PROMISSORY NOTE

(Nine-Month)

 

$150,000.00   October 26, 2012

 

The undersigned, Discovery Energy Corp., a Nevada corporation f/k/a “Santos
Resource Corp.” (hereinafter called "Maker"), whose address for purposes hereof
is One Riverway Drive, Suite 1700, Houston, Texas, 77056 USA, for value
received, without grace, in the manner, on the dates and in the amounts herein
stipulated, promises to pay to Liberty Petroleum Corporation, an Arizona
corporation (hereinafter called "Payee"), at Payee's principal place of business
located at 10851 North Black Canyon Highway, Suite 540, Phoenix, Arizona, 85029
USA, or at such other place as Payee may hereafter designate, the sum of ONE
HUNDRED FIFTY THOUSAND DOLLARS ($150,000.00), in lawful money of the United
States of America, with interest at the rate herein specified.

 

The unpaid principal amount from time to time outstanding hereunder shall bear
interest from and after the date hereof until such amount is paid in full at a
rate per annum equal the lesser of:

 

(a) the arithmetic mean during the applicable interest period of one month term
London Interbank Offer Rates (LIBOR rates) for US$ as published on the first
business day of each month by the Financial Times of London and referred to as
the Interbank Fixing Rate, plus an additional 3% per annum (such aggregate rate
being hereafter referred to as the "Varying Rate"); or

 

(b) the maximum rate of interest, if any, permitted to be charged of the Maker
by applicable state or federal law (the "Maximum Rate").

 

Notwithstanding the foregoing, if at any time the Varying Rate exceeds the
Maximum Rate, the rate of interest chargeable on this Note shall be limited to
the Maximum Rate, but any subsequent reductions in the Varying Rate shall not
reduce the rate of interest chargeable on this Note below the Maximum Rate until
the total amount of interest accrued on this Note equals the amount of interest
which would have accrued if the Varying Rate had at all times been in effect.

 

Interest on this Note shall be computed on the basis of a 365-day (or 366-day,
as the case may be) year for the actual number of days elapsed.

 

The unpaid principal balance of this Note with all accrued but unpaid interest
thereon shall be due and payable in full on or before July 26, 2013, nine months
after the date of this Note. Prepayment of this Note shall be without penalty
and may be made at any time and from time to time for all or any part of the
unpaid principal and accrued interest payable hereunder with all such
prepayments to be applied first to the accrued interest and then to the
principal in the inverse order of due date. If, within 60, 90, or 120 days after
the date of this Note, Maker makes aggregate prepayments of this Note equally or
exceeding the amount indicated on Schedule “A” hereto immediately below the
related number of days (together with all unpaid interest that has theretofore
become due on this Note), then Maker shall owe no further amounts on this Note,
and the difference between the original principal amount of this Note and the
aggregate prepayments shall be deemed a prepayment discount.

 

 

 

If this Note is not paid at maturity and said Note is placed in the hands of an
attorney for collection or if collection by suit or through the probate court,
bankruptcy court, or by any other legal or judicial proceeding is sought, Maker
agrees to pay all expenses incurred, including reasonable attorneys' fees, all
of which shall become a part of the principal hereof.

 

Maker and each and all other liable parties expressly and specifically, (i)
severally waive grace, presentment for payment, demand for payment, notice of
intent to accelerate and notice of acceleration, notice of dishonor, protest and
notice of protest, notice of nonpayment, and any and all other notices, the
filing of suit and diligence in collecting this Note or enforcing any of the
security herefor, (ii) severally agree to any substitution, subordination,
exchange or release of any security held for the payment of this Note or any
other obligation to Payee and release of any party primarily or secondarily
liable hereon, (iii) severally agree that Payee shall not be required first to
institute suit or exhaust Payee's remedies hereon against Maker or other parties
liable hereon or to enforce Payee's rights against them or any security herefor
in order to enforce payment of this Note by any of them, and (iv) severally
agree to any extension or postponement of time of payment of this Note and to
any other indulgence with respect hereto without notice thereof to any of them.

 

The invalidity, or unenforceability in particular circumstances, of any
provision of this Note shall not extend beyond such provision or such
circumstances and no other provision of this Note shall be affected thereby.

 

THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS AND THE APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

 

No provisions of this Note or any instrument securing payment hereof or
otherwise relating to the debt evidenced hereby shall require the payment or
permit the collection, application or receipt of interest in excess of the
maximum permitted by applicable state or federal law (it being the express
intention of Maker and Payee that this Note and the debt evidenced hereby be
subject to the benefits of federal law to the extent that same permits a rate of
interest in excess of that otherwise permitted by state law). If any excess of
interest in such respect is herein or in any such other instrument provided for,
or shall be adjudicated to be so provided for herein or in any such instrument,
the provisions of this paragraph shall govern, and neither Maker nor any
endorsers of this Note nor their respective heirs, personal representatives,
successors or assigns shall be obligated to pay the amount of such interest to
the extent it is in excess of the amount permitted by applicable law. It is
expressly stipulated and agreed to be the intent of Maker and holder to comply
at all times with the usury and other laws relating to this Note and the other
instruments securing payment hereof now or hereafter in effect, and any
subsequent revisions, repeals, or judicial interpretations thereof, to the
extent that any of the same are applicable hereto or to the other instruments
securing payment hereof. In the event the Payee or other holder hereof ever
receives, collects or applies as interest any such excess, such amount which
would be excessive interest shall be applied to the reduction of the unpaid
principal balance of this Note, and, if upon such application the principal
balance of this Note is paid in full, any remaining excess shall be forthwith
paid to Maker and the provisions of this Note and the other instruments securing
payment hereof shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of execution
of any new document, so as to comply with the then applicable law, but so as to
permit the recovery of the fullest amount otherwise called for hereunder and
thereunder. In determining whether or not the interest paid or payable under any
specific contingency exceeds the maximum interest allowed to be charged by
applicable law, Maker and the Payee or other holder hereof shall, to the maximum
extent permitted under applicable law, amortize, prorate, allocate and spread
the total amount of interest throughout the entire term of this Note so that the
amount or rate of interest charged for any and all periods of time during the
term of this Note is to the greatest extent possible less than the maximum
amount or rate of interest allowed to be charged by law during the relevant
period of time. Notwithstanding any of the foregoing, if at any time applicable
laws shall be changed so as to permit a higher rate or amount of interest to be
charged than that permitted prior to such change, then unless prohibited by law,
references in this Note to "applicable law" for purposes of determining the
maximum interest or rate of interest which can be charged shall be deemed to
refer to such applicable laws as so amended to allow the greater amount or rate
of interest.

 

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  Discovery Energy Corp.,     a Nevada corporation f/k/a “Santos Resource Corp.”
          By:                Name               Title    

 

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Repayment Calculation Table – Schedule “A”

 

Promissory Note $500,000 (Six Month) Instrument Date: October 26, 2012 60 Days
90 Days 120 Days At Maturity Base Note Amount Owed $100,000 $112,500 $125,000
$150,000 With Estimated Interest Charges* $100,486 $113,189 $125,912 $152,032  
        *London Libor Rate 0.24% (One Month)

 

*Plus Fixed Interest Rate 3% Per Annum

  

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