Document:

dbog_ex1024-70228.htm

    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

    

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    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.

    601
      W.
      Main Ave., Suite 1017 

    Spokane,
      W 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:
              Robert Martin	 
	 	 	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

    601
      W.
      Main Ave., Suite 714

    Spokane,
      W A 99201

    

    B-3dbog_ex1027-70228.htm

    Exhibit
      10.27

    
CONSULTING
      SERVICES AGREEMENT BETWEEN:

    
      

      DAYBREAK
        OIL AND GAS, INC. (Hereinafter the "Company")

    

    
      

      AND

    

    
      

      JEFFREY
        R. DWORKIN (Hereinafter the "Consultant')

    

    
      

       

      WHEREAS,
        the Company desires to be assured of the association and services of the
        Consultant in order to avail itself of the Consultant's experience, skills,
        abilities, knowledge and background as an public oil and gas industry executive
        and to advise the Company in public oil and gas industry business and/or
        financial matters and is therefore willing to engage the Consultant upon
        the
        terms and conditions set forth herein.

    

    
      

      WHEREAS,
        the Consultant agrees to be engaged and retained by the Company and upon
        the
        terms and conditions set forth herein.

    

    
      

      NOW
        THEREFORE, in consideration of the foregoing, and for other good and valuable
        consideration, the receipt and suffiency of which are hereby acknowledged,
        the
        parties hereto agree as follows:

    

    
      

      1.   Engagement

    

    
      

      The
        Company hereby engages the Consultant on a non exclusive basis, and the
        Consultant hereby accepts the engagement to become a consultant to the Company
        and to render such advice, consultation, information and services to the
        directors and officers of the Company regarding public oil and gas industry
        business matters and public company corporate governance
        matters.

    

    
      

      It
        shall
        be expressly understood that Consultant shall have no power to bind the Company
        to any contract or obligation or to transact any business in the Company's
        name
        or on behalf of the Company in any manner.

    

    
      

    

    
      2.  
        Term

    

    
      

      The
        term
        of this Agreement shall commence on the date hereof and continue for Seven
        (7)
        months. The Agreement may be extended upon agreement by both
        parties.

    

    
      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      3.           Compensation
        and fees

    

    
      

      The
        Company shall pay to the Consultant:

    

    
      

      
        	
              	
                a)

              	
                Consulting
                  Fees in the amount of one hundred fifty ($150.00) dollars per hour
                  for
                  time spent on the business of the Company including but not limited
                  to
                  telephone conversations, personal conferences, strategy development
                  and
                  planning, letter and document preparation and review, research
                  and
                  drafting.

              

      

    

    
      
        	
              	
                b)

              	
                the
                  Consultant will also be paid for expenses incurred or advanced
                  on your behalf.

              

      

    

    
      
        	
              	
                c)

              	
                The
                  Consultant will also be paid a monthly miscellaneous expense
                  fee of $1,500.00 per month.

              

      

    

    
      

      4.           Exclusivity,
        Performance and Confidentiality

    

    
      

      The
        services of the Consultant hereunder shall not be exclusive, and Consultant
        and
        its agents may perform similar or different services for other persons or
        entities whether or not they are competitors of the Company. The Consultant
        shall be required to expend only such time as is necessary to service the
        Company in a commercially reasonable manner. The Consultant acknowledges
        and
        agrees that confidential and valuable information proprietary to the Company
        and
        obtained during its engagement by the Company shall not be directly or
        indirectly, disclosed without the prior written consent of the Company, unless
        and until such information is otherwise known to the public generally or
        is not
        otherwise secret and confidential.

    

    
      

      5.           Independent
        Contractor

    

    
      

      In
        its
        performance hereunder, the Consultant and its agents shall be independent
        contractors. The Consultant shall complete the services required hereunder
        according to his own means and methods of work, shall be in the exclusive
        charge
        and control of the Consultant and shall not be subject to the control or
        supervision of the Company, except as to the results of the work or the extent
        necessary for the Company to verify the Consultant's compliance with applicable
        laws and regulations to which the Company may be subject. The Company
        acknowledges that nothing in this Agreement shall be construed to require
        the
        Consultant to provide services to the Company at any specific time, or in
        any
        specific place or manner.

    

    
      

      6.    Waiver

    

    
      

      No
        waiver
        of any of the provisions of this Agreement shall be deemed or shall constitute
        a
        waiver of any other provision and no waiver shall constitute a continuing
        waiver. No waiver shall be binding unless executed in writing by the party
        making the waiver.

    

    
      

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

      7.    Complete
        Agreement

    

    
      

      No
        supplement, modification or amendment of the Agreement shall be binding unless
        executed in writing by all parties. This Agreement constitutes the entire
        agreement between the parties and supersedes any prior agreements or
        negotiations.

    

    
      

      8.    General
        Provisions

    

    
      

      
        	 	
                a.

              	
                This
                  Agreement shall in all respects be interpreted, enforced and governed
                  under the laws of State of Washington. The language and all parts
                  of this
                  Agreement shall be in all cases construed as a whole and not strictly
                  for
                  or against any individual
                  party.

              

      

    

    
      

      
        	 	
                b.

              	
                Any
                  dispute arising under in any way related to this agreement shall
                  be
                  submitted to binding arbitration by the American Arbitration Association
                  in accordance with the Association's commercial rules then in effect.
                  The
                  arbitration may be conducted in person, by telephone or online
                  as agreed
                  by all parties. The arbitration shall be binding on the parties
                  and the
                  arbitration award may be confirmed by ant court of competent
                  jurisdiction.

              

      

    

    
      

      9.    Counterparts
        and facsimile

    

    
      

      This
        Agreement may be executed in one or more counterparts, each of which shall
        be
        deemed to be an original and all of which shall constitute one agreement.
        A
        telefacsimile of this Agreement may be relied upon as full and sufficient
        evidence as an original.

    

    
      

      IN
        WITNESS WHEREOF, the parties hereto have entered into this Agreement effective
        the 1st day of
        August 2006.

    

    
      

       

      Daybreak
        Oil and Gas, Inc.

    

     

    
      	 	 	 
	 	 	 	 
	 	 	/s/ JEFFREY
              R. DWORKIN	 
	 	 	Jeffrey
              R. Dworkin	 
	 	 	 	 
	 	 	Date:   
              8/1/06       	 

    

    

    
      /s/Thomas
        C. Kilbourne, Treasurer

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