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Exhibit 10.23
EXHIBIT
C FORM OF WARRANT
This
Warrant and the underlying shares of Common Stock represented
by this Certificate have not been registered under the
Securities Act of 1933 (the "Act"), and are "restricted
securities" as that term is defined in Rule 144 under the Act.
The securities may not be offered for sale, sold or otherwise
transferred except pursuant to an effective registration
statement under the Act, or pursuant to an exemption from
registration under the Act, the availability of which is to be
established to the satisfaction of the Company.
Warrant
No. 2006
WARRANT
TO PURCHASE SHARES OF COMMON STOCK
Warrant
to Purchase
Shares
(subject
to adjustment as set forth herein)
Exercise
Price $2.00 Per Share
(subject
to adjustment as set forth herein)
VOID
AFTER 3:00 P.M., PACIFIC TIME, ON _,2011
THIS
CERTIFIES THAT [INVESTOR'S NAME], [INVESTOR'S ADDRESS] is
entitled to purchase from Daybreak Oil and Gas, Inc., a
Washington corporation (hereinafter called the "Company") with
its principal office located at 601 West Main Street, Suite
1017, Spokane, Washington 99201, at any time after the
issuance of this warrant, but before 3: 00 P.M., Pacific Time,
on --' 2011 (the "Termination Date"), at the purchase price of
$2.00 per share (the "Exercise Price"), the number of shares
(the "Shares") of the Company's Common Stock (the "Common
Stock") set forth above. The number of Shares purchasable upon
exercise of this Warrant and the Exercise Price per Share
shall be subject to adjustment from time to time as set forth
in Section 4 below.
Section
1. Definitions.
The
following terms used in this agreement shall have the
following meanings (unless otherwise expressly provided
herein):
The "Act. " The Securities Act of 1933, as
amended.
The "Commission." The Securities and Exchange
Commission.
The "Company." Daybreak Oil and Gas, Inc.
"Common Stock." The Company's Common Stock.
"Current Market Price." The Current Market Price shall be
determined as follows:
(a)
if the security at issue is listed on a national securities
exchange or admitted to unlisted trading privileges on such an
exchange or quoted on either the National Market System or the
Small Cap Market of the automated quotation service operated
by The Nasdaq Stock Market, Inc. ("Nasdaq"), the current value
shall be the last reported sale price of that security on such
exchange or system on the day for which the Current Market
Price is to be determined or, if no such sale is made on such
day, the average of the highest closing bid and lowest asked
price for such day on such exchange or system; or
(b)
if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges, the Current Market
Value shall be the average of the last reported highest bid
and lowest asked prices quoted on the Nasdaq Electronic
Bulletin Board, or, if not so quoted, then by the National
Quotation Bureau, Inc. on the last business day prior to the
day for which the Current Market Price is to be determined;
or
(c)
if the security at issue is not so listed or quoted or
admitted to unlisted trading privileges and bid and asked
prices are not reported, the current market value shall be
determined in such reasonable manner as may be prescribed from
time to time by the Board of Directors of the Company, subject
to the objection and arbitration procedure as described in
Section 7 below.
"Expiration Date." J 2011.
"Holder" or "Warrantholder." The person to whom this Warrant
is issued, and any valid transferee thereof pursuant to Section 3.1
below.
"NASD." The National Association of Securities Dealers,
Inc.
"Nasdaq." The automated quotation system operated by the
Nasdaq Stock Market, Inc.
"Termination of Business. " Any sale, lease or
exchange of all, or substantially all, of the Company's assets or
business or any dissolution, liquidation or winding up of the
Company.
"Warrants." The warrants issued in accordance with the terms
of this Agreement and any Warrants issued in substitution for or
replacement of such warrants, including those evidenced by a
certificate or certificates originally issued or issued upon
division, exchange, substitution or transfer pursuant to this
Agreement.
"Warrant Securities." The Common Stock
purchasable upon exercise of a Warrant including
the Common Stock underlying unexercised portions of a
Warrant.
Section
2. Term
of Warrants; Exercise of Warrant.
2.1. Exercise of Warr
ant. Subject to the terms of this Agreement, the Holder shall
have the right, at any time prior to 5:00 p.m., Spokane Time, on
the Expiration Date, to purchase from the Company up to the number
of fully paid and nonassessable Shares to which the Holder may at
the time be entitled to purchase pursuant to this Agreement, upon
surrender to the Company, at its principal office, of the Warrant
to be exercised, together with the purchase form attached hereto as
Exhibit 1. duly filled in and signed, and upon payment to the
Company of the Exercise Price for the number of Shares in respect
of which such Warrants are then exercised, but in no event for less
than 100 Shares (unless fewer than an aggregate of 100 shares are
then purchasable under all outstanding Warrants held by a
Holder).
2.2. Exercise Price. The exercise price ("Exercise
Price) is $2.00 per Share, as modified in accordance with Section
4, below.
2.3. Issuance of Shares. Upon such
surrender of the Warrants and payment of such Exercise
Price as aforesaid, the Company shall issue and cause to be
delivered with all reasonable dispatch to or upon the written order
of the Holder and in such name or names as the Holder may
designate, a certificate or certificates for the number of full
Shares so purchased upon the exercise of the Warrant, together with
cash, as provided in Section 13 hereof, in respect of any
ftactional Shares otherwise issuable upon such
surrender.
2.4
. Upon receipt of the Warrant by the
company as described in Sections 2.1. above, the Holder shall
be deemed to be the holder of record of the Shares issuable
upon such exercise, notwithstanding that the transfer books of
the Company may then be closed or that certificates
representing such Shares may not have been prepared or
actually delivered to the Holder.
Section 3. Transferability and Form of
Warrant
3.1. Limitation on Transfer. Any
assignment or transfer of a Warrant shall be made by the
presentation and surrender of the Warrant to the Company at its
principal office or the office of its transfer agent, if any,
accompanied by a duly executed Assignment Form. Upon the
presentation and surrender of these items to the Company, the
Company, at its sole expense, shall execute and deliver to the new
Holder or Holders a new Warrant or Warrants, in the name of the new
Holder or Holders as named in the Assignment Form, and the Warrant
presented or surrendered shall at that time be
canceled.
3.2. Exchange of Certificate. Any
Warrant may be exchanged for another certificate or certificates
entitling the Warrantholder to purchase a like aggregate number of
Shares as the certificate or certificates surrendered then entitled
such Warrantholder to purchase. Any Warrantholder desiring to
exchange a Warrant shall make such request in writing delivered to
the Company, and shall surrender, properly endorsed, with
signatures guaranteed, the certificate evidencing the Warrant to be
so exchanged. Thereupon, the Company shall execute and deliver to
the person entitled thereto a new Warrant as so
requested.
3.3. Mutilated, Lost, Stolen, or Destroyed
Certificate. In case the certificate or certificates
evidencing the Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the Warrantholder,
issue and deliver in exchange and substitution for and
upon
cancellation
of the mutilated certificate or certificates, or in lieu of
and substitution for the certificate or certificates lost,
stolen or destroyed, a new Warrant or certificates of like
tenor and representing an equivalent right or interest, but
only upon receipt of evidence satisfactory to the Company of
such loss, theft or destruction of such Warrant and a bond of
indemnity, if requested, also satisfactory in form and amount,
at the applicant's cost. Applicants for such substitute
Warrant shall also comply with such other reasonable
regulations and pay such other reasonable charges as the
Company may prescribe.
Section 4. Adjustment of Number of
Shares.
The
number and kind of securities purchasable upon the exercise of
the Warrants and the Warrant Price shall be subj ect to adj
ustment from time to time upon the happening of certain
events, as follows:
4.1. Adjustments. The number of Shares purchasable
upon the exercise of the Warrants shall be subject to adjustments
as follows:
(a)
In case the Company shall (i) pay a dividend in Common Stock
or make a distribution to its stockholders in Common Stock,
(ii) subdivide its outstanding Common Stock, (iii) combine its
outstanding Common Stock into a smaller number of shares of
Common Stock, or (iv) issue by classification of its Common
Stock other securities of the Company, the number of Shares
purchasable upon exercise of the Warrants immediately prior
thereto shall be adjusted so that the Warrantholder shall be
entitled to receive the kind and number of Shares or other
securities of the Company which it would have owned or would
have been entitled to receive immediately after the happening
of any of the events described above, had the Warrants been
exercised immediately prior to the happening of such event or
any record date with respect thereto. Any adjustment made
pursuant to this subsection 4.1. (a) shall become effective
immediately after the effective date of such event retroactive
to the record date, if any, for such event.
(b)
In case the Company shall issue rights, options, warrants, or
convertible securities to all or substantially all holders of
its Common Stock, without any charge to such holders,
entitling them to subscribe for or purchase Common Stock at a
price per share which is lower at the record date mentioned
below than the then Current Market Price, the number of Shares
thereafter purchasable upon the exercise of each Warrant shall
be determined by multiplying the number of Shares theretofore
purchasable upon exercise of the Warrants by a fraction, of
which the numerator shall be the number of shares of Common
Stock outstanding immediately prior to the issuance of such
rights, options, warrants or convertible securities plus the
number of additional shares of Common Stock offered for
subscription or purchase, and of which the denominator shall
be the number of shares of Common Stock outstanding
immediately prior to the issuance of such rights, options,
warrants, or convertible securities plus the number of shares
which the aggregate offering price
of the total number of shares offered would purchase at such
Current Market Price. Such adjustment shall be made whenever
such rights, options, warrants, or convertible securities are
issued, and shall become effective immediately and
retroactively to the record
date
for the determination of stockholders entitled to receive such
rights, options, warrants, or convertible
securities.
(c)
In case the Company shall distribute to all or substantially
all holders of its Common Stock evidences of its indebtedness
or assets (excluding cash dividends or distributions out of
earnings) or rights, options, warrants, or convertible
securities containing the right to subscribe for or purchase
Common Stock (excluding those referred to in subsection 4.1
(b) above), then in each case the number of Shares thereafter
purchasable upon the exercise of the Warrants shall be
determined by multiplying the number of Shares theretofore
purchasable upon exercise of the Warrants by a fraction, of
which the numerator shall be the then Current Market Price on
the date of such distribution, and of which the denominator
shall be such Current Market Price on such date minus the then
fair value (determined as provided in subparagraph ( e) below)
of the portion of the assets or evidences of indebtedness so
distributed or of such subscription rights, options, warrants,
or convertible securities applicable to one share. Such
adjustment shall be made whenever any such distribution is
made and shall become effective on the date of distribution
retroactive to the record date for the determination of
stockholders entitled to receive such
distribution.
(d)
No adjustment in the number of Shares purchasable pursuant to
the Warrants shall be required unless such adjustment would
require an increase or decrease of at least one percent in the
number of Shares then purchasable upon the exercise of the
Warrants or, if the Warrants are not then exercisable, the
number of Shares purchasable upon the exercise of the Warrants
on the first date thereafter that the Warrants become
exercisable; provided, however, that any adjustments which by
reason of this subsection (4.1 (d» are not required to
be made immediately shall be carried forward and taken into
account in any subsequent adjustment.
(e)
Whenever the number of Shares purchasable upon the exercise of
the Warrant is adjusted, as herein provided, the Exercise
Price payable upon exercise of the Warrant shall be adjusted
by multiplying such Exercise Price immediately prior to such
adjustment by a fraction, of which the numerator shall be the
number of Warrant Shares purchasable upon the exercise of the
Warrant immediately prior to such adjustment, and of which the
denominator shall be the number of Warrant Shares so
purchasable immediately thereafter.
(f)
Whenever the number of Shares purchasable upon exercise of the
Warrants is adjusted as herein provided, the Company shall
cause to be promptly mailed to the Warrantholder by first
class mail, postage prepaid, notice of such adjustment and a
certificate of the chief financial officer of the Company
setting forth the number of Shares purchasable upon the
exercise of the Warrants after such adjustment, a brief
statement of the facts requiring such adjustment and the
computation by which such adjustment was made.
(g)
For the purpose of this Section 4.1, the term "Common Stock"
shall mean (i) the class of stock designated as the Common
Stock of the Company at the date of this Agreement, or (ii)
any other class of stock resulting from successive changes or
reclassifications of such Common Stock consisting solely of
changes in par value, or from par value to no par value, or
from no par value to par value. In the event that at any time,
as
a
result of an adjustment made pursuant to this Section 4, the
Warrantholder shall become entitled to purchase any securities
of the Company other than Common Stock, (y) if the
Warrantholder's right to purchase is on any other basis than
that available to all holders of the Company's Common Stock,
the Company shall obtain an opinion of an independent
investment banking firm valuing such other securities and (z)
thereafter the number of such other securities so purchasable
upon exercise of the Warrants shall be subject to adjustment
from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to
the Shares contained in this Section 4.
(h)
Upon the expiration of any rights, options, warrants, or
conversion privileges, if such shall have not been exercised,
the number of Shares purchasable upon exercise of the
Warrants, to the extent the Warrants have not then been
exercised, shall, upon such expiration, be readjusted and
shall thereafter be such as they would have been had they been
originally adjusted (or had the original adjustment not been
required, as the case may be) on the basis of (i) the fact
that the only shares of Common Stock so issued were the shares
of Common Stock, if any, actually issued or sold upon the
exercise of such rights, options, warrants, or conversion
privileges, and (ii) the fact that such shares of Common
Stock, if any, were issued or sold for th
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