares

, and hereby irrevocably constitutes and appoints _____________________________
as agent and attorney-in-fact to transfer said Warrant on the books of the
within-named corporation, with full power of substitution in the premises.

Dated: _____________________, ____

In the presence of

___________________

                                   Name: _______________________________________

                                   Signature: __________________________________
                                   Title of Signing Officer or Agent (if any):
                                   _____________________________________________

                                   Address: ____________________________________
                                            ____________________________________
                                            ____________________________________

                                   Note: The above signature should correspond
                                         exactly with the name on the face of
                                         the within Warrant.