Document:

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                                                                    EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (this "AGREEMENT") is made and
entered into as of December 31, 2003, by and among Daugherty Resources, Inc., a
British Columbia corporation (the "COMPANY"), and the purchasers signatory
hereto (each a "PURCHASER" and collectively, the "PURCHASERS").

         This Agreement is made pursuant to the Securities Purchase Agreement,
dated as of the date hereof among the Company and the Purchasers (the "PURCHASE
AGREEMENT").

         The Company and the Purchasers hereby agree as follows:

         1.       DEFINITIONS. Capitalized terms used and not otherwise defined
herein that are defined in the Purchase Agreement shall have the meanings given
such terms in the Purchase Agreement. As used in this Agreement, the following
terms shall have the following meanings:

                  "EFFECTIVENESS DATE" means, with respect to the initial
         Registration Statement required to be filed hereunder, the earlier of
         (a) 90th calendar day following the Closing Date (150th calendar day
         following the Closing Date in the event of a "full review" by the
         Commission) and (b) the fifth Trading Day following the date on which
         the Company is notified by the Commission that such Registration
         Statement will not be reviewed or is no longer subject to further
         review and comments and with respect to any additional Registration
         Statements required pursuant to Section 2(c), the earlier of (x) the
         60th calendar day following the date on which the Company first knows,
         or reasonably should have known, that such additional Registration
         Statement is required hereunder and (y) the fifth Trading Day following
         the date on which the Company is notified by the Commission that such
         Registration Statement will not be reviewed or is no longer subject to
         further review and comments.

                  "EFFECTIVENESS PERIOD" shall have the meaning set forth in
         Section 2(a).

                  "FILING DATE" means, with respect to the initial Registration
         Statement required to be filed hereunder, the 30th calendar day
         following the Closing Date and, with respect to any additional
         Registration Statements which may be required pursuant to Section 2(c),
         the 30th calendar day following the date on which the Company first
         knows, or reasonably should have known that such additional
         Registration Statement is required hereunder.

                  "HOLDER" or "HOLDERS" means the holder or holders, as the case
         may be, from time to time of Registrable Securities.

                  "INDEMNIFIED PARTY" shall have the meaning set forth in
         Section 5(c).

                  "INDEMNIFYING PARTY" shall have the meaning set forth in
         Section 5(c).

                  "LOSSES" shall have the meaning set forth in Section 5(a).

                  "PROCEEDING" means an action, claim, suit, investigation or
         proceeding (including, without limitation, an investigation or partial
         proceeding, such as a deposition), whether commenced or threatened.

                  "PROSPECTUS" means the prospectus included in a Registration
         Statement (including, without limitation, a prospectus that includes
         any information previously omitted from a prospectus filed as part of
         an effective registration statement in reliance upon Rule 430A
         promulgated under the Securities Act), as amended or supplemented by
         any prospectus supplement, with respect to the terms of the offering of
         any portion of the Registrable Securities covered by a Registration
         Statement, and all other amendments and supplements to the Prospectus,
         including post-effective amendments, and all material incorporated by
         reference or deemed to be incorporated by reference in such Prospectus.

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                  "REGISTRABLE SECURITIES" means the Shares, together with any
         securities issued or issuable upon any stock split, dividend or other
         distribution, recapitalization or similar event with respect to the
         foregoing or pursuant to any anti-dilution provisions contained in the
         Warrants.

                  "REGISTRATION STATEMENT" means a Registration Statements
         required to be filed hereunder, including (in each case) the
         Prospectus, amendments and supplements to such registration statement
         or Prospectus, including pre- and post-effective amendments, all
         exhibits thereto, and all material incorporated by reference or deemed
         to be incorporated by reference in such registration statement.

                  "RULE 415" means Rule 415 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same effect as such Rule.

                  "RULE 424" means Rule 424 promulgated by the Commission
         pursuant to the Securities Act, as such Rule may be amended from time
         to time, or any similar rule or regulation hereafter adopted by the
         Commission having substantially the same effect as such Rule.

                  "SECURITIES ACT" means the Securities Act of 1933, as amended.

                  "SHARES" solely for the purpose of this Agreement means the
         Shares (as defined in the Purchase Agreement) together with the Warrant
         Shares issuable upon exercise of the Warrants.

                  2.       REGISTRATION.

                  (a) On or prior to each Filing Date, the Company shall prepare
         and file with the Commission a Registration Statement covering the
         resale of 100% of the Registrable Securities for an offering to be made
         on a continuous basis pursuant to Rule 415. A Registration Statement
         required hereunder shall be on Form S-3 (except if the Company is not
         then eligible to register for resale the Registrable Securities on Form
         S-3, in which case such registration shall be on another appropriate
         form in accordance herewith). Each Registration Statement required
         hereunder shall contain (except if otherwise directed by the Holders)
         the "Plan of Distribution" attached hereto as Annex A. The Company
         shall cause such Registration Statement to become effective and remain
         effective as provided herein. The Company shall use its reasonable best
         efforts to cause each Registration Statement to be declared effective
         under the Securities Act as promptly as possible after the filing
         thereof, but in any event not later than the Effectiveness Date, and
         shall use its reasonable best efforts to keep such Registration
         Statement continuously effective under the Securities Act until the
         date when all Registrable Securities covered by such Registration
         Statement have been sold or may be sold without volume restrictions
         pursuant to Rule 144(k) as determined by the counsel to the Company
         pursuant to a written opinion letter to such effect, addressed and
         acceptable to the Company's transfer agent and the affected Holders
         (the "Effectiveness Period").

                  (b) If: (i) a Registration Statement is not filed on or prior
         to its Filing Date (if the Company files a Registration Statement
         without affording the Holder the opportunity to review and comment on
         the same as required by Section 3(a), the Company shall not be deemed
         to have satisfied this clause (i)), or (ii) the Company fails to file
         with the Commission a request for acceleration in accordance with Rule
         461 promulgated under the Securities Act, within five Trading Days of
         the date that the Company is notified (orally or in writing, whichever
         is earlier) by the Commission that a Registration Statement will not be
         "reviewed," or not subject to further review, or (iii) prior to the
         date when such Registration Statement is first declared effective by
         the Commission, the Company fails to file a pre-effective amendment and
         otherwise respond in writing to comments made by the Commission in
         respect of such Registration Statement within fifteen Trading Days
         after the receipt of comments by or notice from the Commission that
         such amendment is required in order for a Registration Statement to be
         declared effective, or (iv) a Registration Statement filed or required
         to be filed hereunder is not declared effective by the Commission on or
         before the Effectiveness Date, or (v) after a Registration Statement is
         first declared effective by the Commission, it ceases for any reason to
         remain continuously effective as to all Registrable Securities for
         which it is required to be effective, or the Holders are not permitted
         to utilize the Prospectus therein to resell such Registrable
         Securities, for in any such cases ten Trading Days (which need not be
         consecutive days) in the aggregate during any 12 month period (any such
         failure or breach being referred to as an

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         "Event," and for purposes of clause (i) or (iv) the date on which such
         Event occurs, or for purposes of clause (ii) the date on which such
         five Trading Day period is exceeded, or for purposes of clauses (iii)
         the date which such ten Trading Day period is exceeded, or for purposes
         of clause (v) the date on which such ten Trading Day period is exceeded
         being referred to as "Event Date"), then in addition to any other
         rights the Holders may have hereunder or under applicable law: (x) on
         each such Event Date the Company shall pay to each Holder an amount in
         cash, as partial liquidated damages and not as a penalty, equal to 3%
         of the aggregate purchase price paid by such Holder pursuant to the
         Purchase Agreement for any Registrable Securities then held by such
         Holder; and (y) on each monthly anniversary of each such Event Date (if
         the applicable Event shall not have been cured by such date) until the
         applicable Event is cured, the Company shall pay to each Holder an
         amount in cash, as partial liquidated damages and not as a penalty,
         equal to 2% of the aggregate purchase price paid by such Holder
         pursuant to the Purchase Agreement for any Registrable Securities then
         held by such Holder. If the Company fails to pay any liquidated damages
         pursuant to this Section in full within seven days after the date
         payable, the Company will pay interest thereon at a rate of 18% per
         annum (or such lesser maximum amount that is permitted to be paid by
         applicable law) to the Holder, accruing daily from the date such
         liquidated damages are due until such amounts, plus all such interest
         thereon, are paid in full.

                  (c) If during the Effectiveness Period, the number of
         Registrable Securities at any time exceeds 100% of the number of shares
         of Common Stock then registered in a Registration Statement, then the
         Company shall file as soon as reasonably practicable but in any case
         prior to the applicable Filing Date, an additional Registration
         Statement covering the resale of by the Holders of not less than 100%
         of the number of such Registrable Securities.

                  3.       REGISTRATION PROCEDURES

         In connection with the Company's registration obligations hereunder,
the Company shall:

                  (a) Not less than three Trading Days prior to the filing of a
         Registration Statement or any related Prospectus or any amendment or
         supplement thereto, the Company shall, (i) furnish to the Holders
         copies of all such documents proposed to be filed (including documents
         incorporated or deemed incorporated by reference to the extent
         requested by such Person) which documents will be subject to the review
         of such Holders, and (ii) cause its officers and directors, counsel and
         independent certified public accountants to respond to such inquiries
         as shall be necessary, in the reasonable opinion of respective counsel
         to conduct a reasonable investigation within the meaning of the
         Securities Act.

                  (b) (i) Prepare and file with the Commission such amendments,
         including post-effective amendments, to a Registration Statement and
         the Prospectus used in connection therewith as may be necessary to keep
         a Registration Statement continuously effective as to the applicable
         Registrable Securities for the Effectiveness Period and prepare and
         file with the Commission such additional Registration Statements in
         order to register for resale under the Securities Act all of the
         Registrable Securities; (ii) cause the related Prospectus to be amended
         or supplemented by any required Prospectus supplement, and as so
         supplemented or amended to be filed pursuant to Rule 424; (iii) respond
         as promptly as reasonably possible, and in any event within fifteen
         days, to any comments received from the Commission with respect to a
         Registration Statement or any amendment thereto and, as promptly as
         reasonably possible, upon request, provide the Holders true and
         complete copies of all correspondence from and to the Commission
         relating to such Registration Statement; and (iv) comply in all
         material respects with the provisions of the Securities Act and the
         Exchange Act with respect to the disposition of all Registrable
         Securities covered by a Registration Statement during the applicable
         period in accordance with the intended methods of disposition by the
         Holders thereof set forth in a Registration Statement as so amended or
         in such Prospectus as so supplemented.

                  (c) Notify the Holders of Registrable Securities to be sold as
         promptly as reasonably possible (and, in the case of (i)(A) below, not
         less than three Trading Days prior to such filing) and (if requested by
         any such Person) confirm such notice in writing promptly following the
         day (i)(A) when a Prospectus or any Prospectus supplement or
         post-effective amendment to a Registration Statement is proposed to be
         filed; (B) when the Commission notifies the Company whether there will
         be a "review" of a Registration Statement and whenever the Commission
         comments in writing on such Registration Statement (the Company shall

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         upon request provide true and complete copies thereof and all written
         responses thereto to each of the Holders); and (C) with respect to a
         Registration Statement or any post-effective amendment, when the same
         has become effective; (ii) of any request by the Commission or any
         other Federal or state governmental authority during the period of
         effectiveness of a Registration Statement for amendments or supplements
         to a Registration Statement or Prospectus or for additional
         information; (iii) of the issuance by the Commission or any other
         federal or state governmental authority of any stop order suspending
         the effectiveness of a Registration Statement covering any or all of
         the Registrable Securities or the initiation of any Proceedings for
         that purpose; (iv) of the receipt by the Company of any notification
         with respect to the suspension of the qualification or exemption from
         qualification of any of the Registrable Securities for sale in any
         jurisdiction, or the initiation or threatening of any Proceeding for
         such purpose; and (v) of the occurrence of any event or passage of time
         that makes the financial statements included in a Registration
         Statement ineligible for inclusion therein or any statement made in
         such Registration Statement or Prospectus or any document incorporated
         or deemed to be incorporated therein by reference untrue in any
         material respect or that requires any revisions to such Registration
         Statement, Prospectus or other documents so that, in the case of a
         Registration Statement or the Prospectus, as the case may be, it will
         not contain any untrue statement of a material fact or omit to state
         any material fact required to be stated therein or necessary to make
         the statements therein, in light of the circumstances under which they
         were made, not misleading.

                  (d) Use its reasonable best efforts to avoid the issuance of,
         or, if issued, obtain the withdrawal of (i) any order suspending the
         effectiveness of a Registration Statement, or (ii) any suspension of
         the qualification (or exemption from qualification) of any of the
         Registrable Securities for sale in any jurisdiction, at the earliest
         practicable moment.

                  (e) Furnish to each Holder, without charge, at least one
         conformed copy of each Registration Statement and each amendment
         thereto, including financial statements and schedules, all documents
         incorporated or deemed to be incorporated therein by reference to the
         extent requested by such Person, and all exhibits to the extent
         requested by such Person (including those previously furnished or
         incorporated by reference) promptly after the filing of such documents
         with the Commission.

                  (f) Promptly deliver to each Holder, without charge, as many
         copies of the Prospectus or Prospectuses (including each form of
         prospectus) and each amendment or supplement thereto as such Persons
         may reasonably request. The Company hereby consents to the use of such
         Prospectus and each amendment or supplement thereto by each of the
         selling Holders in connection with the offering and sale of the
         Registrable Securities covered by such Prospectus and any amendment or
         supplement thereto.

                  (g) Prior to any public offering of Registrable Securities,
         use its reasonable best efforts to register or qualify or cooperate
         with the selling Holders in connection with the registration or
         qualification (or exemption from such registration or qualification) of
         such Registrable Securities for offer and sale under the securities or
         Blue Sky laws of such jurisdictions within the United States as any
         Holder reasonably requests in writing, to keep each such registration
         or qualification (or exemption therefrom) effective during the
         Effectiveness Period and to do any and all other acts or things
         reasonably necessary or advisable to enable the disposition in such
         jurisdictions of the Registrable Securities covered by a Registration
         Statement; provided, that the Company shall not be required to qualify
         generally to do business in any jurisdiction where it is not then so
         qualified, subject the Company to any material tax in any such
         jurisdiction where it is not then so subject or file a general consent
         to service of process in any such jurisdiction.

                  (h) Cooperate with the Holders to facilitate the timely
         preparation and delivery of certificates representing Registrable
         Securities to be delivered to a transferee pursuant to a Registration
         Statement, which certificates shall be free, to the extent permitted by
         the Purchase Agreement, of all restrictive legends, and to enable such
         Registrable Securities to be in such denominations and registered in
         such names as any such Holders may request.

                  (i) Upon the occurrence of any event contemplated by Section
         3(c)(v), as promptly as reasonably possible, prepare a supplement or
         amendment, including a post-effective amendment, to a Registration
         Statement or a supplement to the related Prospectus or any document
         incorporated or deemed to be

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         incorporated therein by reference, and file any other required document
         so that, as thereafter delivered, neither such Registration Statement
         nor such Prospectus will contain an untrue statement of a material fact
         or omit to state a material fact required to be stated therein or
         necessary to make the statements therein, in light of the circumstances
         under which they were made, not misleading.

                  (j) Comply with all applicable rules and regulations of the
         Commission.

                  (k) The Company may require each selling Holder to furnish to
         the Company a certified statement as to the number of shares of Common
         Stock beneficially owned by such Holder and, if requested by the
         Commission or the Principal Market, the controlling person thereof.

         REGISTRATION EXPENSES. All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with the Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities included in a Registration Statement),
(iii) messenger, telephone and delivery expenses, (iv) fees and disbursements of
counsel for the Company, (v) Securities Act liability insurance, if the Company
so desires such insurance, and (vi) fees and expenses of all other Persons
retained by the Company in connection with the consummation of the transactions
contemplated by this Agreement. In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation of
the transactions contemplated by this Agreement (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit and the fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange as required hereunder.

         4.       INDEMNIFICATION

                  (a) INDEMNIFICATION BY THE COMPANY. The Company shall,
         notwithstanding any termination of this Agreement, indemnify and hold
         harmless each Holder, the officers, directors, agents and employees of
         each of them, each Person who controls any such Holder (within the
         meaning of Section 15 of the Securities Act or Section 20 of the
         Exchange Act) and the officers, directors, agents and employees of each
         such controlling Person, to the fullest extent permitted by applicable
         law, from and against any and all losses, claims, damages, liabilities,
         costs (including, without limitation, reasonable attorneys' fees) and
         expenses (collectively, "Losses"), as incurred, arising out of or
         relating to any untrue or alleged untrue statement of a material fact
         contained in a Registration Statement, any Prospectus or any form of
         prospectus or in any amendment or supplement thereto or in any
         preliminary prospectus, or arising out of or relating to any omission
         or alleged omission of a material fact required to be stated therein or
         necessary to make the statements therein (in the case of any Prospectus
         or form of prospectus or supplement thereto, in light of the
         circumstances under which they were made) not misleading, except to the
         extent, but only to the extent, that (1) such untrue statements or
         omissions are based solely upon information regarding such Holder
         furnished in writing to the Company by such Holder expressly for use
         therein, or to the extent that such information relates to such Holder
         or such Holder's proposed method of distribution of Registrable
         Securities and was reviewed and expressly approved in writing by such
         Holder expressly for use in a Registration Statement, such Prospectus
         or such form of Prospectus or in any amendment or supplement thereto
         (it being understood that the Holder has approved Annex A hereto for
         this purpose) or (2) in the case of an occurrence of an event of the
         type specified in Section 3(c)(ii)-(v), the use by such Holder of an
         outdated or defective Prospectus after the Company has notified such
         Holder in writing that the Prospectus is outdated or defective and
         prior to the receipt by such Holder of the Advice contemplated in
         Section 6(d). The Company shall notify the Holders promptly of the
         institution, threat or assertion of any Proceeding of which the Company
         is aware in connection with the transactions contemplated by this
         Agreement.

                  (b) Indemnification by Holders. Each Holder shall, severally
         and not jointly, indemnify and hold harmless the Company, its
         directors, officers, agents and employees, each Person who controls the
         Company (within the meaning of Section 15 of the Securities Act and
         Section 20 of the Exchange Act), and

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         the directors, officers, agents or employees of such controlling
         Persons, to the fullest extent permitted by applicable law, from and
         against all Losses, as incurred, arising out of or based solely upon:
         (x) such Holder's failure to comply with the prospectus delivery
         requirements of the Securities Act or (y) any untrue or alleged untrue
         statement of a material fact contained in any Registration Statement,
         any Prospectus, or any form of prospectus, or in any amendment or
         supplement thereto or in any preliminary prospectus, or arising out of
         or relating to any omission or alleged omission of a material fact
         required to be stated therein or necessary to make the statements
         therein not misleading (i) to the extent, but only to the extent, that
         such untrue statement or omission is contained in any information so
         furnished in writing by such Holder to the Company specifically for
         inclusion in such Registration Statement or such Prospectus or (ii) to
         the extent that (1) such untrue statements or omissions are based
         solely upon information regarding such Holder furnished in writing to
         the Company by such Holder expressly for use therein, or to the extent
         that such information relates to such Holder or such Holder's proposed
         method of distribution of Registrable Securities and was reviewed and
         expressly approved in writing by such Holder expressly for use in a
         Registration Statement (it being understood that the Holder has
         approved Annex A hereto for this purpose), such Prospectus or such form
         of Prospectus or in any amendment or supplement thereto or (2) in the
         case of an occurrence of an event of the type specified in Section
         3(c)(ii)-(v), the use by such Holder of an outdated or defective
         Prospectus after the Company has notified such Holder in writing that
         the Prospectus is outdated or defective and prior to the receipt by
         such Holder of the Advice contemplated in Section 6(d). In no event
         shall the liability of any selling Holder hereunder be greater in
         amount than the dollar amount of the net proceeds received by such
         Holder upon the sale of the Registrable Securities giving rise to such
         indemnification obligation.

                  (c) Conduct of Indemnification Proceedings. If any Proceeding
         shall be brought or asserted against any Person entitled to indemnity
         hereunder (an "Indemnified Party"), such Indemnified Party shall
         promptly notify the Person from whom indemnity is sought (the
         "Indemnifying Party") in writing, and the Indemnifying Party shall have
         the right to assume the defense thereof, including the employment of
         counsel reasonably satisfactory to the Indemnified Party and the
         payment of all fees and expenses incurred in connection with defense
         thereof; provided, that the failure of any Indemnified Party to give
         such notice shall not relieve the Indemnifying Party of its obligations
         or liabilities pursuant to this Agreement, except (and only) to the
         extent that it shall be finally determined by a court of competent
         jurisdiction (which determination is not subject to appeal or further
         review) that such failure shall have prejudiced the Indemnifying Party.

                  An Indemnified Party shall have the right to employ separate
         counsel in any such Proceeding and to participate in the defense
         thereof, but the fees and expenses of such counsel shall be at the
         expense of such Indemnified Party or Parties unless: (1) the
         Indemnifying Party has agreed in writing to pay such fees and expenses;
         (2) the Indemnifying Party shall have failed promptly to assume the
         defense of such Proceeding and to employ counsel reasonably
         satisfactory to such Indemnified Party in any such Proceeding; or (3)
         the named parties to any such Proceeding (including any impleaded
         parties) include both such Indemnified Party and the Indemnifying
         Party, and such Indemnified Party shall have been advised by counsel
         that a conflict of interest is likely to exist if the same counsel were
         to represent such Indemnified Party and the Indemnifying Party (in
         which case, if such Indemnified Party notifies the Indemnifying Party
         in writing that it elects to employ separate counsel at the expense of
         the Indemnifying Party, the Indemnifying Party shall not have the right
         to assume the defense thereof and the reasonable fees and expenses of
         one separate counsel shall be at the expense of the Indemnifying
         Party). The Indemnifying Party shall not be liable for any settlement
         of any such Proceeding effected without its written consent, which
         consent shall not be unreasonably withheld. No Indemnifying Party
         shall, without the prior written consent of the Indemnified Party,
         effect any settlement of any pending Proceeding in respect of which any
         Indemnified Party is a party, unless such settlement includes an
         unconditional release of such Indemnified Party from all liability on
         claims that are the subject matter of such Proceeding.

                  All reasonable fees and expenses of the Indemnified Party
         (including reasonable fees and expenses to the extent incurred in
         connection with investigating or preparing to defend such Proceeding in
         a manner not inconsistent with this Section) shall be paid to the
         Indemnified Party, as incurred, within ten Trading Days of written
         notice thereof to the Indemnifying Party; PROVIDED, that the
         Indemnified Party shall promptly reimburse the Indemnifying Party for
         that portion of such fees and expenses applicable to such

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         actions for which such Indemnified Party is not entitled to
         indemnification hereunder, determined based upon the relative faults of
         the parties.

                  (d) Contribution. If a claim for indemnification under Section
         5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
         public policy or otherwise), then each Indemnifying Party, in lieu of
         indemnifying such Indemnified Party, shall contribute to the amount
         paid or payable by such Indemnified Party as a result of such Losses,
         in such proportion as is appropriate to reflect the relative fault of
         the Indemnifying Party and Indemnified Party in connection with the
         actions, statements or omissions that resulted in such Losses as well
         as any other relevant equitable considerations. The relative fault of
         such Indemnifying Party and Indemnified Party shall be determined by
         reference to, among other things, whether any action in question,
         including any untrue or alleged untrue statement of a material fact or
         omission or alleged omission of a material fact, has been taken or made
         by, or relates to information supplied by, such Indemnifying Party or
         Indemnified Party, and the parties' relative intent, knowledge, access
         to information and opportunity to correct or prevent such action,
         statement or omission. The amount paid or payable by a party as a
         result of any Losses shall be deemed to include, subject to the
         limitations set forth in Section 5(c), any reasonable attorneys' or
         other reasonable fees or expenses incurred by such party in connection
         with any Proceeding to the extent such party would have been
         indemnified for such fees or expenses if the indemnification provided
         for in this Section was available to such party in accordance with its
         terms.

                  The parties hereto agree that it would not be just and
         equitable if contribution pursuant to this Section 5(d) were determined
         by pro rata allocation or by any other method of allocation that does
         not take into account the equitable considerations referred to in the
         immediately preceding paragraph. Notwithstanding the provisions of this
         Section 5(d), no Holder shall be required to contribute, in the
         aggregate, any amount in excess of the amount by which the proceeds
         actually received by such Holder from the sale of the Registrable
         Securities subject to the Proceeding exceeds the amount of any damages
         that such Holder has otherwise been required to pay by reason of such
         untrue or alleged untrue statement or omission or alleged omission,
         except in the case of fraud by such Holder.

                  The indemnity and contribution agreements contained in this
         Section are in addition to any liability that the Indemnifying Parties
         may have to the Indemnified Parties.

                  5.       MISCELLANEOUS

                  (a) REMEDIES. In the event of a breach by the Company or by a
         Holder, of any of their obligations under this Agreement, each Holder
         or the Company, as the case may be, in addition to being entitled to
         exercise all rights granted by law and under this Agreement, including
         recovery of damages, will be entitled to specific performance of its
         rights under this Agreement. The Company and each Holder agree that
         monetary damages would not provide adequate compensation for any losses
         incurred by reason of a breach by it of any of the provisions of this
         Agreement and hereby further agrees that, in the event of any action
         for specific performance in respect of such breach, it shall waive the
         defense that a remedy at law would be adequate.

                  (b) [INTENTIONALLY OMITTED]

                  (c) COMPLIANCE. Each Holder covenants and agrees that it will
         comply with the prospectus delivery requirements of the Securities Act
         as applicable to it in connection with sales of Registrable Securities
         pursuant to a Registration Statement.

                  (d) DISCONTINUED DISPOSITION. Each Holder agrees by its
         acquisition of such Registrable Securities that, upon receipt of a
         notice from the Company of the occurrence of any event of the kind
         described in Section 3(c), such Holder will forthwith discontinue
         disposition of such Registrable Securities under a Registration
         Statement until such Holder's receipt of the copies of the supplemented
         Prospectus and/or amended Registration Statement or until it is advised
         in writing (the "Advice") by the Company that the use of the applicable
         Prospectus may be resumed, and, in either case, has received copies of
         any additional or supplemental filings that are incorporated or deemed
         to be incorporated by reference in such Prospectus or

                                       7

<PAGE>

         Registration Statement. The Company may provide appropriate stop orders
         to enforce the provisions of this paragraph.

                 (e) PIGGY-BACK REGISTRATIONS. If at any time during the
         Effectiveness Period there is not an effective Registration Statement
         covering all of the Registrable Securities and the Company shall
         determine to prepare and file with the Commission a registration
         statement relating to an offering for its own account or the account of
         others under the Securities Act of any of its equity securities, other
         than on Form S-4 or Form S-8 (each as promulgated under the Securities
         Act) or their then equivalents relating to equity securities to be
         issued solely in connection with any acquisition of any entity or
         business or equity securities issuable in connection with the stock
         option or other employee benefit plans, then the Company shall send to
         each Holder a written notice of such determination and, if within
         fifteen days after the date of such notice, any such Holder shall so
         request in writing, the Company shall include in such registration
         statement all or any part of such Registrable Securities such Holder
         requests to be registered, subject to customary underwriter cutbacks
         applicable to all holders of registration rights.

                 (f) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
         including the provisions of this sentence, may not be amended, modified
         or supplemented, and waivers or consents to departures from the
         provisions hereof may not be given, unless the same shall be in writing
         and signed by the Company and each Holder of the then outstanding
         Registrable Securities.

                 (g) NOTICES. Any and all notices or other communications or
         deliveries required or permitted to be provided hereunder shall be in
         writing and shall be deemed given and effective on the earliest of (i)
         the date of transmission, if such notice or communication is delivered
         via facsimile at the facsimile number provided for below prior to 6:30
         p.m. (New York City time) on a Trading Day, (ii) the Trading Day after
         the date of transmission, if such notice or communication is delivered
         via facsimile at the facsimile number provided for below later than
         6:30 p.m. (New York City time) on any date and earlier than 11:59 p.m.
         (New York City time) on such date, (iii) the Trading Day following the
         date of mailing, if sent by nationally recognized overnight courier
         service, or (iv) upon actual receipt by the party to whom such notice
         is required to be given. The address for such notices and
         communications shall be delivered and addressed as set forth in the
         Purchase Agreement

                 (h) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
         benefit of and be binding upon the successors and permitted assigns of
         each of the parties and shall inure to the benefit of each Holder. The
         Company may not assign its rights or obligations hereunder without the
         prior written consent of each Holder. Each Holder may assign their
         respective rights hereunder in the manner and to the Persons as
         permitted under the Purchase Agreement.

                 (i) EXECUTION AND COUNTERPARTS. This Agreement may be executed
         in any number of counterparts, each of which when so executed shall be
         deemed to be an original and, all of which taken together shall
         constitute one and the same Agreement. In the event that any signature
         is delivered by facsimile transmission, such signature shall create a
         valid binding obligation of the party executing (or on whose behalf
         such signature is executed) the same with the same force and effect as
         if such facsimile signature were the original thereof.

                 (j) GOVERNING LAW. All questions concerning the construction,
         validity, enforcement and interpretation of this Agreement shall be
         governed by and construed and enforced in accordance with the internal
         laws of the State of New York, without regard to the principles of
         conflicts of law thereof. If either party shall commence an action or
         proceeding to enforce any provisions of this Agreement, then the
         prevailing party in such action or proceeding shall be reimbursed by
         the other party for its attorneys fees and other costs and expenses
         incurred with the investigation, preparation and prosecution of such
         action or proceeding.

                 (k) CUMULATIVE REMEDIES. The remedies provided herein are
         cumulative and not exclusive of any remedies provided by law.

                 (l) SEVERABILITY. If any term, provision, covenant or
         restriction of this Agreement is held by a court of competent
         jurisdiction to be invalid, illegal, void or unenforceable, the
         remainder of the terms, provisions,

                                       8

<PAGE>

         covenants and restrictions set forth herein shall remain in
         full force and effect and shall in no way be affected, impaired or
         invalidated, and the parties hereto shall use their reasonable best
         efforts to find and employ an alternative means to achieve the same or
         substantially the same result as that contemplated by such term,
         provision, covenant or restriction. It is hereby stipulated and
         declared to be the intention of the parties that they would have
         executed the remaining terms, provisions, covenants and restrictions
         without including any of such that may be hereafter declared invalid,
         illegal, void or unenforceable.

                 (m) HEADINGS. The headings in this Agreement are for
         convenience of reference only and shall not limit or otherwise affect
         the meaning hereof.

                 (n) INDEPENDENT NATURE OF PURCHASERS' OBLIGATIONS AND RIGHTS.
         The obligations of each Purchaser hereunder is several and not joint
         with the obligations of any other Purchaser hereunder, and no Purchaser
         shall be responsible in any way for the performance of the obligations
         of any other Purchaser hereunder. Nothing contained herein or in any
         other agreement or document delivered at any closing, and no action
         taken by any Purchaser pursuant hereto or thereto, shall be deemed to
         constitute the Purchasers as a partnership, an association, a joint
         venture or any other kind of entity, or create a presumption that the
         Purchasers are in any way acting in concert with respect to such
         obligations or the transactions contemplated by this Agreement. Each
         Purchaser shall be entitled to protect and enforce its rights,
         including without limitation the rights arising out of this Agreement,
         and it shall not be necessary for any other Purchaser to be joined as
         an additional party in any proceeding for such purpose.

                            *************************

                                       9
<PAGE>

         IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.

                                DAUGHERTY RESOURCES, INC.

                                By:_____________________________________
                                     William S. Daugherty,
                                     President and Chief Executive Officer

                     [PURCHASERS' SIGNATURE PAGES TO FOLLOW]

<PAGE>

                    [PURCHASER'S SIGNATURE PAGE TO NGAS RRA]

Name of Investing Entity: __________________________
Signature of Authorized Signatory of Investing entity: _________________________
Name of Authorized Signatory: _________________________
Title of Authorized Signatory: __________________________

                           [SIGNATURE PAGES CONTINUE]<PAGE>

                                                                    EXHIBIT 10.3

THESE SECURITIES HAVE NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN
EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO
AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO
SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE
COMPANY. THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN
ACCOUNT WITH A REGISTERED BROKER-DEALER OR OTHER LOAN WITH A FINANCIAL
INSTITUTION THAT IS AN "ACCREDITED INVESTOR" AS DEFINED IN RULE 501(a) UNDER THE
SECURITIES ACT.

                          COMMON STOCK PURCHASE WARRANT

                To Purchase __________ Shares of Common Stock of

                            DAUGHERTY RESOURCES, INC.

         THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received,
_____________ (the "HOLDER") is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time on
or after December 31, 2003 (the "INITIAL EXERCISE DATE") and on or prior to the
close of business on the third anniversary of the Initial Exercise Date (the
"TERMINATION DATE") but not thereafter, to subscribe for and purchase from
Daugherty Resources, Inc., a corporation incorporated in the Province of British
Columbia (the "COMPANY"), up to ____________ shares (the "WARRANT SHARES") of
Common Stock, no par value, of the Company (the "COMMON STOCK"). The purchase
price of one share of Common Stock (the "EXERCISE PRICE") under this Warrant
shall be $5.65, subject to adjustment hereunder. The Exercise Price and the
number of Warrant Shares for which the Warrant is exercisable shall be subject
to adjustment as provided herein. Capitalized terms used and not otherwise
defined herein shall have the meanings set forth in that certain Securities
Purchase Agreement (the "PURCHASE AGREEMENT") dated as of December 31, 2003
among the Company and the purchasers signatory thereto.

         1. TITLE TO WARRANT. Prior to the Termination Date and subject to
compliance with applicable laws and SECTION 7, this Warrant and all rights
hereunder are transferable, in whole or in part, at the office or agency of the
Company by the Holder in person or by duly authorized attorney, upon surrender
of this Warrant together with the Assignment Form annexed hereto properly
endorsed. The transferee shall sign an investment letter in form and substance
reasonably satisfactory to the Company.

         2. AUTHORIZATION OF SHARES. The Company covenants that all Warrant
Shares issued upon the exercise of the purchase rights represented by this
Warrant will, upon exercise of those purchase rights, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges in respect thereof, other than taxes in respect of any transfer
occurring contemporaneously with such issuance.

         3. EXERCISE OF WARRANT. (a) Except as provided in SECTION 4, exercise
of the purchase rights represented by this Warrant may be made at any time or
times on or after the Initial Exercise Date and on or before the Termination
Date by the surrender of this Warrant and the Notice of Exercise Form annexed
hereto duly executed, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the registered
Holder at the address of such Holder appearing on the books of the Company) and
upon payment of the Exercise Price of the shares thereby purchased by wire
transfer or cashier's check drawn on a United States bank or by means of a
cashless exercise if permitted pursuant to SECTION 3(D). Upon such exercise, the
Holder shall be entitled to receive a certificate for the number of Warrant
Shares so purchased. Certificates for shares purchased hereunder shall be
delivered to the Holder within five (5) Trading Days (three (3) Trading Days
after the Company reincorporates in Delaware and has a U.S. based transfer
agent) after the date on which this Warrant shall have been

<PAGE>

so exercised. This Warrant shall be deemed to have been exercised and such
certificate or certificates shall be deemed to have been issued, and the Holder
or any other person so designated to be named therein shall be deemed to have
become a holder of record of the Warrant Shares so purchased for all purposes as
of the date the Warrant has been exercised by payment to the Company of the
Exercise Price and any taxes required to be paid by the Holder pursuant to
SECTION 5 prior to the issuance of such shares. If the Company fails to deliver
to the Holder a certificate or certificates representing the Warrant Shares
pursuant to this SECTION 3(A) by the fifth Trading Day (or third Trading Day, as
applicable) after the date of exercise, then the Holder will have the right to
rescind such exercise. In addition to any other rights available to the Holder,
if the Company fails to deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise by the fifth Trading Day
(or third Trading Day, as applicable) after the date of exercise, and if after
such fifth Trading Day (or third Trading Day, as applicable) the Holder is
required by its broker to purchase (in an open market transaction or otherwise)
shares of Common Stock to deliver in satisfaction of a sale by the Holder of the
Warrant Shares which the Holder anticipated receiving upon such exercise (a
"Buy-In"), then the Company shall (1) pay in cash to the Holder the amount by
which (x) the Holder's total purchase price (including brokerage commissions, if
any) for the shares of Common Stock so purchased exceeds (y) the amount obtained
by multiplying (A) the number of Warrant Shares that the Company was required to
deliver to the Holder in connection with the exercise times (B) the price at
which the sell order giving rise to such purchase obligation was executed, and
(2) at the option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and delivery
obligations hereunder. For example, if the Holder purchases Common Stock having
a total purchase price of $11,000 to cover a Buy-In with respect to an attempted
exercise of shares of Common Stock with an aggregate sale price giving rise to
such purchase obligation of $10,000, under clause(1) of the immediately
preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable
to the Holder in respect of the Buy-In, together with applicable confirmations
and other evidence reasonably requested by the Company. Nothing herein shall
limit a Holder's right to pursue any other remedies available to it hereunder,
at law or in equity, including a decree of specific performance and other
injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

              (b) If this Warrant shall have been exercised in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Shares, deliver to the Holder a new Warrant evidencing the rights of the
Holder to purchase the remaining Warrant Shares purchasable hereunder, which new
Warrant shall in all other respects be identical with this Warrant.

              (c) Notwithstanding anything herein to the contrary, in no event
shall the Holder be permitted to exercise this Warrant for Warrant Shares to the
extent that (1) the number of shares of Common Stock beneficially owned by such
Holder, together with any affiliate thereof (other than Warrant Shares issuable
upon exercise of this Warrant) plus (2) the number of Warrant Shares issuable
upon such exercise of this Warrant, would be equal to or exceed 4.9999% of the
number of shares of Common Stock then issued and outstanding, including shares
issuable upon exercise of this Warrant held by such Holder after application of
this Section 3(c). As used herein, beneficial ownership shall be determined in
accordance with section 13(d) of the Exchange Act and the rules promulgated
thereunder. To the extent that the limitation contained in this Section 3(c)
applies, the determination of whether this Warrant is exercisable (in relation
to other securities owned by the Holder) and of which a portion of this Warrant
is exercisable shall be in the sole discretion of such Holder, and the
submission of a Notice of Exercise shall be deemed to be such Holder's
determination of whether this Warrant is exercisable (in relation to other
securities owned by such Holder) and of which portion of this Warrant is
exercisable, in each case subject to such aggregate percentage limitation, and
the Company shall have no obligation to verify or confirm the accuracy of such
determination. Nothing contained herein shall be deemed to restrict the right of
a Holder to exercise this Warrant into Warrant Shares at such time as such
exercise will not violate the provisions of this Section 3(c). The provisions of
this Section 3(c) may be waived by the Holder upon, at the election of the
Holder, not less than 61 days' prior notice to the Company, and the provisions
of this Section 3(c) shall continue to apply until such 61st day (or such later
date, as determined by the Holder, as may be specified in such notice of
waiver). No exercise of this Warrant in violation of this Section 3(c) but
otherwise in accordance with this Warrant shall affect the status of the Warrant
Shares as validly issued, fully-paid and nonassessable.

         (d) If at any time after one year from the date of issuance of this
Warrant there is no effective Registration Statement registering the resale of
the Warrant Shares by the Holder, this Warrant may also be exercised at such

                                       2
<PAGE>

time by means of a "cashless exercise" in which the Holder shall be entitled to
receive a certificate for the number of Warrant Shares equal to the quotient
obtained by dividing [(A-B) (X)] by (A), where:

(A) = the VWAP on the Trading Day immediately preceding the date of such
election;

(B) =  the Exercise Price of the Warrants, as adjusted; and

(X) = the number of Warrant Shares issuable upon exercise of this Warrant in
accordance with the terms of this Warrant if this Warrant is exercised for cash
rather than by cashless exercise.

         4. NO FRACTIONAL SHARES OR SCRIP. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant. As to any fraction of a share which the Holder would otherwise be
entitled to purchase upon such exercise, the Company shall pay a cash adjustment
in respect of such fraction in an amount equal to such fraction multiplied by
the Exercise Price.

         5. CHARGES, TAXES AND EXPENSES. Issuance of certificates for Warrant
Shares shall be made without charge to the Holder for any issue or transfer tax
or other incidental expense in respect of the issuance of such certificate, any
of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be
directed by the Holder; PROVIDED, HOWEVER, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder,
this Warrant when surrendered for exercise shall be accompanied by the
Assignment Form attached hereto duly executed by the Holder; and the Company may
require, as a condition thereto, the payment of a sum sufficient to reimburse it
for any transfer tax incidental thereto.

         6. CLOSING OF BOOKS. The Company will not close its stockholder books
or records in any manner which prevents the timely exercise of this Warrant
pursuant to the terms hereof.

         7. TRANSFER, DIVISION AND COMBINATION. (a) Subject to compliance with
any applicable securities laws and the conditions set forth in SECTIONS 1 and
7(F) and to the provisions of Section 4.1 of the Purchase Agreement, this
Warrant and all rights hereunder are transferable, in whole or in part, upon
surrender of this Warrant at the principal office of the Company, together with
a written assignment of this Warrant substantially in the form attached hereto
duly executed by the Holder or its agent or attorney, accompanied by funds
sufficient to pay any transfer taxes payable upon the making of such transfer.
Upon such surrender and, if required, such payment, the Company shall execute
and deliver a new Warrant or Warrants in the name of the assignee or assignees
and in the denomination or denominations specified in such instrument of
assignment, and shall issue to the assignor a new Warrant evidencing the portion
of this Warrant not so assigned, and this Warrant shall promptly be cancelled. A
Warrant, if properly assigned, may be exercised by a new holder for the purchase
of Warrant Shares without having a new Warrant issued.

              (b) This Warrant may be divided or combined with other Warrants
upon presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 7(a) as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice.

              (c) The Company shall prepare, issue and deliver at its own
expense (other than transfer taxes) the new Warrant or Warrants issuable under
this Section 7.

              (d) The Company agrees to maintain, at its aforesaid office, books
for the registration and the registration of transfer of the Warrants.

              (e) If, at the time of the surrender of this Warrant in connection
with any transfer of this Warrant, the transfer of this Warrant shall not be
registered pursuant to an effective registration statement under the Securities
Act and under applicable state securities or blue sky laws, the Company may
require, as a condition of allowing such transfer (1) that the Holder or
transferee of this Warrant, as the case may be, furnish to the Company a written
opinion of counsel (in form, substance and scope customary for opinions of
counsel in comparable transactions) to

                                       3

<PAGE>

the effect that such transfer may be made without registration under the
Securities Act and under applicable state securities or blue sky laws, (2) that
the holder or transferee execute and deliver to the Company an investment letter
in form and substance acceptable to the Company and (3) that the transferee be
an "accredited investor" as defined in Rule 501(a) promulgated under the
Securities Act.

         8. NO RIGHTS AS SHAREHOLDER UNTIL EXERCISE. This Warrant does not
entitle the Holder to any voting rights or other rights as a shareholder of the
Company prior to the exercise hereof. Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price (or by means of a cashless exercise, if
permitted hereunder), the Warrant Shares so purchased shall be and be deemed to
be issued to such Holder as the record owner of such shares as of the close of
business on the later of the date of such surrender or payment.

         9. LOSS, THEFT, DESTRUCTION OR MUTILATION OF WARRANT. The Company
covenants that upon receipt by the Company of evidence reasonably satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant or any stock
certificate relating to the Warrant Shares, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it (which, in
the case of the Warrant, shall not include the posting of any bond), and upon
surrender and cancellation of such Warrant or stock certificate, if mutilated,
the Company will make and deliver a new Warrant or stock certificate of like
tenor and dated as of such cancellation, in lieu of such Warrant or stock
certificate.

         10. SATURDAYS, SUNDAYS, HOLIDAYS, ETC. If the last or appointed day for
the taking of any action or the expiration of any right required or granted
herein shall be a Saturday, Sunday or a legal holiday, then such action may be
taken or such right may be exercised on the next succeeding day not a Saturday,
Sunday or legal holiday.

         11. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES. The
number and kind of securities purchasable upon the exercise of this Warrant and
the Exercise Price shall be subject to adjustment from time to time upon the
happening of any of the following. In case the Company shall (1) pay a dividend
in shares of Common Stock or make a distribution in shares of Common Stock to
holders of its outstanding Common Stock, (2) subdivide its outstanding shares of
Common Stock into a greater number of shares, (3) combine its outstanding shares
of Common Stock into a smaller number of shares of Common Stock, or (4) issue
any shares of its capital stock in a reclassification of the Common Stock, then
the number of Warrant Shares purchasable upon exercise of this Warrant
immediately prior thereto shall be adjusted so that the Holder shall be entitled
to receive the kind and number of Warrant Shares or other securities of the
Company which it would have owned or have been entitled to receive had such
Warrant been exercised in advance thereof. Upon each such adjustment of the kind
and number of Warrant Shares or other securities of the Company which are
purchasable hereunder, the Holder shall thereafter be entitled to purchase the
number of Warrant Shares or other securities resulting from such adjustment at
an Exercise Price per Warrant Share or other security obtained by multiplying
the Exercise Price in effect immediately prior to such adjustment by the number
of Warrant Shares purchasable pursuant hereto immediately prior to such
adjustment and dividing by the number of Warrant Shares or other securities of
the Company that are purchasable pursuant hereto immediately thereafter. An
adjustment made pursuant to this SECTION 11 shall become effective immediately
after the effective date of such event, retroactive to the record date, if any,
for such event.

         12. REORGANIZATION, RECLASSIFICATION, MERGER, CONSOLIDATION OR
DISPOSITION OF ASSETS. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is a change in or distribution with respect to the Common Stock of the Company),
or sell, transfer or otherwise dispose of all or substantially all its property,
assets or business to another corporation and, pursuant to the terms of such
reorganization, reclassification, merger, consolidation or disposition of
assets, shares of common stock of the successor or acquiring corporation, or any
cash, shares of stock or other securities or property of any nature whatsoever
(including warrants or other subscription or purchase rights) in addition to or
in lieu of common stock of the successor or acquiring corporation ("OTHER
PROPERTY"), are to be received by or distributed to the holders of Common Stock
of the Company, then the Holder shall have the right thereafter to receive, at
the option of the Holder, upon exercise of this Warrant, the number of shares of
Common Stock of the successor or acquiring corporation or of the Company, if it
is the surviving corporation, and Other Property receivable upon or as a result
of such reorganization, reclassification, merger, consolidation or disposition
of assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company) shall
expressly assume the due and punctual observance and performance of each and
every covenant and condition of

                                       4
<PAGE>

this Warrant to be performed and observed by the Company and all of its
obligations and liabilities hereunder, subject to such modifications as may be
deemed appropriate (as determined in good faith by resolution of the Board of
Directors of the Company) in order to provide for adjustments of Warrant Shares
for which this Warrant is exercisable which shall be as nearly equivalent as
practicable to the adjustments provided for in this SECTION 12. For purposes of
this SECTION12, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exchangeable for any such stock, either immediately or upon the arrival of a
specified date or the happening of a specified event and any warrants or other
rights to subscribe for or purchase any such stock. The foregoing provisions of
this SECTION 12 shall similarly apply to successive reorganizations,
reclassifications, mergers, consolidations or disposition of assets.

         13. VOLUNTARY ADJUSTMENT BY THE COMPANY. The Company may at any time
during the term of this Warrant reduce the then current Exercise Price to any
amount and for any period of time deemed appropriate by the Board of Directors
of the Company.

         14. NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares or
number or kind of securities or Other Property purchasable upon the exercise of
this Warrant or the Exercise Price is adjusted as herein provided, the Company
shall give notice thereof to the Holder, which notice shall state the number of
Warrant Shares (and other securities or property) purchasable upon the exercise
of this Warrant and the Exercise Price of such Warrant Shares (and other
securities or property) after such adjustment, setting forth a brief statement
of the facts requiring such adjustment and setting forth the computation by
which such adjustment was made.

         15.  NOTICE OF CORPORATE ACTION.  If at any time:

              (a) the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or other
distribution, or any right to subscribe for or purchase any evidences of its
indebtedness, any shares of stock of any class or any other securities or
property, or to receive any other right, or

              (b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation or,

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

then, in any one or more of such cases, the Company shall give to Holder (1) at
least 20 days' prior written notice of the record date for such dividend,
distribution or right or for determining rights to vote in respect of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, liquidation or winding up, and (2) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, at least 20 days' prior
written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause also shall specify (A) the date on which
any such record is to be taken for the purpose of such dividend, distribution or
right, the date on which the holders of Common Stock shall be entitled to any
such dividend, distribution or right, and the amount and character thereof, and
(B) the date on which any such reorganization, reclassification, merger,
consolidation, sale, transfer, disposition, dissolution, liquidation or winding
up is to take place and the time, if any such time is to be fixed, as of which
the holders of Common Stock shall be entitled to exchange their Warrant Shares
for securities or other property deliverable upon such disposition, dissolution,
liquidation or winding up. Each such written notice shall be sufficiently given
if addressed to Holder at the last address of Holder appearing on the books of
the Company and delivered in accordance with SECTION 17(D).

         16. AUTHORIZED SHARES. (a) The Company covenants that during the period
the Warrant is outstanding, it will reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of the
Warrant Shares upon the exercise of any purchase rights under this Warrant. The
Company further covenants that its issuance of this Warrant shall constitute
full authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary certificates for the Warrant
Shares upon the exercise of the purchase rights under this Warrant. The Company
will take all such reasonable action as may be necessary to assure that such
Warrant Shares may be issued as provided herein without violation of any
applicable

                                       5
<PAGE>

law or regulation, or of any requirements of the Trading Market upon which the
Common Stock may be listed.

              (b) Except and to the extent as waived or consented
to by the Holder, the Company shall not by any action, including, without
limitation, amending its certificate of incorporation 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 of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment. Without
limiting the generality of the foregoing, the Company will (a) not increase the
par value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares upon the exercise
of this Warrant, and (c) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having
jurisdiction thereof as may be necessary to enable the Company to perform its
obligations under this Warrant.

              (c) Before taking any action which would result in an adjustment
in the number of Warrant Shares for which this Warrant is exercisable or in the
Exercise Price, the Company shall obtain all such authorizations or exemptions
thereof, or consents thereto, as may be necessary from any public regulatory
body or bodies having jurisdiction thereof.

         17.  MISCELLANEOUS.

              (a) Jurisdiction. This Warrant shall constitute a contract under
the laws of New York, without regard to its conflict of law, principles or
rules.

              (b) Restrictions. The Holder acknowledges that the Warrant Shares
acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.

              (c) Non-Waiver and Expenses. No course of dealing or any delay or
failure to exercise any right hereunder on the part of Holder shall operate as a
waiver of such right or otherwise prejudice Holder's rights, powers or remedies,
notwithstanding all rights hereunder terminate on the Termination Date. If the
Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys' fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

              (d) Notices. Any notice, request or other document required or
permitted to be given or delivered to the Holder by the Company shall be
delivered in accordance with the notice provisions of the Purchase Agreement.

              (e) Limitation of Liability. No provision hereof, in the absence
of any affirmative action by Holder to exercise this Warrant or purchase Warrant
Shares, and no enumeration herein of the rights or privileges of Holder, shall
give rise to any liability of Holder for the purchase price of any Common Stock
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.

              (f) Remedies. Holder, in addition to being entitled to exercise
all rights granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Warrant. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Warrant and hereby agrees to
waive the defense in any action for specific performance that a remedy at law
would be adequate.

              (g) Successors and Assigns. Subject to applicable securities laws,
this Warrant and the rights and obligations evidenced hereby shall inure to the
benefit of and be binding upon the successors of the Company and the successors
and permitted assigns of Holder. The provisions of this Warrant are intended to
be for the benefit of all Holders from time to time of this Warrant and shall be
enforceable by any such Holder or holder of Warrant Shares.

              (h) Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the

                                       6

<PAGE>

written consent of the Company and the Holder.

              (i) Severability. Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

              (j) Headings. The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

                                      * * *

                                       7

<PAGE>

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

Dated:  December 31, 2003
                                     DAUGHERTY RESOURCES, INC.

                                     By:_____________________________________
                                          William S. Daugherty,
                                          President and Chief Executive Officer

                                       8

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