Exhibit 10.4

ASSIGNMENT AND ASSUMPTION AGREEMENT

This Assignment and Assumption Agreement (this “Assignment”) is made as of
October 31, 2012 (the “Effective Date”), by and between DAYBREAK OIL AND GAS,
INC., a Washington corporation with offices located at 601 W. Main Ave., Suite
1017, Spokane, Washington (“Assignor”), and MAXIMILIAN INVESTORS LLC, a Delaware
limited liability company, with an address of 152 West 57th Street, 54th Floor,
New York, New York 10019 (“Assignee”).

RECITALS

WHEREAS, on the date hereof, Assignor and Assignee are entering into that
certain Loan and Security Agreement (the “Loan Agreement”), pursuant to which
Assignee shall extend certain financial accommodations to and for the benefit of
Assignor;

WHEREAS, Assignor is the owner and holder of an interest in, and is a
“Non-Operator” party to, that certain Operating Agreement, dated as of June 11,
2009, by and among Assignor, San Joaquin Investments, Inc., O & G Energy
Partners, LLC, and West Coast Partners, LLC (the “Operating Agreement”);

WHEREAS, Assignor is the owner and holder of an interest as lessee under the
leases and occupancy agreements identified on Schedule 1 attached hereto and
made a part hereof (each, herein a “Lease” and, collectively, the “Leases”);

WHEREAS, Assignor desires to sell, transfer and assign to Assignee, and Assignee
desires to acquire from Assignor, ten percent (10%) of all of Assignor’s right,
title, and interest in and to the Operating Agreement and the Leases
(collectively, the “Assigned Interest”) pursuant to the terms and conditions
hereof; and

WHEREAS, it is a condition precedent to Assignee entering into the Loan
Agreement with Assignor that Assignor execute and deliver this Assignment of
Assignee;

NOW, THEREFORE, for the sum of TEN AND NO/100 DOLLARS ($10.00), and other good
and valuable consideration, the receipt and legal sufficiency of which are
hereby acknowledged, the parties hereto hereby agree as follows:

1.

Assignment.  Assignor hereby unconditionally and irrevocably assigns, grants,
sells, conveys, transfers and sets over, as of the Effective Date, the Assigned
Interest unto Assignee, together with all rights, title, benefits, and interest
of Assignor in and to the Assigned Interest, including, without limitation, all
rights to the capital, profits, losses and distributions of any kind allocated
to the Assigned Interest, provided that, with respect to such portion of the
Assigned Interest as concerns the Operating Agreement, such portion shall be
subject to the terms and conditions of the Operating Agreement and that, with
respect to such portion of the Assigned Interest as concerns a Lease, such
portion shall be subject to the terms and conditions of the applicable Lease.

2.

Assumption.  Assignee hereby (a) assumes the Assigned Interest and all of the
obligations and liabilities associated with the Assigned Interest accruing from
and after the Effective Date, (ii) agrees to be bound by the terms and
provisions of the Operating Agreement and the Leases.

3.

Lease Conveyance Documents.  Simultaneously herewith, Assignor shall execute and
deliver a deed, in the form attached hereto as Schedule 2 (the “Deed”),
conveying all of Assignor’s right, title, and interest in and to the Leases to
Assignor, as to a ninety percent (90%) interest, and to Assignee, as to a ten
percent (10%) interest, as tenants-in-common.  Assignee may record the Deed in
the appropriate land records at Assignor’s sole cost and expense.

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4.

Representations and Warranties of Assignor. Assignor hereby represents and
warrants to the Company and Assignee that, as of the Effective Date:

a.

No Liens.  Assignor is the sole owner of the Assigned Interest and holds such
Assigned Interest free and clear of all liens, charges, encumbrances, and claims
whatsoever and the same was not subject to any restriction with respect to its
transferability;

b.

Authority.  Assignor has full right, power and authority to enter into this
Assignment and has obtained all consents and approvals necessary to make this
Assignment binding on Assignor, and the person signing this Assignment on behalf
of Assignor has been authorized and empowered to do so;

c.

No Conflicts. This Assignment does not violate the terms of any contract or
instrument to which Assignor is a party or to which its assets are subject,
including, without limitation, the Operating Agreement or any Lease;

d.

No Claims.  No third party has the basis for any claims against the Assigned
Interest or Assignor which affects this Assignment or subjects Assignee to any
liability or obligation other than as may be specifically set forth in the
Operating Agreement or any Lease;

e.

No Defaults.  Assignor is not in default in the performance or observance of any
of the covenants, agreements or obligations which are required to be performed
or observed by Assignor as a party to any Lease or to the Operating Agreement;
and

f.

OFAC.  Assignor is not listed, nor is it owned or controlled by, or acting for
or on behalf of any person or entity, on the list of Specially Designated
Nationals and Blocked Persons maintained by the Office of Foreign Assets Control
of the United States Department of the Treasury.

g.

Notice Under Operating Agreement.  Simultaneously with the transactions
evidenced hereby, Assignor shall send a notice to each “Non-Operator” party to
the operating agreement, in form an substance satisfactory to Assignee,
informing such Non-Operators of the transactions evidenced hereby.

5.

Representations and Warranties of Assignee.  Assignee hereby represents and
warrants to the Company and Assignor that, as of the Effective Date:

a.

Authority.  Assignee has full right, power and authority to enter into this
Assignment and has obtained all consents and approval necessary to make this
Assignment binding on Assignee, and the person signing the Assignment on behalf
of Assignee has been authorized and empowered to do so;

b.

No Conflicts.  This Assignment does not violate the terms of any contract or
instrument to which Assignee is a party or by which its assets are subject; and

c.

OFAC.  Assignee is not listed, nor is it owned or controlled by, or acting for
or on behalf of any person or entity, on the list of Specially Designated
Nationals and Blocked Persons maintained by the Office of Foreign Assets Control
of the United States Department of the Treasury.

6.

Further Assurances.  Assignor and Assignee each agrees to do, or cause to be
done, all such further reasonable acts and things, and to execute and deliver,
or cause to be executed and delivered, all such additional conveyances,
assignments, agreements and instruments, as may be reasonably requested by the
other party to assure, perfect or confirm the conveyance of the Assigned
Interest unto Assignee.

7.

Binding Effect. This Assignment shall be binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, executors,
administrators, successors, assigns, agents, legal representatives, bankruptcy
trustees and attorneys.  Any modification of this Assignment shall be effective
only if in a writing executed by all parties hereto.

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8.

Governing Law.  This Assignment shall be governed by, and construed in
accordance with, the laws of the State of New York applicable to contracts made
and performed in such state (without regard to principles of conflict of laws
which would defer to the laws of another jurisdiction as governing).

9.

Counterparts; Facsimile.  This Assignment may be executed in any number of
duplicate originals and each such duplicate original shall be deemed to be an
original.  This Assignment may be executed in two or more counterpart copies of
the entire document or of signature pages to the document, each of which may be
executed by one or more of the parties hereto, but all of which, when taken
together, shall constitute a single agreement binding upon all of the parties
hereto.  The failure of any party hereto to execute this Assignment, or any
counterpart hereof, shall not relieve the other signatories from their
obligations hereunder.  This Assignment may be executed by facsimile or email
(PDF) signatures of one or more of the parties hereto, which signatures shall be
binding on such parties as if original signatures were obtained.

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In Witness Whereof, this Assignment has been executed by the parties hereto as
of the Effective Date.

ASSIGNOR:

 

 

DAYBREAK OIL AND GAS, INC., a Washington corporation

 

 

 

 

By:

/s/ JAMES F. WESTMORELAND

 

Name: James F. Westmoreland

 

Title: President and Chief Executive Officer

ASSIGNEE:

 

 

MAXIMILIAN INVESTORS LLC, a Delaware limited liability company

 

 

 

 

By:

/s/ WILL SLOTA

 

Name:  Will Slota

 

Title:  Portfolio Manager

Signature Page

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SCHEDULE 2

Form of Deed

RECORDING REQUESTED BY
AND WHEN RECORDED MAIL TO:

TROUTMAN SANDERS LLP
405 LEXINGTON AVENUE
NEW YORK, NEW YORK  10174
ATTENTION:  ROBERT BOURGUIGNON
REFERENCE:  DAYBREAK OIL AND GAS

 

GRANT DEED

The undersigned declares that the DOCUMENTARY TRANSFER TAX is $102.50 and is

__x__ computed on the full value of the interest or property conveyed; OR IS

_____ computed on the full value less value of liens or encumbrances remaining
thereon at the time of sale.

/s/ JAMES F. WESTMORELAND

Signature of Declarant

FOR VALUABLE CONSIDERATION, receipt of which is hereby acknowledged, DAYBREAK
OIL AND GAS, INC., a Washington corporation, Grantor, hereby grants to DAYBREAK
OIL AND GAS, INC., a Washington corporation, Grantee, as to an undivided ninety
percent (90%) interest as tenant-in-common, and to MAXIMILIAN INVESTORS LLC, a
Delaware limited liability company, Grantee as to an undivided ten percent (10%)
interest as tenant-in-common, all of Grantor’s right, title, and interest in and
to the leases and occupancy agreements set forth on Exhibit A incorporated by
reference to this document.

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Schedule 2 – Page 1

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Each Grantee hereby waives the right to file a complaint or institute any
proceeding at law or in equity to have the property conveyed hereby partitioned
in accordance with any applicable law.

DAYBREAK OIL AND GAS, INC., a Washington corporation

 

 

 

 

By:

/s/ JAMES F. WESTMORELAND

 

Name: James F. Westmoreland

 

Title: President and Chief Executive Officer

Schedule 2 – Page 2