Exhibit 10.03

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS EXERCISABLE
HAS 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 COMPANY.
THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY 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 OR OTHER LOAN
SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

DISCOVERY ENERGY CORP.

 

Warrant Shares: 750,000     Initial Exercise Date: August 16, 2016

 

THIS COMMON STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value
received, DEC Funding LLC, a Texas limited liability company, or its assigns
(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 the
date hereof (the “Initial Exercise Date”) and on or prior to the close of
business on May 27, 2019 (the “Termination Date”) but not thereafter, to
subscribe for and purchase from Discovery Energy Corp., a Nevada corporation
(the “Company”), up to 750,000 shares (as subject to adjustment hereunder, the
“Warrant Shares”) of Common Stock. The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in
Section 2(b).

 

Section 1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the meanings set forth in that certain Securities Purchase Agreement
(the “Purchase Agreement”), dated May 27, 2016, among Company and the purchasers
signatory thereto.

 

Section 2. Exercise.

 

a)           Exercise of Warrant. Exercise of the purchase rights represented by
this Warrant may be made, in whole or in part, at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by delivery to
Company (or such other office or agency of Company as it may designate by notice
in writing to the registered Holder at the address of Holder appearing on the
books of Company) of a duly executed facsimile or pdf copy of the Notice of
Exercise form annexed hereto. Within seven (7) Trading Days following the date
of exercise as aforesaid, Holder shall deliver the aggregate Exercise Price for
the shares specified in the applicable Notice of Exercise by wire transfer or
cashier’s check drawn on a United States bank. Notwithstanding anything herein
to the contrary, Holder shall not be required to physically surrender this
Warrant to Company until Holder has purchased all of the Warrant Shares
available hereunder and the Warrant has been exercised in full, in which case,
Holder shall surrender this Warrant to Company for cancellation within seven (7)
Trading Days of the date the final Notice of Exercise is delivered to Company.
Partial exercises of this Warrant resulting in purchases of a portion of the
total number of Warrant Shares available hereunder shall have the effect of
lowering the outstanding number of Warrant Shares purchasable hereunder in an
amount equal to the applicable number of Warrant Shares purchased. Holder and
Company shall maintain records showing the number of Warrant Shares purchased
and the date of such purchases. Company shall deliver any objection to any
Notice of Exercise Form within one (1) Business Day of receipt of such notice.
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
that, by reason of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant Shares available
for purchase hereunder at any given time may be less than the amount stated on
the face hereof.

 

 

 

 

b)           Exercise Price. The exercise price per share of the Common Stock
under this Warrant shall initially be $0.20, subject to adjustment hereunder
(the “Exercise Price”).

 

c)           [Reserved.]

 

d)           Mechanics of Exercise.

 

i.            Delivery of Certificates Upon Exercise. Certificates for shares
purchased hereunder shall be transmitted by the Transfer Agent to Holder by
crediting the account of Holder’s designated brokerage firm with The Depository
Trust Company through its Deposit or Withdrawal at Custodian (“DWAC”) system if
Company is then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the Warrant Shares
to or resale of the Warrant Shares by Holder or (B) following the six-month
anniversary of the Closing Date, if such Warrant Shares are eligible for sale
under Rule 144 without volume or manner-of-sale restrictions and as of such date
Company is in compliance with the current public information required under Rule
144 as to such Warrant Shares, and otherwise by physical delivery to the address
specified by Holder in the Notice of Exercise by the date that is three (3)
Trading Days after the latest of (A) the delivery to Company of the Notice of
Exercise, (B) surrender of this Warrant (if required), and (C) payment of the
aggregate Exercise Price as set forth above (such date, the “Warrant Share
Delivery Date”). The Warrant Shares shall be deemed to have been issued, and
Holder or any other person so designated to be named therein shall be deemed to
have become a holder of record of such shares for all purposes, as of the date
the Warrant has been exercised, with payment to Company of the Exercise Price
and all taxes required to be paid by Holder, if any, pursuant to Section
2(d)(vi) prior to the issuance of such shares, having been paid. If Company
fails for any reason to deliver to Holder certificates evidencing the Warrant
Shares subject to a Notice of Exercise prior to the third Trading Day following
the Warrant Share Delivery Date, Company shall pay to Holder, in cash, as
liquidated damages and not as a penalty, for each $1,000 of Warrant Shares
subject to such exercise (based on the VWAP of the Common Stock on the date of
the applicable Notice of Exercise), $5 per Trading Day (increasing to $10 per
Trading Day five (5) Trading Days after such damages have begun to accrue)
commencing on the third Trading Day after such Warrant Share Delivery Date until
such certificates are delivered or Holder rescinds such exercise.

 

ii.          Delivery of New Warrants Upon Exercise. If this Warrant shall have
been exercised in part, Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the
certificate or certificates representing Warrant Shares, deliver to Holder a new
Warrant evidencing the rights of Holder to purchase the unpurchased Warrant
Shares called for by this Warrant, which new Warrant shall in all other respects
be identical with this Warrant.

 

iii.          Rescission Rights. If Company fails to cause the Transfer Agent to
credit the account of Holder’s designated brokerage firm with The Depository
Trust Company through its DWAC system if Company is then a participant in such
system or to transmit to Holder a certificate or the certificates representing
the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery
Date, then Holder will have the right to rescind such exercise.

 

iv.         Compensation for Buy-In on Failure to Timely Deliver Certificates
Upon Exercise. In addition to any other rights available to Holder, if Company
fails to cause the Transfer Agent to credit the account of Holder’s designated
brokerage firm with The Depository Trust Company through its DWAC system if
Company is then a participant in such system or to transmit to Holder a
certificate or the certificates representing the Warrant Shares pursuant to an
exercise on or before the Warrant Share Delivery Date, and if after such date
Holder is required by its broker to purchase (in an open market transaction or
otherwise) or Holder’s brokerage firm otherwise purchases, shares of Common
Stock to deliver in satisfaction of a sale by Holder of the Warrant Shares which
Holder anticipated receiving upon such exercise (a “Buy-In”), then Company shall
(A) pay in cash to Holder the amount, if any, by which (x) 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 (1) the
number of Warrant Shares that Company was required to deliver to Holder in
connection with the exercise at issue times (2) the price at which the sell
order giving rise to such purchase obligation was executed, and (B) at the
option of Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored (in which case
such exercise shall be deemed rescinded) or deliver to Holder the number of
shares of Common Stock that would have been issued had Company timely complied
with its exercise and delivery obligations hereunder. For example, if 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 (A) of the immediately preceding sentence Company shall be required to
pay Holder $1,000. Holder shall provide Company written notice indicating the
amounts payable to Holder in respect of the Buy-In and, upon request of Company,
evidence of the amount of such loss. Nothing herein shall limit a Holder’s right
to pursue any other remedies available to it hereunder, at law or in equity
including, without limitation, a decree of specific performance and/or
injunctive relief with respect to Company’s failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as
required pursuant to the terms hereof.

 

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v.           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 Holder would otherwise be entitled
to purchase upon such exercise, Company shall, at its election, either pay a
cash adjustment in respect of such final fraction in an amount equal to such
fraction multiplied by the Exercise Price or round up to the next whole share.

 

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

 

vii.         Closing of Books. 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.

 

Section 3. Certain Adjustments.

 

a)           Stock Dividends and Splits. If Company, at any time while this
Warrant is outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any other equity
or equity equivalent securities payable in shares of Common Stock (which, for
avoidance of doubt, shall not include any shares of Common Stock issued by
Company upon exercise of this Warrant), (ii) subdivides outstanding shares of
Common Stock into a larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number of
shares or (iv) issues by reclassification of shares of the Common Stock any
shares of capital stock of Company, then in each case the Exercise Price shall
be multiplied by a fraction of which the numerator shall be the number of shares
of Common Stock (excluding treasury shares, if any) outstanding immediately
before such event and of which the denominator shall be the number of shares of
Common Stock outstanding immediately after such event, and the number of shares
issuable upon exercise of this Warrant shall be proportionately adjusted such
that the aggregate Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become effective immediately
after the record date for the determination of stockholders entitled to receive
such dividend or distribution and shall become effective immediately after the
effective date in the case of a subdivision, combination or re-classification.

 

b)           Subsequent Equity Issuances. Except in the case of an event
described in Section 3(a), if Company at any time while this Warrant is
outstanding issues or sells its Common Stock or Common Stock Equivalents at a
price per share of Common Stock (in the case of Common Stock Equivalents, taking
into account the maximum number of shares of Common Stock issuable thereunder,
whether or not currently convertible or exercisable, and the consideration
received by Company in connection with the issuance or sale of such Common Stock
Equivalents plus the minimum consideration, if any, payable to Company upon the
conversion or exercise thereof) that is less than the Exercise Price at such
time (such price, the “New Offer Price”), then the Exercise Price of this
Warrant shall be reduced (and in no event increased) to equal the New Offer
Price, effective upon the consummation of such sale; provided, that no such
adjustment shall be made in connection with an issuance permitted under Section
7(h) of the Debentures. Simultaneously with any adjustment under this Section
3(b), the number of shares issuable upon exercise of this Warrant shall be
proportionately adjusted such that the aggregate Exercise Price of this Warrant
shall remain unchanged. Company shall give Holder at least five (5) Trading
Days’ notice prior to consummating any Qualified Offering.

 

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c)           Subsequent Rights Offerings. If Company, at any time while the
Warrant is outstanding, shall issue rights, options or warrants to all holders
of Common Stock (and not to Holder) entitling them to subscribe for or purchase
shares of Common Stock (the “Purchase Rights”), then, upon any exercise of this
Warrant, Holder will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights that Holder could have acquired
if Holder had held the number of Warrant Shares issued upon such exercise of
this Warrant immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.

 

d)           Pro Rata Distributions. If Company, at any time while this Warrant
is outstanding, shall distribute to all holders of Common Stock (and not to
Holder) evidences of its indebtedness or assets (including cash and cash
dividends) or rights or warrants to subscribe for or purchase any security other
than the Common Stock (a “Distribution”), then, upon any exercise of this
Warrant, Holder shall be entitled to participate in such Distribution to the
same extent that Holder would have participated therein if Holder had held the
number of Warrant Shares issued upon such exercise of this Warrant immediately
before the date on which a record is taken for such Distribution, or, if no such
record is taken, the date as of which the record holders of shares of Common
Stock are to be determined for the participation in such Distribution.

 

e)           Fundamental Transaction. If, at any time while this Warrant is
outstanding, (i) Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of Company with or into another
Person, (ii) Company, directly or indirectly, effects any sale, lease, license,
assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct
or indirect, purchase offer, tender offer or exchange offer (whether by Company
or another Person) is completed pursuant to which holders of Common Stock are
permitted to sell, tender or exchange their shares for other securities, cash or
property and has been accepted by Holders of 50% or more of the outstanding
Common Stock, (iv) Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization of
the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or
property, (v) Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person or group of Persons
whereby such other Person or group acquires more than 50% of the outstanding
shares of Common Stock (not including any shares of Common Stock held by the
other Person or other Persons making or party to, or associated or affiliated
with the other Persons making or party to, such stock or share purchase
agreement or other business combination) (each a “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, Holder shall have the right
to receive, for each Warrant Share that would have been issuable upon such
exercise immediately prior to the occurrence of such Fundamental Transaction, at
the option of Holder, the number of shares of Common Stock of the successor or
acquiring corporation or of Company, if it is the surviving corporation, and any
additional consideration (the “Alternate Consideration”) receivable as a result
of such Fundamental Transaction by a holder of the number of shares of Common
Stock for which this Warrant is exercisable immediately prior to such
Fundamental Transaction. For purposes of any such exercise, the determination of
the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one share of Common Stock in such Fundamental Transaction, and Company shall
apportion the Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Stock are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction,
then Holder shall be given the same choice as to the Alternate Consideration it
receives upon any exercise of this Warrant following such Fundamental
Transaction. Notwithstanding anything to the contrary, in the event of a
Fundamental Transaction that is (1) an all cash transaction, (2) a “Rule 13e-3
transaction” as defined in Rule 13e-3 under the Exchange Act, or (3) a
Fundamental Transaction involving a person or entity not traded on a national
securities exchange, Company or any Successor Entity (as defined below) shall,
at Holder’s option, exercisable at any time concurrently with, or within 30 days
after, the consummation of the Fundamental Transaction, purchase this Warrant
from Holder by paying to Holder an amount of cash equal to the Black Scholes
Value of the remaining unexercised portion of this Warrant on the date of the
consummation of such Fundamental Transaction. “Black Scholes Value” means the
value of this Warrant based on the Black and Scholes Option Pricing Model
obtained from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as
of the day of consummation of the applicable Fundamental Transaction for pricing
purposes and reflecting (A) a risk-free interest rate corresponding to the U.S.
Treasury rate for a period equal to the time between the date of the public
announcement of the applicable Fundamental Transaction and the Termination Date,
(B) an expected volatility equal to the greater of 100% and the 100 day
volatility obtained from the HVT function on Bloomberg as of the Trading Day
immediately following the public announcement of the applicable Fundamental
Transaction, (C) the underlying price per share used in such calculation shall
be the sum of the price per share being offered in cash, if any, plus the value
of any non-cash consideration, if any, being offered in such Fundamental
Transaction and (D) a remaining option time equal to the time between the date
of the public announcement of the applicable Fundamental Transaction and the
Termination Date. Company shall cause any successor entity in a Fundamental
Transaction in which Company is not the survivor (the “Successor Entity”) to
assume in writing all of the obligations of Company under this Warrant and the
other Transaction Documents in accordance with the provisions of this Section
3(e) pursuant to written agreements in form and substance reasonably
satisfactory to Holder and approved by Holder (without unreasonable delay) prior
to such Fundamental Transaction and shall, at the option of Holder, deliver to
Holder in exchange for this Warrant a security of the Successor Entity evidenced
by a written instrument substantially similar in form and substance to this
Warrant which is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the shares
of Common Stock acquirable and receivable upon exercise of this Warrant prior to
such Fundamental Transaction, and with an exercise price which applies the
exercise price hereunder to such shares of capital stock (but taking into
account the relative value of the shares of Common Stock pursuant to such
Fundamental Transaction and the value of such shares of capital stock, such
number of shares of capital stock and such exercise price being for the purpose
of protecting the economic value of this Warrant immediately prior to the
consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to Holder. Upon the occurrence of any such
Fundamental Transaction, the Successor Entity shall succeed to, and be
substituted for (so that from and after the date of such Fundamental
Transaction, the provisions of this Warrant and the other Transaction Documents
referring to the “Company” shall refer instead to the Successor Entity), and may
exercise every right and power of Company and shall assume all of the
obligations of Company under this Warrant and the other Transaction Documents
with the same effect as if such Successor Entity had been named as Company
herein.

 

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f)         Calculations. All calculations under this Section 3 shall be made to
the nearest cent or the nearest 1/100th of a share, as the case may be. For
purposes of this Section 3, the number of shares of Common Stock deemed to be
issued and outstanding as of a given date shall be the sum of the number of
shares of Common Stock (excluding treasury shares, if any) issued and
outstanding.

 

g)           Notice to Holder.

 

i.            Adjustment to Exercise Price. Whenever the Exercise Price is
adjusted pursuant to any provision of this Section 3, Company shall promptly
mail to Holder a notice setting forth the Exercise Price after such adjustment
and any resulting adjustment to the number of Warrant Shares and setting forth a
brief statement of the facts requiring such adjustment.

 

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ii.         Notice to Allow Exercise by Holder. If (A) Company shall declare a
dividend (or any other distribution in whatever form) on the Common Stock, (B)
Company shall declare a special nonrecurring cash dividend on or a redemption of
the Common Stock, (C) Company shall authorize the granting to all holders of the
Common Stock rights or warrants to subscribe for or purchase any shares of
capital stock of any class or of any rights, (D) the approval of any
stockholders of Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which
Company is a party, any sale or transfer of all or substantially all of the
assets of Company, or any compulsory share exchange whereby the Common Stock is
converted into other securities, cash or property, or (E) Company shall
authorize the voluntary or involuntary dissolution, liquidation or winding up of
the affairs of Company, then, in each case, Company shall cause to be mailed to
Holder at its last address as it shall appear upon the Warrant Register of
Company, at least 20 calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, redemption, rights
or warrants, or if a record is not to be taken, the date as of which Holders of
the Common Stock of record to be entitled to such dividend, distributions,
redemption, rights or warrants are to be determined or (y) the date on which
such reclassification, consolidation, merger, sale, transfer or share exchange
is expected to become effective or close, and the date as of which it is
expected that holders of the Common Stock of record shall be entitled to
exchange their shares of the Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange; provided that the failure to mail such notice or any defect
therein or in the mailing thereof shall not affect the validity of the corporate
action required to be specified in such notice. To the extent that any notice
provided hereunder constitutes, or contains, material, non-public information
regarding Company or any of the Subsidiaries, and so long as Company remains
subject to the reporting requirements of Sections 13(a) or 15(d) of the Exchange
Act, Company shall simultaneously file such notice with the Commission pursuant
to a Current Report on Form 8-K. Holder shall remain entitled to exercise this
Warrant during the 20-day period commencing on the date of such notice to the
effective date of the event triggering such notice except as may otherwise be
expressly set forth herein.

 

Section 4. Transfer of Warrant.

 

a)           Transferability. Subject to compliance with any applicable
securities laws and the conditions set forth in Section 4(d) hereof and to the
provisions of Section 4.1 of the Purchase Agreement, this Warrant and all rights
hereunder (including, without limitation, any registration rights) are
transferable, in whole or in part, upon surrender of this Warrant at the
principal office of Company or its designated agent, together with a written
assignment of this Warrant substantially in the form attached hereto duly
executed by Holder or its agent or attorney and funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, Company shall execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees, as applicable, 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. The Warrant, if
properly assigned in accordance herewith, may be exercised by a new holder for
the purchase of Warrant Shares without having a new Warrant issued.

 

b)           New Warrants. This Warrant may be divided or combined with other
Warrants upon presentation hereof at the aforesaid office of Company, together
with a written notice specifying the names and denominations in which new
Warrants are to be issued, signed by Holder or its agent or attorney. Subject to
compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, 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. All Warrants issued on transfers or exchanges shall
be dated the Initial Exercise Date and shall be identical with this Warrant
except as to the number of Warrant Shares issuable pursuant thereto.

 

c)           Warrant Register. Company shall register this Warrant, upon records
to be maintained by Company for that purpose (the “Warrant Register”), in the
name of the record Holder hereof from time to time. Company may deem and treat
the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to Holder, and for all other
purposes, absent actual notice to the contrary.

 

d)           Representation by Holder. Holder, by the acceptance hereof,
represents and warrants to Company that Holder’s representations and warranties
contained in Section 3.2 of the Purchase Agreement, including that Holder is
acquiring this Warrant and, upon any exercise hereof, will acquire the Warrant
Shares issuable upon such exercise, for its own account and not with a view to
or for distributing or reselling such Warrant Shares or any part thereof in
violation of the Securities Act or any applicable state securities law, except
pursuant to sales registered or exempted under the Securities Act, are true and
correct.

 

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Section 5. Miscellaneous.

 

a)           No Rights as Stockholder Until Exercise. This Warrant does not
entitle Holder to any voting rights, dividends or other rights as a stockholder
of Company prior to the exercise hereof as set forth in Section 2.

 

b)           Loss, Theft, Destruction or Mutilation of Warrant. Company
covenants that upon receipt by 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,
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.

 

c)           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 not be a Business Day, then, such action may be taken or such right
may be exercised on the next succeeding Business Day.

 

d)           Authorized Shares. 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. 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. 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 law
or regulation, or of any requirements of any Trading Market upon which the
Common Stock may be listed. Company covenants that all Warrant Shares which may
be issued upon the exercise of the purchase rights represented by this Warrant
will, upon exercise of the purchase rights represented by this Warrant and
payment for such Warrant Shares in accordance herewith, be duly authorized,
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges created by Company in respect of the issue thereof (other than taxes in
respect of any transfer occurring contemporaneously with such issue). Except and
to the extent as waived or consented to by Holder, 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, Company will (i) 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, (ii) take all such
action as may be necessary or appropriate in order that Company may validly and
legally issue fully paid and nonassessable Warrant Shares upon the exercise of
this Warrant and (iii) 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 Company to perform its
obligations under this Warrant. 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, 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.

 

e)           Jurisdiction. All questions concerning the construction, validity,
enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Purchase Agreement.

 

f)            Restrictions. 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.

 

g)           Nonwaiver 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 the fact that all rights hereunder terminate on the Termination
Date. If Company willfully and knowingly fails to comply with any provision of
this Warrant, which results in any material damages to Holder, 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.

 

 7 

 

 

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

 

i)            Limitation of Liability. No provision hereof, in the absence of
any affirmative action by Holder to exercise this Warrant to 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 Company, whether such liability is asserted by Company or
by creditors of Company.

 

j)            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. 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 and not to assert the defense in any action for specific performance that
a remedy at law would be adequate.

 

k)           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 and permitted assigns of Company
and the successors and permitted assigns of Holder. The provisions of this
Warrant are intended to be for the benefit of any Holder from time to time of
this Warrant and shall be enforceable by Holder or holder of Warrant Shares.

 

l)            Amendment. This Warrant may be modified or amended or the
provisions hereof waived with the written consent of Company and Holder.

 

m)          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.

 

n)           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.

 

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

 

(Signature Page Follows)

 

 8 

 

 

IN WITNESS WHEREOF, Company has caused this Warrant to be executed by its
officer thereunto duly authorized as of the date first above indicated.

 

  DISCOVERY ENERGY CORP.         By:       Keith D. Spickelmier, Chairman

 

[Signature Page – Warrant]

 

 

 

 

NOTICE OF EXERCISE

 

TO: DISCOVERY ENERGY CORP.

 

(1) The undersigned hereby elects to purchase ________ Warrant Shares of Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.

 

(2) Payment shall take the form of wire transfer or cashier’s check drawn on a
United States bank as specified by Section 2(a) of this Warrant.

 

(3) Please issue a certificate or certificates representing said Warrant Shares
in the name of the undersigned or in such other name as is specified below:

_______________________________

 

The Warrant Shares shall be delivered to the following DWAC Account Number or by
physical delivery of a certificate to:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4) Accredited Investor. By delivery of this Notice of Exercise, the undersigned
represents and warrants to Company that the undersigned’s representations and
warranties contained in Section 3.2 of the Purchase Agreement (as defined in the
Debenture), including that the undersigned is either (i) an “accredited
investor” as defined in Rule 501(a) under the Securities Act or (ii) a
“qualified institutional buyer” as defined in Rule 144A(a) under the Securities
Act, are true and correct as of the giving of this Notice of Exercise.

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity:
________________________________________________________________________

Signature of Authorized Signatory of Investing Entity:
_________________________________________________

Name of Authorized Signatory:
___________________________________________________________________

Title of Authorized Signatory:
____________________________________________________________________

Date:
________________________________________________________________________________________

 

 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [____] all of or [_______] shares of the foregoing Warrant
and all rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address is

 

_______________________________________________________________.

 

_______________________________________________________________

 

Dated: ______________, _______

 

Holder’s Signature: _____________________________

 

Holder’s Address: _____________________________

 

_____________________________

 

Signature Guaranteed: ___________________________________________

 

NOTE: The signature to this Assignment Form must correspond with the name as it
appears on the face of the Warrant, without alteration or enlargement or any
change whatsoever, and must be guaranteed by a bank or trust company. Officers
of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.