EXHIBIT B REGISTRATION RIGHTS AGREEMENT
Exhibit
10.24
EXHIBIT
B REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this "AGREEMENT") is made and entered into as
of
July ___ 2006, by and among Daybreak Oil and Gas, Inc., a corporation
(the "COMPANY"), and the investors signatory hereto (each a "INVESTOR" and
collectively, the "INVESTORS").
This
Agreement is made pursuant to Subscription Agreements between the Company and
each
Investor (the "SUBSCRIPTION AGREEMENT").
The
Company and the Investors hereby agree as follows:
1.
Definitions. Capitalized terms used and not otherwise defined herein that
are defined in
the
Subscription Agreement will have the meanings given such terms in the
Subscription Agreement. As used in this Agreement, the following terms have
the
respective meanings set forth in this Section 1:
"ADDITIONAL
WARRANTS" has the meaning set forth in Section 2( d). "ADVICE" has the meaning
set forth in Section 6(d).
"EFFECTIVE
DATE" means the date that the Registration Statement filed pursuant to Section
2( a) or
2(b)
is first declared effective by the Commission.
"EFFECTIVENESS
PERIOD" has the meaning set forth in Section 2(a).
"EXCHANGE
ACT" means the Securities Exchange Act of 1934, as amended.
"FILING
DATE" means (a) with respect to the initial Registration Statement required
to
be filed under Section 2(a), the latter of the 60th day following the Closing
Date or within thirty (30) days after the effective date of the registration
statement relating to our private placement offering dated March 3, 2006; and
(b) with respect to any additional Registration Statements that may be required
pursuant to Section 2(b)' the 45th day following (x) if such Registration
Statement is required because the Commission shall have notified the Company
in
writing that certain Registrable Securities were not eligible for inclusion
on a
previously filed Registration Statement, the date or time on which the
Commission shall indicate as being the first date or time that such Registrable
Securities may then be included in a Registration Statement, or (y) if such
Registration Statement is required for a reason other than as described in
(x)
above, the date on which the Company first knows, or reasonably should have
known, that such additional Registration Statement( s) is required; and (c)
with
respect to a Registration Statement required to be filed under Section 2(c),
the
30th day following the date on which the Company becomes eligible to utilize
Form S-3 to register the resale of Common Stock.
"HOLDER"
or "HOLDERS" means the holder or holders, as the case may be, from time to
time
of Registrable
Securities.
"INDEMNIFIED
PARTY" has the meaning set forth in Section 5( c).
"INDEMNIFYING
PARTY" has the meaning set forth in Section 5( c).
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"LOSSES"
has the meaning set forth in Section 5(a).
"OFFERING"
means that private offering of shares and warrants, offered together as Units,
made pursuant
to the Placement Agent Agreement.
"PLACEMENT
AGENT AGREEMENT' means that agreement dated June 30, 2006, between the Company
and Bathgate Capital Partners LLC relating to the offering of Units of the
Company's securities.
"PROCEEDING"
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.
"PROSPECTUS"
means the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"REGISTRABLE
SECURITIES" means: (i) the Shares, (ii) the Warrant Shares, (iii) any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event, or any conversion price adjustment with
respect to any of the securities referenced in (i) or (ii) above.
"REGISTRATION
STATEMENT" means the initial registration statement required to be filed in
accordance with Section 2(a) and any additional registration statement(s)
required to be filed under Section 2(b) and 2( c), including (in each case)
the
Prospectus, amendments and supplements to such registration statements or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference therein.
"RULE
144" means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
"RULE
415" means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
"RULE
424" means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.
"SECURITIES
ACT" means the Securities Act of 1933, as amended.
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"SHARES"
means the shares of Common Stock issued or issuable to the Investors pursuant
to
the Subscription Agreement.
"WARRANTS"
means the Common Stock purchase warrants issued or issuable to the Investors
pursuant to the Subscription Agreement and the Placement Agent Warrants issued
pursuant to the Placement Agent Agreement.
"WARRANT
SHARES" means the shares of Common Stock issued or issuable upon exercise of
the
Warrants and the Additional Warrants.
"WASHINGTON
COURTS" means the state and federal courts sitting in the City and County of
Spokane.
2.
Registration.
(a)
On or
prior to each Filing Date, the Company shall prepare and file with the
Commission
a Registration Statement covering the resale of all Registrable Securities
not
already covered by an existing and effective Registration Statement, for an
offering to be made on a continuous basis pursuant to Rule 415, on Form SB-2
(or
on such other form appropriate for such purpose). Such Registration Statement
shall contain (except if otherwise required pursuant to written comments
received from the Commission upon a review of such Registration Statement)
the
"Plan of Distribution"
attached hereto as Annex A. The Company shall cause such Registration Statement
to be declared effective under the Securities Act as soon as possible but,
in
any event, no later than its Effectiveness Date, and shall use its reasonable
best efforts to keep the Registration Statement continuously effective under
the
Securities Act until the date which is the earlier of (i) eight years after
its
Effective Date, (ii) such time as all of the Registrable Securities covered
by
such Registration Statement have been publicly sold by the Holders, or (iii)
such time as all of the Registrable Securities covered by such Registration
Statement may be sold by the Holders pursuant to Rule 144(k) as determined
by
the counsel to the Company pursuant to a written opinion letter to such effect,
addressed and acceptable to the Company's transfer agent and the affected
Holders (the "EFFECTIVENESS PERIOD").
(b)
If
for any reason the Commission does not permit all of the Registrable Securities
to be included in the Registration Statement filed pursuant to Section 2( a),
or
for any other reason any outstanding Registrable Securities are not then covered
by an effective Registration Statement, then the Company shall prepare and
file
by the Filing Date for such Registration Statement, an additional Registration
Statement covering the resale of all Registrable Securities not already covered
by an existing and effective Registration Statement for an offering to be made
on a continuous basis pursuant to Rule 415, on Form SB-2 (or on such other
form
appropriate for such purpose). Each such Registration Statement shall contain
(except if otherwise required pursuant to written comments received from the
Commission upon a review of such Registration Statement) the "Plan of
Distribution" attached hereto as Annex A. The Company shall cause each such
Registration Statement to be declared effective under the Securities Act as
soon
as possible but, in any event, by its Effectiveness Date, and shall use its
reasonable best efforts to keep such Registration Statement continuously
effective under the Securities Act during the entire Effectiveness
Period.
(c)
Promptly following any date on which the Company becomes eligible to use a
registration statement on Form S-3 to register the Registrable Securities for
resale, the Company
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shall
file a registration statement on Form S-3 covering the Registrable Securities
(or a post-effective amendment on Form S-3 to the then effective Registration
Statement) and shall cause such Registration Statement to be declared effective
as soon as possible thereafter, but in any event prior to the Effectiveness
Date
therefor. Such Registration Statement shall contain (except if otherwise
required pursuant to written comments received from the Commission upon a review
of such Registration Statement) the "Plan of Distribution" attached hereto
as
Annex A. The Company shall cause such Registration Statement to be declared
effective under the Securities Act as soon as possible but, in any event, by
its
Effectiveness Date, and shall use its reasonable best efforts to keep such
Registration Statement continuously effective under the Securities Act during
the entire Effectiveness Period.
(d)
If a
Registration Statement is not filed on or prior to its Filing Date (if the
Company files a Registration Statement without affording the Holders the
opportunity to review and comment on the same as required by Section 3(a)
hereof, the Company shall not be deemed to have satisfied this clause (i)(such
failure or breach being referred to as an "EVENT" and the date on which such
Event occurs, being referred to as the "EVENT DATE"), then in addition to any
other rights the Holders may have hereunder or under applicable law, the Company
shall issue to the holders of the Registrable Securities, as liquidated damages
and not as a penalty, warrants ("ADDITIONAL WARRANTS"). The number of Additional
Warrants that shall be issued to a Holder is equivalent to one Additional
Warrant for every Unit purchased such Holder. The Additional Warrants will
have
a per share exercise price equal to $2.00 per share. The Additional Warrants
will be exercisable for five years, and will be in the same form as the warrants
issued as part of the Units in the Offering.
(e)
Each
Holder agrees to furnish to the Company a completed Questionnaire in the form
attached to this Agreement as Annex B (a "SELLING HOLDER QUESTIONNAIRE"). The
Company shall not be required to include the Registrable Securities of a Holder
in a Registration Statement and shall not be required to issue any Additional
Warrants or other damages under Section 2( d) to any Holder who fails to furnish
to the Company a fully completed Selling Holder Questionnaire at least two
Trading Days prior to the Filing Date (subject to the requirements set forth
in
Section 3(a».
3.
Registration Procedures. In connection with the Company's registration
obligations hereunder, the Company shall:
(a)
Not
less than four Trading Days prior to the filing of the Registration Statement
or
any related Prospectus or any amendment or supplement thereto, the Company
shall
furnish to each Holder copies of the "Selling Stockholders" section of such
document, the "Plan of Distribution" and any risk factor contained in such
document that addresses specifically this transaction or the Selling
Stockholders, as proposed to be filed which documents will be subject to the
review of such Holder. The Company shall not file a Registration Statement,
any
Prospectus or any amendments or supplements thereto in which the "Selling
Stockholder" section thereof differs from the disclosure received from a Holder
in its Selling Holder Questionnaire (as amended or supplemented).
(b)
Prepare and file with the Commission such amendments, including post-effective
amendments, to each Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep such Registration Statement continuously
effective as to the applicable Registrable Securities for its Effectiveness
Period and prepare and file with the Commission such
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additional
Registration Statements in order to register for resale under the Securities
Act
all of the Registrable Securities; (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as reasonably possible to any comments received from the Commission
with respect to each Registration Statement or any amendment thereto and, as
promptly as reasonably possible provide the Holders true and complete copies
of
all correspondence from and to the Commission relating to such Registration
Statement that would not result in the disclosure to the Holders of material
and
non-public information conceming the Company; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the Registration Statements and the disposition of all Registrable
Securities covered by each Registration Statement.
(c)
Notify the Holders as promptly as reasonably possible (and, in the case of
(i)(A) below, not less than three Trading Days prior to such filing) and (if
requested by any such Person) confirm such notice in writing no later than
one
Trading Day following the day (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment to a Registration Statement is proposed
to be filed; (B) when the Commission notifies the Company whether there will
be
a "review" of such Registration Statement and whenever the Commission comments
in writing on such Registration Statement (the Company shall provide true and
complete copies thereof and all written responses thereto to each of the Holders
that pertain to the Holders as a Selling Stockholder or to the Plan of
Distribution, but not information which the Company believes would constitute
material and non-public information); and (C) with respect to each Registration
Statement or any post-effective amendment, when the same has become effective;
(ii) of any request by the Commission or any other Federal or state governmental
authority for amendments or supplements to a Registration Statement or
Prospectus or for additional information; (iii) of the issuance by the
Commission of any stop order suspending the effectiveness of a Registration
Statement covering any or all of the Registrable Securities or the initiation
of
any Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; and (v) of the occurrence of any event or passage of time that makes
the financial statements included in a Registration Statement ineligible for
inclusion therein or any statement made in such Registration Statement or
Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue in any
material respect or that requires any revisions to such Registration Statement,
Prospectus or other documents so that, in the case of such Registration
Statement or the Prospectus, as the case may be, it will not contain any untrue
statement of a material fact or omit to state any material fact required to
be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(d)
Use
its reasonable best efforts to avoid the issuance of, or, if issued, obtain
the
withdrawal of (i) any order suspending the effectiveness of a Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.
(e)
Furnish to each Holder, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto and all exhibits to the extent
requested by such
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Person
(including those previously furnished) promptly after the filing of such
documents with the Commission.
(f)
Promptly deliver to each Holder, without charge, as many copies of each
Prospectus or Prospectuses (including each form of prospectus) and each
amendment or supplement thereto as such Persons may reasonably request. The
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the selling Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus
and
any amendment or supplement thereto.
(g)
Prior
to any public offering of Registrable Securities, to register or qualify or
cooperate with the selling Holders in connection with the registration or
qualification (or exemption from such registration or qualification) of such
Registrable Securities for offer and sale under the securities or Blue Sky
laws
of all jurisdictions within the United States, to keep each such registration
or
qualification (or exemption therefrom) effective during the Effectiveness Period
and to do any and all other acts or things necessary or advisable to enable
the
disposition in such jurisdictions
of the Registrable Securities covered by the Registration
Statements.
(h)
Cooperate with the Holders to facilitate the timely preparation and delivery
of
certificates representing Registrable Securities to be delivered to a transferee
pursuant to the Registration Statements, which certificates shall be free,
to
the extent permitted by the Subscription Agreement, of all restrictive legends,
and to enable such Registrable Securities to be in such denominations and
registered in such names as any such Holders may request.
(i)
Upon
the occurrence of any event contemplated by Section 3(c)(v), as promptly as
reasonably possible, prepare a supplement or amendment, including a
post-effective amendment, to the affected Registration Statements or a
supplement to the related Prospectus or any document incorporated or deemed
to
be incorporated therein by reference, and file any other required document
so
that, as thereafter delivered, no Registration Statement nor any Prospectus
will
contain an untrue statement of a material fact or omit to state a material
fact
required to be stated therein or necessary to make the statements therein,
in
light of the circumstances under which they were made, not
misleading.
4.
Registration Expenses. All fees and expenses incident to the performance
of or compliance with this Agreement by the Company shall be borne by the
Company whether or not any Registrable Securities are sold pursuant to a
Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and filing
fees
(including, without limitation, fees and expenses (A) with respect to filings
required to be made with any Trading Market on which the Common Stock is then
listed for trading, and (B) in compliance with applicable state securities
or
Blue Sky laws), (ii) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing prospectuses
if the printing of prospectuses is reasonably requested by the holders of a
majority of the Registrable Securities
included in the Registration Statement), (iii) messenger, telephone and delivery
expenses, (iv) fees and disbursements of counsel for the Company , (v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In
addition, the Company shall be responsible for all of its internal expenses
incurred in connection
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with
the
consummation of the transactions contemplated by this Agreement (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expense of any annual audit and
the
fees and expenses incurred in connection with the listing of the Registrable
Securities on any securities exchange as required hereunder.
5.
Indemnification.
(a)
Indemnification by the Company. The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, agents, investment advisors, partners, members and
employees of each of them, each Person who controls
any such Holder (within the meaning of Section 15 of the Securities Act or
Section 20 of the
Exchange Act) and the officers, directors, agents and employees of each such
controlling Person, to the fullest extent permitted by applicable law, from
and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable costs of preparation and reasonable attorneys'
fees) and expenses (collectively, "LOSSES"), as incurred, arising out of or
relating to any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, any Prospectus or any form of prospectus or
in
any amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein
(in the case of any Prospectus or form of prospectus or supplement thereto,
in
light of the circumstances under which they were made) not misleading, except
to
the extent, but only to the extent, that (1) such untrue statements or omissions
are based solely upon information regarding such Holder furnished in writing
to
the Company by such Holder expressly for use therein, or to the extent that
such
information relates to such Holder or such Holder's proposed method of
distribution of Registrable Securities and was reviewed and expressly approved
in writing by such Holder expressly for use in the Registration Statement,
such
Prospectus or such form of Prospectus or in any amendment or supplement thereto
(it being understood that the Holder has approved Annex A hereto for this
purpose) or (2) in the case of an occurrence of an event of the type specified
in Section 3(c)(ii)-(v), the use by such Holder of an outdated or defective
Prospectus after the Company has notified such Holder in writing that the
Prospectus is outdated or defective and prior to the receipt by such Holder
of
an Advice or an amended or supplemented Prospectus, but only if and to the
extent that following the receipt of the Advice or the amended or supplemented
Prospectus the misstatement or omission giving rise to such Loss would have
been
corrected. The Company shall notify the Holders promptly of the institution,
threat or assertion of any Proceeding of which the Company is aware in
connection with the transactions contemplated by this Agreement.
(b)
Indemnification by Holders. Each Holder shall, severally and not jointly,
indemnify and hold harmless the Company, its directors, officers, agents and
employees, each Person who controls the Company (within the meaning of Section
15 of the Securities Act and Section 20 of the Exchange Act), and the directors,
officers, agents or employees of such controlling Persons, to the fullest extent
permitted by applicable law, from and against all Losses, as incurred, arising
solely out of or based solely upon: (x) such Holder's failure to comply with
the
prospectus delivery requirements of the Securities Act or (y) any untrue
statement of a material fact contained in any Registration Statement, any
Prospectus, or any form of prospectus, or in any amendment or supplement
thereto, or arising solely out of or based solely upon any omission of a
material fact required to be stated therein or necessary to make the statements
therein not misleading to the extent, but only to the extent that, (1) such
untrue statements or omissions are based solely upon information
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regarding
such Holder furnished in writing to the Company by such Holder expressly for
use
therein, or to the extent that such information relates to such Holder or such
Holder's proposed method of distribution
of Registrable Securities and was reviewed and expressly approved in writing
by
such Holder expressly for use in the Registration Statement (it being understood
that the Holder has approved Annex A hereto for this purpose), such Prospectus
or such form of Prospectus or in any amendment or supplement thereto or (2)
in
the case of an occurrence of an event of the type specified in Section 3( c
)(ii
)-(v), the use by such Holder of an outdated or defective Prospectus after
the
Company has notified such Holder in writing that the Prospectus is outdated
or
defective and prior to the receipt by such Holder of an Advice or an amended
or
supplemented Prospectus, but only if and to the extent that following the
receipt of the Advice or the amended or supplemented Prospectus the misstatement
or omission giving rise to such Loss would have been corrected. In no event
shall the liability of any selling Holder hereunder be greater in amount than
the dollar amount of the net proceeds received by such Holder upon the sale
of
the Registrable Securities giving rise to such indemnification
obligation.
(c)
Conduct of Indemnification Proceedings. If any Proceeding shall be
brought or asserted against any Person entitled to indemnity hereunder (an
"INDEMNIFIED PARTY"), such Indemnified Party shall promptly notify the Person
from whom indemnity is sought (the "INDEMNIFYING PARTY") in writing, and the
Indemnifying Party shall assume the defense thereof, including the employment
of
counsel reasonably satisfactory to the Indemnified Party and the payment of
all
fees and expenses incurred in connection with defense thereof; provided, that
the failure of any Indemnified Party to give such notice shall not relieve
the
Indemnifying Party of its obligations or liabilities pursuant to this Agreement,
except (and only) to the extent that it shall be finally determined by a court
of competent jurisdiction (which determination is not subject to appeal or
further review) that such failure shall have proximately and materially
adversely prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to
such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including
any impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects
to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying
Party). The Indemnifying Party shall not be liable for any settlement of any
such Proceeding effected without its written consent, which consent shall not
be
unreasonably withheld. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party (which consent shall not be unreasonably
withheld), effect any settlement of any pending Proceeding in respect of which
any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.
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All
fees
and expenses of the Indemnified Party (including reasonable fees and expenses
to
the extent incurred in connection with investigating or preparing to defend
such
Proceeding in a manner not inconsistent with this Section) shall be paid to
the
Indemnified Party, as incurred, within ten Trading Days of written notice
thereof to the Indemnifying Party (regardless of whether it is ultimately
determined that an Indemnified Party is not entitled to indemnification
hereunder; provided, that the Indemnifying Party may require such Indemnified
Party to undertake to reimburse all such fees and expenses to the extent it
is
finally judicially determined that such Indemnified Party is not entitled to
indemnification hereunder).
(d)
Contribution. If a claim for indemnification under Section 5( a) or 5(b)
is unavailable to an Indemnified Party (by reason of public policy or
otherwise), then each Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the Indemnifying Party and
Indemnified Party in connection with the actions, statements or omissions that
resulted in such Losses as well as any other relevant equitable considerations.
The relative fault of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission of a material fact, has been taken or made by, or relates
to
information supplied by, such Indemnifying Party or Indemnified Party, and
the
parties' relative intent, knowledge, access to information and opportunity
to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in Section 5(c), any reasonable attorneys' or
other
reasonable fees or expenses incurred by such party in connection with any
Proceeding to the extent such party would have been indemnified for such fees
or
expenses if the indemnification provided for in this Section was available
to
such party in accordance with its terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5( d) were determined by pro rata allocation or by
any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5( d), no Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount
by
which the proceeds actually received by such Holder from the sale of the
Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
6.
Miscellaneous.
(a)
Remedies. In the event of a breach by the Company or by a Holder, of any
of their obligations under this Agreement, each Holder or the Company, as the
case may be, in addition to being
entitied to exercise all rights granted by law and under this Agreement,
including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.
The
Company and each Holder agree that monetary damages would not provide adequate
compensation for any losses incurred by reason of a breach by it of any of
the
provisions of this Agreement and hereby
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further
agrees that, in the event of any action for specific performance in respect
of
such breach, it shall waive the defense that a remedy at law would be
adequate.
(b)
No
Piggyback on Registrations. Except as and to the extent specified in
Schedule 3. 1 (v) to the Subscription Agreement, neither the Company nor any
of
its security holders (other than the Holders in such capacity pursuant hereto)
may include securities of the Company in a Registration Statement other than
the
Registrable Securities.
(c)
Compliance. Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it
in
connection with sales of Registrable Securities pursuant to the Registration
Statement.
(d)
Discontinued Disposition. Each Holder agrees by its acquisition of such
Registrable Securities that, upon receipt of a notice from the Company of the
occurrence of any event of the kind described in Section 3( c), such Holder
will
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until such Holder's receipt of the copies of the
supplemented Prospectus and/or amended Registration Statement or until it is
advised in writing (the "ADVICE") by the Company that the use of the applicable
Prospectus may be resumed, and, in either case, has received copies of any
additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus or Registration Statement. The
Company may provide appropriate stop orders to enforce the provisions of this
paragraph.
(e)
Piggy-Back Registrations. If at any time during the Effectiveness Period
there is not an effective Registration Statement covering all of the Registrable
Securities and the Company shall determine to prepare and file with the
Commission a registration statement relating to an offering for its own account
or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to
be
issued solely in connection with any acquisition of any entity or business
or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of
such
determination and, if within fifteen days after receipt of such notice, any
such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered, subject to customary underwriter cutbacks
applicable to all holders of registration rights.
(f)
Amendments and Waivers. The provisions of this Agreement, including the
provisions
of this Section 6(f), may not be amended, modified or supplemented, and waivers
or consents to departures from the provisions hereof may not be given, unless
the same shall be in writing and signed by the Company and the Holders of no
less than a majority in interest of the then outstanding Registrable Securities.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
certain Holders
and that does not directly or indirectly affect the rights of other Holders
may
be given by Holders of at least a majority of the Registrable Securities to
which such waiver or consent relates.
(g)
Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall
be
deemed given and effective on the earliest of (a) the date of transmission,
if
such notice or communication is delivered via facsimile (provided the sender
receives a machine-generated confirmation of successful transmission) at
the
-10-
facsimile
number specified in this Section prior to 6:30 p.m. (New York City time) on
a
Trading Day, (b) the next Trading Day after the date of transmission, if such
notice or communication is delivered via facsimile at the facsimile number
specified in this Section on a day that is not a Trading Day orlater than 6:
3 0
p. m. (New York City time) on any Trading Day, ( c) the Trading Day following
the date of mailing, if sent by U. S. nationally recognized overnight courier
service, or (d) upon actual receipt by the party to whom such notice is required
to be given. The address for such notices and communications shall be as
follows:
If
to the
Company:
Daybreak
Oil and Gas, Inc.
▇▇▇
▇.
▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇,
▇ A 99201-0613
Attention:
Chief Financial Officer
If
to an
Investor:
To
the
address set forth under such
Investor's
name on the signature pages hereto.
If
to any
other Person who is then the registered Holder:
To
the
address of such Holder as it appears in the stock transfer books of the Company
or such other address as may be designated in writing hereafter, in the same
manner, by such Person.
(h)
Successors and Assigns. This Agreement shall inure to the benefit of and
be binding upon the successors and permitted assigns of each of the parties
and
shall inure to the benefit of each Holder. The Company may not assign its rights
or obligations hereunder without the prior written consent of each Holder.
Each
Holder may assign their respective rights hereunder in the manner and to the
Persons as permitted under the Subscription Agreement.
(i)
Execution and Counterparts. This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.
(j)
Governing Law. All questions concerning the construction, validity,
enforcement and interpretation of this Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Washington, without regard to the principles of conflicts oflaw thereof. Each
party agrees that all Proceedings concerning the interpretations, enforcement
and defense of the transactions contemplated by this Agreement (whether brought
against a party hereto or its respective Affiliates, employees or agents) will
be commenced in the Washington Courts. Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the Washington Courts for the
adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any Proceeding, any claim that it is not
personally subject to the jurisdiction of any Washington Court, or that such
Proceeding has been commenced in an improper or inconvenient forum. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being
-11-
served
in
any such Proceeding by mailing a copy thereof via registered or certified mail
or overnight delivery (with evidence of delivery) to such party at the address
in effect for notices to it under this Agreement and agrees that such service
shall constitute good and sufficient service of process and notice thereof.
Nothing contained herein shall be deemed to limit in any way any right to serve
process in any manner permitted by law. Each party hereto hereby irrevocably
waives, to the fullest extent permitted by applicable law, any and all right
to
trial by jury in any Proceeding arising out of or relating to this Agreement
or
the transactions contemplated hereby. If either party shall commence a
Proceeding to enforce any provisions of this Agreement, then the prevailing
party in such Proceeding shall be reimbursed by the other party for its
attorney's fees and other costs and expenses incurred with the investigation,
preparation and prosecution of such Proceeding.
(k)
Cumulative Remedies. The remedies provided herein are cumulative and not
exclusive of any remedies provided by law.
(1)
Severability. If any term, provision, covenant or restriction of this
Agreement is held by a court of competent jurisdiction to be invalid, illegal,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions set forth herein shall remain in full force and effect and shall
in
no way be affected, impaired or invalidated, and the parties hereto shall use
their reasonable efforts to find and employ an alternative means to achieve
the
same or substantially the same result as that contemplated by such term,
provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such
that
may be hereafter declared invalid, illegal, void or unenforceable.
(m)
Headings. The headings in this Agreement are for convenience of reference
only and shall
not
limit or otherwise affect the meaning hereof.
(n)
Independent Nature of Investors' Obligations and Rights. The obligations
of each Investor under this Agreement are several and not joint with the
obligations of each other Investor, and no Investor shall be responsible in
any
way for the performance of the obligations of any other Investor
under this Agreement. Nothing contained herein or in any Transaction Document,
and no action taken by any Investor pursuant thereto, shall be deemed to
constitute the Investors as a partnership, an association, a j oint venture
or
any other kind of entity, or create a presumption that the Investors are in
any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Agreement or any other Transaction Document.
Each Investor acknowledges that no other Investor will be acting as agent of
such Investor in enforcing its rights under this Agreement. Each Investor shall
be entitled to independently protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be
necessary for any other Investor to be joined as an additional party in any
Proceeding for such purpose. The Company acknowledges that each of the Investors
has been provided with the same Registration Rights Agreement for the purpose
of
closing a transaction with multiple Investors and not because it was required
or
requested to do so by any Investor.
-12-
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as
of the date first written above.
|
DAYBREAK
OIL AND GAS, INC.
|
|||
|
Date
|
By:
|
/s/ | |
| Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇ | |||
| Title: President | |||
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGES OF INVESTORS TO FOLLOW]
-13-
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as
of the date first written above.
| (print name) | |||||
| By: | |||||
|
(Signature)
|
|
||||
| Title: |
|
|
ADDRESS
FOR NOTICE
c/o:
Street:
City/State/Zip:
Attention:
Tel:
Fax:
Email:
-14-
Annex
A
Plan
of
Distribution
The
Selling Stockholders and any of their pledgees, donees, transferees, assignees
and successors-ininterest may, from time to time, sell any or all of their
shares of Common Stock on any stock exchange, market or trading facility on
which the shares are traded or in private transactions. These sales may be
at
fixed or negotiated prices. The Selling Stockholders may use anyone or more
of
the following methods when selling shares:
-
ordinary brokerage transactions and transactions in which the broker-dealer solicits Investors;
-
block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;
-
purchases by a broker-dealer as principal and resale by the broker-dealer for its account;
-
an exchange distribution in accordance with the rules of the applicable exchange;
-
privately negotiated transactions;
-
to cover short sales made after the date that this Registration Statement is declared effective by the Commission;
-
broker-dealers may agree with the Selling Stockholders to sell a specified number of such shares at a stipulated price per share;
-
a combination of any such methods of sale; and
-
any other method permitted pursuant to applicable law.
The
Selling Stockholders may also sell shares under Rule 144 under the Securities
Act, if available, rather
than under this prospectus.
Broker-dealers
engaged by the Selling Stockholders may arrange for other brokers-dealers to
participate in sales. Broker-dealers may receive commissions or discounts from
the Selling Stockholders (or, if any broker-dealer acts as agent for the
purchaser of shares, from the purchaser) in amounts to be negotiated. The
Selling Stockholders do not expect these commissions and discounts to exceed
what is customary in the types of transactions involved.
The
Selling Stockholders may from time to time pledge or grant a security interest
in some or all of the Shares owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell shares of Common Stock from time to time under this prospectus,
or under an amendment to this prospectus under Rule 424(b)(3) or other
applicable provision of the Securities Act of 1933 amending the list of selling
stockholders to include the pledgee, transferee or other successors in interest
as selling stockholders under this prospectus. upon the Company being notified
in writing by a Selling Stockholder that any material arrangement has been
entered into with a broker-dealer for the sale of Common Stock through a block
trade,
special
offering,
exchange distribution or secondary distribution or a purchase by a broker or
dealer, a supplement to this prospectus will be filed, if required, pursuant
to
Rule 424(b) under the Securities Act, disclosing (i) the name of each such
Selling Stockholder and of the participating brokerdealer(s), (ii) the
number of shares involved, (iii) the price at which such the shares of Common
Stock were sold, (iv)the commissions paid or discounts or concessions allowed
to
such brokerdealer(s), where applicable, (v) that such broker-dealer(s) did
not conduct any investigation to verify the information set out or incorporated
by reference in this prospectus, and (vi) other facts material to the
transaction. In addition, upon the Company being notified in writing by a
Selling Stockholder that a donee or pledgee intends to sell more than 500 shares
of Common Stock, a supplement to this prospectus will be filed if then required
in accordance with applicable securities law.
The
Selling Stockholders also may transfer the shares of Common Stock in other
circumstances, in which case the transferees, pledgees or other successors
in
interest will be the selling beneficial owners for purposes of this
prospectus.
The
Selling Stockholders and any broker-dealers or agents that are involved in
selling the shares may be deemed to be "underwriters" within the meaning of
the
Securities Act in connection with such sales. In such event, any commissions
received by such broker-dealers or agents and any profit on the resale of the
shares purchased by them may be deemed to be underwriting commissions or
discounts under the Securities Act. Discounts, concessions, commissions and
similar selling expenses, if any, that can be attributed to the sale of
Securities will be paid by the Selling Stockholder and/or the purchasers. Each
Selling Stockholder has represented and warranted to the Company that it
acquired the securities subject to this registration statement in the ordinary
course of such Selling Stockholder's business and, at the time of its purchase
of such securities such Selling Stockholder had no agreements or understandings,
directly or indirectly, with any person to distribute any such
securities.
The
Company has advised each Selling Stockholder that it may not use shares
registered on this Registration
Statement to cover short sales of Common Stock made prior to the date on which
this Registration Statement shall have been declared effective by the
Commission. If a Selling Stockholder uses this prospectus for any sale of the
Common Stock, it will be subject to the prospectus delivery requirements of
the
Securities Act. The Selling Stockholders will be responsible to comply with
the
applicable provisions of the Securities Act and Exchange Act, and the rules
and
regulations thereunder promulgated, including, without limitation, Regulation
M,
as applicable to such Selling Stockholders in connection with resales of their
respective shares under this Registration Statement.
The
Company is required to pay all fees and expenses incident to the registration
of
the shares, but the Company will not receive any proceeds from the sale of
the
Common Stock. The Company has agreed to indemnify the Selling Stockholders
against certain losses, claims, damages and liabilities, including liabilities
under the Securities Act.
A-2
Annex
B
DAYBREAK
OIL AND GAS, INC.
SELLING
SECURITYHOLDER QUESTIONNAIRE
The
undersigned beneficial owner of common stock (the "COMMON STOCK") of Daybreak
Oil and Gas, Inc. (the "COMPANY") understands that the Company has filed or
intends to file with the Securities and Exchange Commission (the "COMMISSION")
a
Registration Statement for the registration and resale of the Registrable
Securities, in accordance with the terms of the Registration Rights Agreement,
dated as of ~ 2006 (the
"REGISTRATION RIGHTS AGREEMENT"), among the Company and the Investors named
therein. A copy of the Registration Rights Agreement is available from the
Company upon request at the address set forth below. All capitalized terms
used
and not otherwise defined herein shall have the meanings ascribed thereto in
the
Registration Rights Agreement.
The
undersigned hereby provides the following information to the Company and
represents and warrants that such information is accurate:
QUESTIONNAIRE
|
1.
|
NAME.
|
|
(a)
|
Full
Legal Name of Selling
Securityholder
|
|
(b)
|
Full
Legal Name of Registered Holder (if notthe same as (a) above) through
which Registrable
Securities Listed in Item 3 below are
held:
|
|
(c)
|
Full
Legal Name of Natural Control Person (which means a natural person
who
directly or indirectly alone or with others has power to vote or
dispose
of the securities covered by the
questionnaire):
|
|
2.
|
ADDRESS
FOR NOTICES TO SELLING
SECURITYHOLDER:
|
Telephone:
Fax:
Contact
Person:
|
3.
|
BENEFICIAL
OWNERSHIP OF REGISTRABLE
SECURITIES:
|
Type
and
Principal Amount of Registrable Securities beneficially owned:
|
4.
|
BROKER-DEALER
STATUS:
|
(a)
Are you a broker-dealer?
Yes ___No
___
Note:
If
yes, the Commission's staffhas indicated that you should be identified as an
underwriter in the Registration Statement.
(b)
Are
you an affiliate of a broker-dealer? Yes ___No
___
(c)
If
you are an affiliate of a broker-dealer, do you certify that you bought the
Registrable Securities in the ordinary course of business, and at the time
of
the purchase of the Registrable Securities to be resold, you had no agreements
or understandings, directly or indirectly, with any person to distribute the
Registrable Securities? Yes
___
No ___
Note:
If
no, the Commission's staffhas indicated that you should be identified as an
underwriter in the Registration Statement.
|
5.
|
BENEFICIAL
OWNERSHIP OF OTHER SECURITIES OF THE COMPANY OWNED
BY THE SELLING SECURITYHOLDER.
|
Except
as
set forth below in this Item 5, the undersigned is not the beneficial or
registered owner of any securities of the Company other than the Registrable
Securities listed above in Item 3.
Type
and
Amount of Other Securities beneficially owned by the Selling
Securityholder:
|
6.
|
RELATIONSHIPS
WITH THE COMPANY:
|
Except
as
set forth below, neither the undersigned nor any of its affiliates, officers,
directors or principal equity holders (owners of5% of more of the equity
securities of the undersigned) has held any position or office or has had any
other material relationship with the Company (or its predecessors or affiliates)
during the past three years.
B-2
State
any
exceptions here:
The
undersigned agrees to promptly notify the Company of any inaccuracies or changes
in the information provided herein that may occur subsequent to the date hereof
and prior to the Effective Date for the Registration Statement.
By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus. The
undersigned understands that such information will be relied upon by the Company
in connection with the preparation or amendment of the Registration Statement
and the related prospectus.
IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this Notice
and Questionnaire to be executed and delivered either in person or by its duly
authorized agent.
| Dated:____________________ |
Beneficial
Owner:
|
||
|
By:
|
|||
| Signature | |||
| Title: | |||
PLEASE
FAX A COPY OF THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN
THE ORIGINAL BY OVERNIGHT MAIL, TO:
Workland
& Witherspoon, PLLC
▇▇▇
▇.
▇▇▇▇ ▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇,
▇ A 99201
B-3