Document:

dbog_ex1022-70228.htm

    
      Exhibit
        10.22

       

      EXHIBIT
        A

    

    
      

       

      BROKER'S
        NAME:______________________________________

    

    
       

      IMPORTANT:
        PLEASE READ CAREFULLY BEFORE SIGNING. SIGNIFICANT REPRESENTATIONS ARE CALLED
        FOR
        HEREIN.

    

    
       

      SUBSCRIPTION
        AGREEMENT

    

    
      and
        LETTER OF INVESTMENT INTENT

    

    
       

      Daybreak
        Oil & Gas, Inc. 

      601
        W.
        Main Ave., Suite 1017 

      Spokane,
        WA 99201-0613

    

    
      

      Gentlemen:

    

    
       

      The
        undersigned (the "Subscriber") hereby tenders this subscription for the purchase
        of units ("Units" or the "Securities") consisting of shares of common stock
        ("Shares") of Daybreak Oil & Gas, Inc. (the "Company") and warrants to
        purchase Shares. The Units are described in the Company's Private Placement
        Memorandum dated June 30,2006 (the "Memorandum"). The Subscriber understands
        that a subscription for the Securities may be rejected for any reason and
        that,
        in the event that this subscription is rejected, the funds delivered herewith
        will be promptly returned, without interest thereon or deduction therefrom.
        By
        execution below, the Subscriber acknowledges that the Company is relying
        upon
        the accuracy and completeness of the representations contained herein in
        complying with their obligations under applicable securities
        laws.

    

    
       

      1.
        Subscription Commitment. The Subscriber acknowledges that the minimum
        subscription is $30,000. The Subscriber hereby subscribes for the purchase
        of
        the number of Securities specified below and, as full payment therefor, agrees
        to pay in cash, the amount set forth below by check made payable to "Daybreak
        Oil & Gas Escrow Account," or by wire transfer to the escrow account of the
        Company.

    

    
       

       

      
        	 	Number
                of Units	 	
                At
                  $3.00 per Unit for

                an aggregate of $.

              	 

      

       

    

    
      The
        Subscriber understands that this subscription is not binding on the Company
        until accepted by the Company, which acceptance is at the discretion of the
        Company and is to be evidenced by the Company's execution of this Subscription
        Agreement where indicated. If the subscription is rejected, or if the Minimum
        Offering of 730,000 Units ($2,190,000) is not achieved within the offering
        period set forth in the Memorandum (the "Offering Period"), the Company shall
        return to the Subscriber, without interest or deduction, any payment tendered
        by
        the Subscriber, and the Company and the Subscriber shall have no further
        obligation to each other hereunder. Unless and until rejected by the Company,
        or
        the Minimum Offering is not achieved within the Offering Period, this
        subscription shall be irrevocable by the Subscriber. The Subscriber understands
        that the Company may, in the event that the offering to which the Memorandum
        relates is oversubscribed, reduce this subscription in any amount and to
        any
        extent, whether or not pro rata reductions are made of any other investor's
        subscription.

    

    
       

      2.
        Representations and Warranties. In order to induce the Company to accept
        this subscription, the Subscriber hereby represents and warrants to, and
        covenants with, the Company as follows:

    

    
       

      (a)    
        The Subscriber has received and had the opportunity to review the Memorandum
        and
        has been given access to full and complete information regarding the Company
        and
        has utilized such access to the

    

    
      

       

      Daybreak
        Oil & Gas, Inc.

    

    
      Subscription
        Agreement

    

    
      
        
           

        

        
          1

          
            

          

        

        
           

        

      

       

      Subscriber's
        satisfaction for the purpose of obtaining such information regarding the
        Company
        as the Subscriber
        has reasonably requested; and, particularly, the Subscriber has been given
        reasonable opportunity to
        ask
        questions of, and receive answers from, representatives of the Company
        concerning the terms and conditions
        of the offering of the Securities and to obtain any additional information,
        to
        the extent reasonably available;

    

    
      (b)  Except
        for the Memorandum, the Subscriber has not been furnished with any other
        materials or
        literature relating to the offer and sale of the Securities; except as set
        forth
        in the Memorandum, no representations
        or warranties have been made to the Subscriber by the Company, any selling
        agent
        of the Company,
        or any agent, employee, or affiliate of the Company or such selling
        agent.

    

    
       

      (c)  The
        Subscriber believes that an investment in the securities is suitable for
        the
        Subscriber based
        upon the Subscriber investment objectives and financial needs. The Subscriber
        (i) has adequate means for
        providing for the Subscriber's current financial needs and personal
        contingencies; (ii) has no need for liquidity
        in this investment; (iii) at the present time, can afford a complete loss
        of
        such investment; and (iv) does
        not
        have an overall commitment to investments which are not readily marketable
        that
        is disproportionate to
        the
        Subscriber's net worth, and the Subscriber's investment in the Securities
        will
        not cause such overall commitment
        to become excessive.

    

    
       

      (d)  The
        Subscriber, in reaching a decision to subscribe, has such knowledge and
        experience in financial
        and business matters that the Subscriber is capable of reading and interpreting
        financial statements and
        evaluating the merits and risk of an investment in the Securities and has
        the
        net worth to undertake such risks.

    

    
       

      (e)  The
        Subscriber was not offered or sold the Securities, directly or indirectly,
        by
        means of any form
        of
        general advertising or general solicitation, including, but not limited to,
        the
        following:  (1) any advertisement,
        article, notice or other communication published in any newspaper, magazine,
        or
        similar medium
        of
        or broadcast over television or radio; or (2) to the knowledge of the
        undersigned, any seminar or meeting
        whose attendees had been invited by any general solicitation or general
        advertising.

    

    
       

      (f)  The
        Subscriber has obtained, to the extent the Subscriber deems necessary, the
        Subscriber's own
        personal professional advice with respect to the risks inherent in the
        investment in the securities, and the suitability
        of an investment in the Securities in light of the Subscriber's financial
        condition and investment needs;

    

    
       

      (g)  The
        Subscriber recognizes that the Securities as an investment involves a high
        degree of risk, including
        those set forth under the caption "Risk Factors" in the Executive
        Summary.

    

    
       

      (h)     
        The information contained in this agreement is true, complete and correct
        in all
        material respects as of the date hereof; the Subscriber understands that
        the
        Company's determination that the exemption from the registration provisions
        of
        the Securities Act of 1933, as amended (the "Act"), which is based upon
        non-public offerings and applicable to the offer and sale of the Securities,
        is
        based, in part, upon the representations, warranties, and agreements made
        by the
        Subscriber herein; and the Subscriber consents to the disclosure of any such
        information, and any other information furnished to the Company, to any
        governmental authority, self-regulatory organization, or, to the extent required
        by law, to any other person.

    

    
       

      (i)     
        The Subscriber realizes that (i) the purchase of the Securities is a long-term
        investment; (ii) the purchaser of the Securities must bear the economic risk
        of
        investment for an indefinite period of time because the Securities have not
        been
        registered under the Securities Act of 1933 or under the securities laws
        of any
        state and, therefore, the Securities cannot be resold unless they are
        subsequently registered under said laws or exemptions from such registrations
        are available; (iii) there is presently no public market for the Securities
        and
        the Subscriber may be unable to liquidate the Subscriber's investment in
        the
        event of an emergency, or pledge the Securities as collateral for a loan;
        and
        (iv) the transferability of the Securities is

    

    
      

       

    

    
      
        
          Daybreak
            Oil & Gas, Inc.

          Subscription
            Agreement

        

      

      
        2

        
          

        

      

      
         

      

    

    restricted
      and (A) requires conformity with the restrictions contained in paragraph 2
      below
      and (B) legends will be placed on the certificate(s) representing the Securities
      referring to the applicable restrictions on transferability; and

    
      

       

      (j)     
        The Subscriber certifies, under penalties of perjury, that the Subscriber
        is NOT
        subject to the backup withholding provisions of Section 3406(a)(i)(C) of
        the
        Internal Revenue Code.

    

    
       

      (k)     
        Stop transfer instructions will be placed with the transfer agent for the
        Securities, and a legend may be placed on any certificate representing the
        Securities substantially to the following effect:

    

    
       

      THIS
        SECURITY HAS NOT BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION
        UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), IN RELIANCE UPON
        THE
        EXEMPTIONS FROM REGISTRATION PROVIDED IN THE ACT AND REGULATION D UNDER THE
        ACT.
        AS SUCH, THE PURCHASE OF THIS SECURITY WAS NECESSARILY WITH THE INTENT OF
        INVESTMENT AND NOT WITH A VIEW FOR DISTRIBUTION. THEREFORE, ANY SUBSEQUENT
        TRANSFER OF THIS SECURITY OR ANY INTEREST THEREIN WILL BE UNLAWFUL UNLESS
        IT IS
        REGISTERED UNDER THE ACT OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE.
        FURTHERMORE, IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY
        OR
        ANY INTEREST THEREIN, WITHOUT THE OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
        THAT THE PROPOSED TRANSFER OR SALE DOES NOT AFFECT THE EXEMPTIONS RELIED
        UPON BY
        THE COMPANY IN ORIGINALLY DISTRIBUTING THE SECURITY AND THAT REGISTRATION
        IS NOT
        REQUIRED.

    

    
       

      3.
        Restricted Nature of the Securities. The Subscriber has been advised and
        understands that (a) the Securities have not been registered under the
        Securities Act of 1933 or applicable state securities laws and that the
        securities are being offered and sold pursuant to exemptions from such laws;
        (b)
        the Memorandum may not have been filed with or reviewed by certain state
        securities administrators because of the limited nature of the offering;
        (c) the
        Company is under no obligation to register the Securities under the Act or
        any
        state securities laws, or to take any action to make any exemption from any
        such
        registration provisions available. The Subscriber represents and warrants
        that
        the Securities are being purchased for the Subscriber's own account and for
        investment purposes only, and without the intention of reselling or
        redistributing the same; the Subscriber has made no agreement with others
        regarding any of the Securities; and the Subscriber's financial condition
        is
        such that it is not likely that it will be necessary to dispose of any of
        such
        Securities in the foreseeable future. The Subscriber is aware that, in the
        view
        of the Securities and Exchange Commission, a purchase of such securities
        with an
        intent to resell by reason of any foreseeable specific contingency or
        anticipated change in market value, or any change in the condition of the
        Company, or in connection with a contemplated liquidation settlement of any
        loan
        obtained for the acquisition of such securities and for which such securities
        were pledged, would represent an intent inconsistent with the representations
        set forth above. The Subscriber further represents and agrees that if, contrary
        to the foregoing intentions, the Subscriber should later desire to dispose
        of or
        transfer any of such securities in any manner, the Subscriber shall not do
        so
        unless and until (i) said Securities shall have first been registered under
        the
        Act and all applicable securities laws; or (ii) the Subscriber shall have
        first
        delivered to the Company a written notice declaring such holder's intention
        to
        effect such transfer and describe in sufficient detail the manner and
        circumstances of the proposed transfer, which notice shall be accompanied
        either
        by a written opinion of legal counsel who shall be reasonably satisfactory
        to
        the Company, which opinion shall be addressed to the Company and reasonably
        satisfactory in form and substance to the Company's counsel, to the effect
        that
        the proposed sale or transfer is exempt from the registration provisions
        of the
        Act and all applicable state securities laws, or by a "no action" letter
        from
        the Securities and Exchange Commission to the effect that the transfer of
        the
        Securities without registration will not result in recommendation by the
        staff
        of the Commission that action be taken with respect thereto.

    

    
      

       

      
         

        
          
            
              Daybreak
                Oil & Gas, Inc.

              Subscription
                Agreement

            

          

          
            3

            
              

            

          

          
             

          

        

      

    

     

    
      4.  Residence.
        The Subscriber represents and warrants that the Subscriber is a bona fide
        resident of,
        is
        domiciled in and received the offer and made the decision to invest in the
        Securities in the state set forth on
        the
        signature page hereof, and the Securities are being purchased by the Subscriber
        in the Subscriber's name
        solely for the Subscriber's own beneficial interest and not as nominee for,
        or
        on behalf of, or for the beneficial
        interest of, or with the intention to transfer to, any other person, trust
        or
        organization, except as specifically
        set forth in paragraph 15 of this Subscription Agreement and Letter of
        Investment Intent.

    

    
       

      5.  Investor
        Qualification. The Subscriber represents and warrants that the Subscriber or
        the purchaser
        of the Securities named in paragraph 15 comes within at least one category
        marked below, and that for
        any
        category marked the Subscriber has truthfully set forth the factual basis
        or
        reason the Subscriber comes
        within that category. ALL INFORMATION IN RESPONSE TO THIS PARAGRAPH WILL
        BE
KEPT
        STRICTLY CONFIDENTIAL. The Subscriber agrees to furnish any additional
        information which the Company
        deems necessary in order to verify the answers set forth
        below.

    

     

     
      
        	Category
                I	
                The
                  Subscriber is an individual (not a partnership, corporation, etc.)
                  whose
                  individual net worth, or joint net worth with the Subscriber's
                  spouse,
                  presently exceeds $1,000,000.

              
	 	 
	 	Explanation.
                In calculation of net worth the Subscriber may include equity
                in
                personal property and real estate, including the Subscriber's principal
                residence, cash, short term investments, stocks and securities. Equity
                in
                personal property and real estate should be based on the fair market
                value
                of such property less debt secured by such property.
	 	 
	Category
                II	The
                Subscriber is an individual (not a partnership, corporation, etc.)
                who had
                an individual net income in excess of $200,000 in each of the last
                two
                years, or joint income with his/her spouse in excess of $300,000
                in each
                of the last two years, and has a reasonable expectation of reaching
                the
                same income level in the current year.
	 	 
	Category
                III	The
                Subscriber is an executive officer or director of the
                Company.
	 	 
	Category
                IV	The
                Subscriber is a bank; savings and loan; insurance company; registered
                broker or dealer; registered investment company; registered business
                development company; licensed small business investment company ("SBIC");
                or employee benefit plan within the meaning of Title I of ERISA whose
                plan
                fiduciary is either a bank, savings and loan, insurance company or
                registered investment advisor or whose total assets exceed $5,000,000;
                or
                a self-directed employee benefit plan with investment decisions made
                solely by persons that are accredited investors.
	 	 
	 	
                (describe
                  entity)

              
	 	 
	Category
                V	The
                Subscriber is a private business development company as defined in
Section
                202(a)(22) of the Investment Advisers Act of
                1940.

      

      
        
           

          
            
              
                Daybreak
                  Oil & Gas, Inc.

                Subscription
                  Agreement

              

            

            
              4

              
                

              

            

            
               

            

          

        

      

      
        	 	 
	Category
                VI	
                The
                  Subscriber is an entity with total assets in excess of $5,000,000
                  which
                  was not formed for the purpose of investing in the Units and which
                  is one of the following:

              
	 	
                a
                  corporation; 

                or
                  a partnership; 

                or
                  a business trust; or
                  
                  a
                    tax-exempt organization described in Section 501(cX3) of the
                    Internal
                    Revenue Code of 1986, as amended.

                

              
	 	 
	
                Category
                  VII

              	
                The
                  Subscriber is a trustee for a trust that is revocable by the grantor
                  at
                  any time (including an IRA) and the grantor qualifies under either
                  Category I or Category II above. A copy of the declaration of trust
                  or
                  trust agreement and a representation as to the net worth or income
                  of the
                  grantor is enclosed.

              
	 	 
	
                Category
                  VIII

              	
                The
                  Subscriber is an entity all the equity owners of which are "accredited
                  investors" within one or more of the above categories, other than
                  Category
                  IV or Category V. [If relying upon this category alone, each
                  equity owner must complete a separate copy of this
                  Agreement.]

              
	 	 
	 	
                (describe
                  entity)

              
	 	 
	Category DC	The
                Subscriber is a trust with total assets in excess of $5,000,000,
                not
                formed for the specific
                purpose of acquiring the Securities, whose purchase is directed by
                a
                person who has such knowledge and experience in financial and business
                matters that he is capable of evaluating the merits and risks of
                the
                prospective investment.

      

    

     

    6.         Additional
      Representations.   The undersigned, if other than an
      individual, makes the following additional representations:

     

    
      (a)  
        The Subscriber was not organized for the specific purpose of acquiring the
        Securities;

    and

    
       

    

    
      (b)  
        This Subscription Agreement and Letter of Investment Intent has been duly
        authorized by all necessary action on the part of the Subscriber, has been
        duly
        executed by an authorized officer or representative of the Subscriber, and
        is a
        legal, valid and binding obligation of the Subscriber enforceable in accordance
        with its terms.

    

    
       

      7.
        Sophistication. The Subscriber further represents and warrants that he
        has such knowledge and experience in financial and business matters so as
        to be
        capable of evaluating the merits and risks of an investment in the Securities
        and protecting the Subscriber's own interests in this transaction, and does
        not
        desire to utilize the services of any other person in connection with evaluating
        such merits and risks.

    

    
      

       

      
        
           

          
            
              
                Daybreak
                  Oil & Gas, Inc.

                Subscription
                  Agreement

              

            

            
              5

              
                

              

            

            
               

            

             

          

        

      

    

    
      8.  Reliance
        on Representations.    The Subscriber understands the
        meaning and legal consequences
        of the representations, warranties, agreements, covenants, and confirmations
        set
        out above and agrees
        that the subscription made hereby may be accepted in reliance thereon. The
        Subscriber agrees to indemnify
        and hold harmless the Company and any selling agent (including for this purpose
        their employees, and
        each
        person who controls either of them within the meaning of Section 20 of the
        Securities Exchange Act of
        1934,
        as amended) from and against any and all loss, damage, liability or expense,
        including reasonable costs
        and
        attorney's fees and disbursements, which the Company, or such other persons
        may
        incur by reason of,
        or in
        connection with, any representation or warranty made herein not having been
        true
        when made, any misrepresentation
        made by the Subscriber or any failure by the Subscriber to fulfill any of
        the
        covenants or agreements
        set forth herein, in the Purchaser Questionnaire or in any other document
        provided by the Subscriber
        to the Company.

    

    
       

      9.  Transferabilitv
        and Assignability. Neither this Subscription Agreement nor any of the rights
of
        the
        Subscriber hereunder may be transferred or assigned by the Subscriber. The
        Subscriber agrees that the Subscriber
        may not cancel, terminate, or revoke this Subscription Agreement or any
        agreement of the Subscriber
        made hereunder (except as otherwise specifically provided herein) and that
        this
        Subscription Agreement
        shall survive the death or disability of the Subscriber and shall be binding
        upon the Subscriber's heirs,
        executors, administrators, successors, and assigns.

    

    
       

      10.  Escrow
        Account. Until such time as the Minimum Units have been accepted, the cash
received
        for the subscriptions will be held in a non-interest bearing account ("Escrow
        Account") in the name of
        the
        Company at AMG Guaranty Trust, NA.   Subscribers may not withdraw
        funds from the Escrow Account,
        and subscriptions may not be revoked, canceled or terminated by the subscriber.
        Subsequent to acceptance
        by the Company of subscriptions for at least 1,000,000 Units (the "Minimum
        Units"), the Escrow Account
        will be terminated, and additional Offering proceeds relating to accepted
        subscriptions may be utilized
        by the Company immediately upon acceptance by the Company. If the Minimum
        Units
        are not sold prior
        to
        the expiration of the Offering Period, the Offering will terminate and the
        Company will withdraw the Offering,
        whereupon each Subscriber will receive a refund of any subscription paid,
        without deduction. Upon such
        termination of the Offering by the Company, the Subscriber's subscription
        will
        be automatically canceled
        and the undersigned will have no further rights or obligations under this
        Agreement, and the Company
        and the Placement Agent shall have no liability or other obligation to the
        Subscriber.

    

    
      

       

      11.       NASD
        Membership - Individual Investor. Are you a member of the NASD, 1 a person
        associated with a member 2 of the NASD, or an affiliate of a
        member?

    

    
       

      Yes_____                No_____               

    

    
       

      1            The
        NASD defines a "member" as being either any broker or dealer admitted to
        membership in the NASD or
        any
        officer or partner of such a member, or the executive representative of such
        a
        member or the substitute for such
        representative.

    

    
      \

    

    
      2            The
        NASD defines a "person associated with a member" as being every sole proprietor,
        general or limited partner,
        officer, director or branch manager or such member, or any natural person
        occupying a similar status or performing
        similar functions, or any natural person engaged in the investment banking
        or
        securities business who is directly
        or indirectly controlling or controlled by such member (for example, any
        employee), whether or not any such
        person is registered or exempt from registration without the NASD. Thus,
        "person
        associated with a member" includes
        a sole proprietor, general or limited partner, officer, director or branch
        manager or an organization of any kind
        (whether a corporation, partnership or other business entity) which itself
        is a
        "member" or a "person associated with
        a
        member." ha addition, an organization of any kind is a "person associated
        with a
        member" if its sole proprietor
        or anyone of its general or limited partners, officers, director or branch
        managers is a "member" or "person
        associated with a member."

    

    
      

       

      
        
           

          
            
              
                Daybreak
                  Oil & Gas, Inc.

                Subscription
                  Agreement

              

            

            
              6

              
                

              

            

            
               

            

          

        

         

      

    

    If
      "Yes,"
      please list any members of the NASD with whom you are associated or
      affiliated.

    
       

      NASD
        Membership - Corporate Investor, If you are a Corporation, are any of your
        officers, directors or 5% shareholders a member of the NASD, a person associated
        with a member of the NASD, or an affiliate of a member?

    

    
       

      
        Yes_____                No_____               

      

    

    
       

      If
        "Yes,"
        please list the name of the respective officer, director or 5% shareholder
        and
        any members of the NASD with whom they are associated or
        affiliated.

    

    
       

      12.           Survival.
        The representations and warranties of the Subscriber set forth herein shall
        survive the
        sale
        of the Units pursuant to this Subscription Agreement.

    

    
       

      13.  Notices.
        All notices or other communications hereunder shall be in writing and shall
        be
deemed
        to
        have been duly given if delivered personally or mailed by certified or
        registered mail, return receipt
        requested, postage prepaid, as follows: if to the Subscriber, to the address
        set
        forth below; and if to the Company
        to the address at the beginning of this letter, or to such other address
        as the
        Company or the Subscriber
        shall have designated to the other by like notice.

    

    
       

      14.  (Applicable
        to FLORIDA residents
        only.) The Subscriber has been informed and recognizes that
        (a)
        the Units have not been registered under the Florida Securities Act, and
        (b)
        under Section 517.061 (12) of
        the
        Florida Securities Act, the Subscriber may void the sale of any Securities
        within three (3) days after the tender
        of
        this Subscription Agreement and payment hereunder to the
        Company.

    

    
       

      15.  Counterparts.
        This Agreement may be executed in one or more counterparts, each of which
        shall
        be
        deemed an original, but all of which together shall constitute one and the
        same
        document.

    

    
      

       

      IN
        NO
        EVENT WILL THE COMPANY, THE PLACEMENT AGENT, OR ANY OF THEIR
AFFILIATES OR THE PROFESSIONAL ADVISORS ENGAGED
        BY THEM BE
        LIABLE IF FOR ANY REASON RESULTS OF OPERATIONS OF THE COMPANY
        ARE NOT AS PROJECTED IN THE DOCUMENTS. INVESTORS MUST LOOK
        SOLELY TO, AND RELY ON, THEIR OWN ADVISORS WITH RESPECT TO THE
        TAX CONSEQUENCES OF INVESTING IN THE
SECURITIES.

    

    
       

      16.          Title.
        Manner in Which Title is To Be Held.

    

    
      \

    

    
      Place
        an
        "X" in one space below:

    

    
      

      (a)           Individual
        Ownership

    

    
      (b)           Community
        Property

    

    
      (c)           Joint
        Tenant with Right of
        Survivorship (both parties must sign)

    

    
      (d)           Partnership

    

    
      (e)           Tenants
        in
        Common

    

    
      (f)           Corporation

    

    
      (g)           Trust

    

    
      (h)           Other
        (Describe):

    

    
      

       

       

    

    
      
        
          
            
              
                
                  Daybreak
                    Oil & Gas, Inc.

                  Subscription
                    Agreement

                

              

              
                7

                
                  

                

              

              
                 

              

            

          

           

           

           

          Please
            print above the exact name(s) in which the Securities are to be
            held.

        

      

    

    
      

       

      17.  State
        of Residence. My state of residence and the state in which I
        received the offer to invest and
        made
        the decision to invest in the Securities
        is                                                                                           .

    

    
       

      18.  Date
        of Birth. My date of birth
        is:                                                                                 

    

    
      

       

      SIGNATURE
        PAGE ON NEXT PAGE

    

    
      

       

      

    

    
      

       

      

    

    
      

       

      

    

    
      

       

      

    

    
      

       

      

    

    
      

      
        
          
             

            
              
                
                  Daybreak
                    Oil & Gas, Inc.
                    
                      Subscription
                        Agreement

                    

                  

                

              

              
                8

                
                  

                

              

              
                 

              

            

          

           

          SIGNATURES

        

      

    

    
      

      The
        Subscriber hereby represents he has read this entire Subscription Agreement
        and
        the Memorandum dated                    ,
        2006.

    

    
       

    

    
      Dated:                                      

    

    
      

       

      INDIVIDUAL

    

    
      

       

      
        	 	 	 
	 	 	Address
                to Which Correspondence Should be Directed
	 	 	 
	 	 	 
	Signature
                (Individual)	 	City,
                State and Zip Code
	 	 	 
	 	 	 
	Signature
                (All record holders should sign)	 	Tax
                Identification or Social Security Number
	 	 	 
	 	 	 
	Name(s)
                Typed or Printed 	 	Telephone
                Number
	 	 	 

      

       

    

    
       

       

    

    
       COPY
        OF DRIVER'S LICENSE OR PASSAPORT REQUIRED IF NON-BCP
        CUSTOMER

    

    
      

       

      

    

    
      

       

      

    

    
      

       

      

    

    
      

       

      

    

    
      

       

       

    

    
      

      
        
          
            Daybreak
              Oil & Gas, Inc.

            
              Subscription
                Agreement

            

          

        

        
          9

          
            

          

        

        
           

        

      

       

      CORPORATION,
        PARTNERSHIP, TRUST, RETIREMENT ACCOUNT OR OTHER
        ENTITY

    

    
      

      
         

        
          	 	 	 
	Name
                  of Entity	 	Address
                  to Which Correspondence Should be Directed
	 	 	 
	By:	 	 
	* Signature	 	City,
                  State and Zip Code
	 	 	 
	Its: 	 	 
	Title	 	Tax
                  Identification or Social Security Number
	 	 	 
	
                	 	 
	Name Typed or Printed	 	Telephone
                  Number
	 	 	 

        

         

      

    

    
      *
        If
        Securities are being subscribed for by an entity, the Certificate of Signatory
        must also be completed.

    

    
      

       

      CERTIFICATE
        OF SIGNATORY To be completed if Securities are being subscribed for by an
        entity.

       

    

    
      I,                                                                           
        , am
        the                                                                              
of                                                                                                 
 (the
        "Entity").

    

    
       

      I
        certify
        that I am empowered and duly authorized by the Entity to execute and carry
        out
        the terms of the Subscription Agreement and Letter of Investment Intent and
        to
        purchase and hold the Securities, and certify that the Subscription Agreement
        and Letter of Investment Intent has been duly and validly executed on behalf
        of
        the Entity and constitutes a legal and binding obligation of the
        Entity.

    

    
      

       

      IN
        WITNESS WHEREOF, I have hereto set may hand
        this                      day
        of               ,
        2006.

    

    
      

       

      
        	 	 
	 	Signature

      

       

    

    
      

       

      COPY
        OF SIGNER'S DRIVER'S LICENSE OR PASSAPORT REQUIRED FOR NON-BCP
CUSTOMERS

    

    
      

       

      

    

    
      

       

       

      
        

        
          
            
              Daybreak
                Oil & Gas, Inc.

              
                Subscription
                  Agreement

              

            

          

          
            10

            
              

            

          

          
             

          

        

         

        ACCEPTANCE

      

    

    
      

       

      This
        Subscription Agreement is accepted as of
                                                                              ,
        2006.

    

    
       

      
        	 	Daybreak
                Oil &
                Gas, Inc.	 
	 	 	 	 
	
                 

              	
                By:
                  

              	/s/ 	 
	 	 	Authorized
                Officer	 
	 	 	 	 
	 	 	
                Date:
                  ______________________

              	 

      

       

    

    
      

       

    

    
       

       

      

    

    
       

      

    

    
      

       

      

    

    
      

       

      

    

    
      

       

      

    

    
      

      Daybreak
        Oil & Gas, Inc.

    

    
      Subscription
        Agreement

    

    
      11dbog_ex1023-70228.htm

    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

        
          

        

      

      
        
        

      

    

    2.1.   Exercise
      of Warrant.
      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

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    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

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    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

     

                                        

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    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 the consideration actually
      received by the Company upon such exercise plus the consideration, if any,
      actually received by the Company for the issuance, sale or grant of all such
      rights, options, warrants, or conversion privileges whether or not exercised;
      provided, however, that no such readjustment shall have the effect of decreasing
      the number of Shares purchasable upon exercise of the Warrants by an amount
      in
      excess of the amount of the adjustment initially made in respect of the
      issuance, sale, or grant of such rights, options, warrants, or conversion
      rights.

    

    4.2.  
      No Adjustment for Dividends. Except as provided in Section 4.1, no
      adjustment in respect
      of any dividends or distributions out of eamings shall be made during the term
      of the Warrants or upon the exercise of the Warrants.

    

    4.3.  
      No Adjustment in Certain Cases. No adjustments shall be made pursuantto
      Section 4 hereof
      in
      connection with the issuance of the Common Stock upon exercise of the Warrants.
      No adjustments
      shall be made pursuant to Section 4 hereof in connection with grant or exercise
      of presently authorized or outstanding options to purchase, or the issuance
      of
      shares of Common Stock under the Company's director or employee benefit
      plan.

    

    4.4.  
      Preservation ofPurchase Rights upon Reclassification, Consolidation, etc.
      In case of any
      consolidation of the Company with or merger of the Company into another
      corporation, or in case of any sale or conveyance to another corporation of
      the
      property, assets, or business of the Company as an entirety or substantially
      as
      an entirety, the Company or such successor or purchasing corporation, as the
      case may be, shall execute with the Warrantholder an agreement that the
      Warrantholder shall have the right thereafter upon payment of the Exercise
      Price
      in effect immediately prior to such action to purchase, upon exercise of the
      Warrants, the kind and amount of shares and other securities and property which
      it would have owned or have been entitled to receive after the happening of
      such
      consolidation, merger, sale, or conveyance had the Warrants been exercised
      immediately prior to such action. In the event of a merger described in Section
      368(a)(2)(E) of the Internal Revenue Code of 1986, in which the Company is
      the
      surviving

    

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    corporation,
      the right to purchase Shares under the Warrants shall terminate on the date
      of
      such merger and thereupon the Warrants shall become null and void, but only
      if
      the controlling corporation shall agree to substitute for the Warrants, its
      warrants which entitle the holder thereof to purchase upon their exercise the
      kind and amount of shares and other securities and property which it would
      have
      owned or been entitled to receive had the Warrants been exercised immediately
      prior to such merger. Any such agreements referred to in this Section 4.4 shall
      provide for adjustments, which shall be as nearly equivalent as may be
      practicable to the adjustments provided for in Section 4 hereof The provisions
      of this Section (4.4) shall similarly apply to successive consolidations,
      mergers, sales, or conveyances.

    

    4.5.  
      Par Value ofShares of Common Stock. Before taking any action which
      would cause an
      adjustment effectively reducing the portion of the Exercise Price allocable
      to
      each Share below the par value per share of the Common Stock issuable upon
      exercise of the Warrants, the Company will take any corporate action which
      may,
      in the opinion of its counsel, be necessary in order that the Company may
      validly and legally issue fully paid and nonassessable Common Stock upon
      exercise of the Warrants.

    

    4.6.  
      Independent Public Accountants. The Company may retain a firm of
      independent public
      accountants of recognized national standing (which may be any such firm
      regularly employed by the Company) to make any computation required under this
      Section 4, and a certificate signed by such
      firm
      shall be conclusive evidence of the correctness of any computation made under
      this Section 4.

    

    4.7.  
      Statement on Warrants. Irrespective of any adjustments in the number of
      securities issuable
      upon exercise of the Warrants, Warrants theretofore or thereafter issued may
      continue to express the same number of securities as are stated in the similar
      Warrants initially issuable pursuant to this Agreement. However, the Company
      may, at any time in its sole discretion (which shall be conclusive), make any
      change in the form of Warrant that it may deem appropriate and that does not
      affect the substance thereof; and any Warrant thereafter issued, whether upon
      registration of transfer of, or in exchange or substitution for, an outstanding
      Warrant, may be in the form so changed.

    

    4.8. 
       Treasury Stock. For purposes of this Section 4, shares of Common
      Stock owned or held at any relevant time by, or for the account of, the Company,
      in its treasury or otherwise, shall not be deemed to be outstanding for purposes
      of the calculations and adjustments described.

    

    Section
      5.   Payment
      of Exercise Price

    

    The
      payment of the Exercise Price shall be made in cash or by check or any
      combination thereof

     

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    Section
      6.   Redemption

    

    6.1  
      Right to Redeem. The Company may, at its option, redeem the Warrants in
      whole or in
      part
      on a pro rata basis for a redemption price of $.05 per Warrant (the "Redemption
      Price") on 15 days
      prior written notice to the Warrant Holders. The right to redeem the Warrants
      may be exercised by the Company only in the event (i) the average of the closing
      sale prices of the Company's
      common stock is at or above $3.00 per share for twenty (20) out of the thirty
      (30) trading
      preceding the date the Warrants are called, (ii) the Warrant Securities can
      be
      resold pursuant to an effective registration statement under the Act, (iii)
      the
      expiration of the 15 days notice period is within the Exercise Period. In the
      event the Company exercises its right to redeem the Warrants, the Expiration
      Date will be deemed to be, and the Warrants will be exercisable until the close
      of business on, the date fixed for redemption in such notice (the "Redemption
      Date"). If any Warrant called for redemption is not exercised by such time,
      it
      will cease to be exercisable and the Warrant Holder thereof will be entitled
      only to the Redemption Price.

    

    6.2  
      Termination ofRights. From and after the Redemption Date, all rights of
      the holders of
      record
      of redeemed Warrants (except the right to receive the Redemption Price) shall
      terminate.

    

    6.3 
       Payment of Redemption Price. The Company shall pay to the holders of
      record of redeemed Warrants all amounts to which the holders of record of such
      redeemed Warrants who shall have surrendered their Warrants are
      entitled.

    

    Section
      7.   Notice to Holders.

    

    If,
      prior
      to the expiration of this Warrant either by its terms or by its exercise in
      full, any of the
      following shall occur:

    

    (a)
      the
      Company shall declare a dividend or authorize any other distribution on its
      Common
      Stock; or

    

    (b)
      the
      Company shall authorize the granting to the shareholders of its Common Stock
      of
      rights to subscribe for or purchase any securities or any other similar rights;
      or

    

    (c)
      any
      reclassification, reorganization or similar change of the Common Stock, or
      any
      consolidation or merger to which the Company is a party, or the sale, lease,
      or
      exchange of any significant
      portion of the assets of the Company; or

    

    (d)
      the
      voluntary or involuntary dissolution, liquidation or winding up of the Company;
      or

     

    (e)
      any
      purchase, retirement or redemption by the Company of its Common
      Stock;

    

    then,
      and
      in any such case, the Company shall deliver to the Holder or Holders written
      notice thereof at least 30 days prior to the earliest applicable date specified
      below with respect to which notice is to be given, which notice shall state
      the
      following:

    

     

    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    (x)
      the
      date on which a record is to be taken for the purpose of such dividend,
      distribution or rights, or, if a record is not to be taken, the date as of
      which
      the shareholders of Common Stock of record to be entitled to such dividend,
      distribution or rights are to be determined;

    

    (y)
      the
      date on which such reclassification, reorganization, consolidation, merger,
      sale, transfer, dissolution, liquidation, winding up or purchase, retirement
      or
      redemption is expected to become
      effective, and the date, if any, as of which the Company's shareholders of
      Common Stock of record shall be entitled to exchange their Common Stock for
      securities or other property deliverable upon such reclassification,
      reorganization, consolidation, merger, sale, transfer, dissolution, liquidation,
      winding up, purchase, retirement or redemption; and

    

    (z)
      if
      any matters referred to in the foregoing clauses (x) and (y) are to be voted
      upon by shareholders of Common Stock, the date as of which those shareholders
      to
      be entitled to vote are to be determined.

    

    Section
      8.   Officers' Certificate.

    

    Whenever
      the Exercise Price or the aggregate number of Warrant Securities purchasable
      pursuant to this Warrant shall be adjusted as required by the provisions of
      Section 4 above, the Company shall promptly file with its Secretary or an
      Assistant Secretary at its principal office, and with its transfer agent, if
      any, an officers' certificate executed by the Company's President and Secretary
      or Assistant Secretary, describing the adjustment and setting forth, in
      reasonable detail, the facts requiring such adjustment and the basis for and
      calculation of such adjustment in accordance with the provisions of this
      Warrant. Each such officers' certificate shall be made available to the Holder
      or Holders of this Warrant for inspection at all reasonable times, and the
      Company, after each such adjustment, shall promptly deliver a copy of the
      officers' certificate relating to that adjustment to the Holder or Holders
      of
      this Warrant. The officers' certificate described in this Section 8 shall be
      deemed to be conclusive as to the correctness of the adjustment reflected
      therein if, and only if, no Holder of this Warrant delivers written notice
      to
      the Company of an objection to the adjustment within 30 days after the officers'
      certificate is delivered to the Holder or Holders of this Warrant. The Company
      will make its books and records available for inspection and copying during
      normal business hours by the Holder so as to permit a determination as to the
      correctness of the adjustment. If written notice of an objection is delivered
      by
      a Holder to the Company and the parties
      cannot reconcile the dispute, the Holder and the Company shall submit the
      dispute to arbitration pursuant to the provisions of Section 20 below. Failure
      to prepare or provide the officers' certificate shall not modify the parties'
      rights hereunder.

    

    Section
      9.   Reservation of Warrant Securities.

    

    There
      has
      been reserved, and the Company shall at all times keep reserved so long as
      the
      Warrants remain outstanding, out of its authorized and unissued Common Stock,
      such number of shares of Common Stock as shall be subject to purchase under
      the
      Warrants. Every transfer agent for the Common Stock and other securities of
      the
      Company issuable upon the exercise of the Warrants will be irrevocably
      authorized and directed at all times to reserve such number of authorized shares
      and other securities as shall be requisite for such purpose. The Company will
      keep a copy of this Agreement on file with every transfer agent for the Common
      Stock and other

    

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    securities
      of the Company issuable upon the exercise of the Warrants. The Company will
      supply every such transfer agent with duly executed stock and other
      certificates, as appropriate, for such purpose and will provide or otherwise
      make available any cash which may be payable as provided in Section 14
      hereof

    

    Section
      10.   Restrictions
      on Transfer; Registration Rights.

    

    10.1.
      Restrictions on Transfer. The Warrantholder agrees that prior to making any
      disposition of the Warrants or the Shares, the Warrantholder shall give written
      notice to the Company describing briefly the manner in which any such proposed
      disposition is to be made; and no such disposition shall be made if the Company
      has notified the Warrantholder that in the opinion of counsel reasonably
      satisfactory to the Warrantholder, there is no applicable exemption from the
      registration requirements under the Act available for the disposition, and
      a
      registration statement or other notification or post-effective amendment thereto
      (hereinafter collectively a "Registration Statement") under the Act is required
      with respect to such disposition and no such Registration Statement has been
      filed by the Company with, and declared effective, if necessary, by, the
      Commission.

    

    10.2.
      Registration Right. The Warrant Securities are subj ect to the terms of a
      Registration Rights Agreement. Upon request, a copy of the Registration Rights
      Agreement is available, without charge, from the Company.

    

    Section
      11.   Payment
      of Taxes.

    

    The
      Company will pay all documentary stamp taxes, if any, attributable to the
      initial issuance
      of the Warrants or the securities comprising the Shares; provided, however,
      the
      Company shall
      not
      be required to pay any tax which may be payable in respect of any transfer
      of
      the Warrants or the securities comprising the Shares.

    

    Section
      12.   Transfer
      to Comply With the Securities Act of 1933

    

    This
      Warrant, the Warrant Securities, and all other securities issued or issuable
      upon exercise of
      this
      Warrant, may not be offered, sold or transferred, in whole or in part, except
      in
      compliance with
      the
      Act, and except in compliance with all applicable state securities laws. The
      Company may cause
      substantially the following legends, or their equivalents, to be set forth
      on
      each certificate representing the Warrant Securities, or any other security
      issued or issuable upon exercise of this Warrant, not theretofore distributed
      to
      the public or sold to underwriters, as defmed by the Act, for distribution
      to
      the public pursuant to Section 8 above:

    

    (a)
      "THE
      SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
      .SECURITIES ACT OF 1933 OR ANY STATE SECURITIES LAWS AND MAY NOT BE SOLD,
      EXCHANGED, HYPOTHECATED OR TRANSFERRED IN ANY MANNER EXCEPT IN COMPLIANCE WITH
      THE AGREEMENT PURSUANT TO WHICH THEY WERE ISSUED."

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (b)
      Any
      legend required by applicable state securities laws.

    

    Any
      certificate issued at any time in exchange or substitution for any certificate
      bearing such legends
      (except a new certificate issued upon completion of a public distribution
      pursuant to a registration
      statement under the Securities Act of 1933, as amended (the "Act"), or the
      securities represented thereby) shall also bear the above legends unless, in
      the
      opinion of the Company's counsel, the securities represented thereby need no
      longer be subject to such restrictions.

    

    Section
      13.   Fractional
      Shares

    

    No
      fractional shares or scrip representing fractional shares shall be issued upon
      the exercise of all or any part of this Warrant. With respect to any fraction
      of
      a share of any security called for upon any exercise of this Warrant, the
      Company shall pay to the Holder an amount in money equal to that fraction
      multiplied by the Current Market Price of that share.

    

    Section
      14.   No
      Rights
      as Stockholder; Notices to Warrantholder.

    

    Nothing
      contained in this Agreement or in the Warrants shall be construed as conferring
      upon
      the
      Warrantholder or its transferees any rights as a stockholder of the Company,
      including the right to vote, receive dividends, consent or receive notices
      as a
      stockholder in respect to any meeting of stockholders for the election of
      directors of the Company or any other matter. The Company covenants,
      however, that for so long as this Warrant is at least partially unexercised,
      it
      will furnish any Holder of this Warrant with copies of all reports and
      communications furnished to the shareholders of the Company. In addition, if
      at
      any time prior to the expiration of the Warrants and prior to their exercise,
      anyone or more of the following events shall occur:

    

    (a)
      any
      action which would require an adjustment pursuant to Section 4.1 (except
subsections
      4. 1 (e) and 4. 1 (h) or 4.4; or

    

    (b)
      a
      dissolution, liquidation, or winding up of the Company (other than in connection
      with a consolidation, merger, or sale of its property, assets, and business
      as
      an entirety or substantially as an entirety) shall be proposed:

    

    then
      the
      Company shall give notice in writing of such event to the Warrantholder, as
      provided in Section
      17 hereof, at least 20 days prior to the date fixed as a record date or the
      date
      of closing the transfer
      books for the determination of the stockholders entitled to any relevant
      dividend, distribution,
      subscription rights or other rights or for the determination of stockholders
      entitled to vote on such proposed dissolution, liquidation, or winding up.
      Such
      notice shall specify such record date or the date of closing the transfer books,
      as the case may be. Failure to mail or receive notice or any defect therein
      shall not affect the validity of any action taken with respect
      thereto.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    Section
      15.   Charges
      Due Upon Exercise.

    

    The
      Company shall pay any and all issue or transfer taxes, including, but not
      limited to, all federal or state taxes, that may be payable with respect to
      the
      transfer of this Warrant or the issue or delivery of Warrant Securities upon
      the
      exercise of this Warrant.

    

    Section
      16.   Warrant
      Securities to be Fully Paid

    

    The
      Company covenants that all Warrant Securities that may be issued and delivered
      to a Holder of this Warrant upon the exercise of this Warrant and payment of
      the
      Exercise Price will be, upon such delivery, validly and duly issued, fully
      paid
      and nonassessable.

    

    Section
      17.   Notices

    

    Any
      notice pursuant to this Agreement by the Company or by a Warrantholder or a
      holder of Shares
      shall be in writing and shall be deemed to have been duly given if delivered
      or
      mailed by certified
      mail, return receipt requested:

    

    (i)  
      If to a Warrantholder or a holder of Shares, addressed to the address set forth
      above.

    

    (ii)  
      If to the Company addressed to it at 601 W. Main Ave., Suite 1017, Spokane,
      Washington
      99201, Attention: Secretary.

    

    Each
      party may from time to time change the address to which notices to it are to
      be
      delivered or mailed hereunder by notice in accordance herewith to the other
      party.

    

    Section
      18.   Merger
      or
      Consolidation of the Company.

    

    The
      Company will not merge or consolidate with or into any other corporation or
      sell
      all or substantially all of its property to another corporation, unless the
      provisions of Section 4.4 are complied with.

    

    Section
      19.   Applicable
      Law

    

    This
      Warrant shall be governed by and construed in accordance with the laws of the
      State of Washington,
      and courts located in Spokane County, Washington shall have exclusive
      jurisdiction over
      all
      disputes arising hereunder.

    

    Section
      20.   Arbitration.

    

    The
      Company and the Holder, and by receipt of this Warrant or any Warrant
      Securities, all subsequent Holders or holders of Warrant Securities, agree
      to
      submit all controversies, claims, disputes and matters of difference with
      respect to this Warrant, including, without limitation, the application of
      this
      Section 20 to arbitration in Spokane, Washington, according to the rules and
      practices of the American Arbitration Association from time to time in force;
      provided, however, that if such rules and practices conflict with the applicable
      procedures of Washington courts of

    

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    general
      jurisdiction or any other provisions of Washington law then in force, those
      Washington rules and provisions shall govern. This agreement to arbitrate shall
      be specifically enforceable. Arbitration
      may proceed in the absence of any party if notice of the proceeding has been
      given to that party. The parties agree to abide by all awards rendered in any
      such proceeding. These awards shall be final and binding on all parties to
      the
      extent and in the manner provided by the rules of civil procedure enacted in
      Washington. All awards may be filed, as a basis of judgment and of the
issuance
      of execution for its collection, with the clerk of one or more courts, state
      or
      federal, having jurisdiction
      over either the party against whom that award is rendered or its property.
      No
      party shall be considered in default hereunder during the pendency of
      arbitration proceedings relating to that default.

    

    Section
      21.   Acceptance of Terms; Successors.

    

    By
      its
      acceptance of this Warrant Certificate, the Holder accepts and agrees to comply
      with all of the terms and provisions hereof. All the covenants and provisions
      of
      this Warrant Certificate by or for the benefit of the Company or the Holder
      shall bind and inure to the benefit of their respective successors and assigns
      hereunder.

    

    Section
      22.   Miscellaneous
      Provisions

    

    (a)
      Subject to the terms and conditions contained herein, this Warrant shall be
      binding on the Company and its successors and shall inure to the benefit of
      the
      original Holder, its successors and assigns and all holders of Warrant
      Securities and the exercise of this Warrant in full shall not terminate the
      provisions of this Warrant as it relates to holders of Warrant
      Securities.

    

    (b)
      If
      the Company fails to perform any of its obligations hereunder, it shall be
      liable to the
      Holder for all damages, costs and expenses resulting from the failure,
      including, but not limited to,
      all
      reasonable attorney's fees and disbursements.

    

    (c)
      This
      Warrant cannot be changed or terminated or any performance or condition
waived
      in
      whole or in part except by an agreement in writing signed by the party against
      whom enforcement
      of the change, termination or waiver is sought; provided, however, that any
      provisions hereof
      may be amended, waived, discharged or terminated upon the written consent of
      the
      Company and
      the
      Company.

    

    (d)
      If
      any provision of this Warrant shall be held to be invalid, illegal or
      unenforceable, such
      provision shall be severed, enforced to the extent possible, or modified in
      such
      a way as to make
      it
      enforceable, and the invalidity, illegality or unenforceability shall not affect
      the remainder of this Warrant.

    

    (e)
      The
      Company agrees to execute such further agreements, conveyances, certificates
      and
      other documents as may be reasonably requested by the Holder to effectuate
      the
      intent and provisions of this Warrant.

    

    (f)
      Paragraph headings used in this Warrant are for convenience only and shall
      not
      be taken or construed to define or limit any of the terms or provisions of
      this
      Warrant. Unless

    

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    otherwise
      provided, or unless the context shall otherwise require, the use of the singular
      shall include the plural and the use of any gender shall include all
      genders.

    

    Dated
      _________________

     

    
      	 	DAYBREAK
              OIL AND GAS,
              INC.	 
	 	 	 	 
	 	
              By:
                

            	 	 
	 	 	Terrence
              J. Dunne, Chief
              Financial Officer	 
	 	 	 	 
	 	 	 	 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

    EXHIBIT
      1

    

    PURCHASE
      FORM

    

    Dated
      ___________________

    

    The
      undersigned hereby irrevocably elects to exercise the Warrant represented by
      this Warrant
      Certificate to the extent of
      purchasing                                                                      Shares
      of Daybreak Oil and Gas, Inc.,
      and
      hereby tenders payment of the exercise price thereof.

    

    INSTRUCTIONS
      FOR REGISTRATION OF STOCK

    

    Name__________________________________________

            (please
      type or print in block letters)

    

    Address______________________________________________

     

    _____________________________________________________

    

    

    ASSIGNMENT
      FORM

    

    FOR
      VALUE
      RECEIVED, ________________________________ ,
      hereby
      sells, assigns and transfers unto

    

    Name__________________________________________

            (please
      type or print in block letters)

    

    Address______________________________________________

     

    _____________________________________________________

     

     

    the
      right to purchase Shares of
      Daybreak Oil and Gas, Inc represented by this Warrant Certificate to the extent
      of ___________________ Shares
      as
      to which such right is exercisable and does hereby irrevocably constitute and
      appoint ____________________________________ attorney,
      to transfer the same on the books of the Company with full power of substitution
      in the premises.

    

     

    
      	 	 	 	 	 
	 	 	 	 	 
	
              
                Signature

              

            	 	 	
              
                Dated

              

            	 
	
               

            	 	 	
               

            	 

    

    

    Notice:
      the signature on this assignment must correspond with the name as it appears
      upon the face of this Warrant Certificate in every particular, without
      alteration or enlargement or any change whatever.

     

     

    
 

    15

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