Document:

exv10w46

EXHIBIT 10.46

WAREHOUSING LINE OF CREDIT PROMISSORY NOTE

INTRODUCTION. This Warehousing Line of Credit Promissory Note (the “NOTE”), governs your line of
credit (the “CREDIT LINE”) with Genesis Financial Inc., a Washington corporation. The words
“BORROWER,” “you,” mean Daybreak Oil and Gas, Inc., a Washington corporation. The words “LENDER,”
“we,” “us,” and “our,” means Genesis Financial Inc., a Washington corporation, the entity that is
making the loan and advances described in this NOTE. The CREDIT LINE will provide BORROWER with
financing to fund operational expenses, in accordance with the procedures described in this NOTE
and the attached exhibits (if any).

MAXIMUM CREDIT. The unpaid principal balance under the CREDIT LINE may not exceed $180,000.00
outstanding at any given time during the term of the NOTE.

PROMISE TO PAY. You promise to pay LENDER the total of all loan advances and finance charges,
together with all costs and expenses for which you are responsible under this NOTE. You will pay
the CREDIT LINE according to the payment terms set forth below.

DUE DATE. You promise to pay the balance of this NOTE on or before June 30, 2006, or, should any
of the agreed upon terms be breached by the BORROWER, at the option of LENDER on demand. So long
as this NOTE is in good standing, you may obtain advances on the CREDIT LINE in accordance with the
procedures described in this NOTE and the attached exhibits (if any).

INTEREST. This Note carries zero (0%) interest.

COMMITMENT FEE. BORROWER will give LENDER thirty-six thousand (36,000) shares of Daybreak Oil and
Gas, Inc. common stock as a Loan Origination or Commitment Fee. This stock is to be delivered to
LENDER on or before the date of this note.

ADVANCES AND REPAYMENTS. BORROWER will receive an advance on the CREDIT LINE of sixty thousand
dollars ($60,000) at closing. BORROWER may request a portion, or all, of the remaining one hundred
twenty thousand dollars ($120,000) upon notice, and LENDER’s verification, that the Ginny South
well has reached completion. BORROWER may make payments against the outstanding principle balance
at any time during the term of the CREDIT LINE, subject to LENDER’s conversion option rights.

CONVERSION OPTION. LENDER and BORROWER agree that LENDER has the option, and the right, at any
time during the term of this NOTE, to convert all, or a portion of, the principle balance
outstanding, to shares of common stock in Daybreak Oil and Gas, Inc. LENDER and BORROWER agree
that the conversion rate will be twenty-five cents ($.25) per share. LENDER will notify BORROWER
in writing of any conversion request, and those amounts converting will be deducted from the
principle balance outstanding on this NOTE, upon receipt of the appropriate stock certificates.

PERSONAL GUARANTEES. This NOTE is partially personally guaranteed by Terrence J. Dunne, and
individual residing in Spokane, Washington. Dunne is guaranteeing only the initial

 

 

EXHIBIT 10.46

sixty thousand dollar ($60,000) advance. The personal guarantee agreement is attached as Exhibit D
(attached).

DEFAULT. If BORROWER defaults in timely payment of any amount due under this NOTE, including
non-payment upon LENDER’S demand, or is in default as a result of non-compliance with the Financial
Covenant requirements, and such default continues without cure for ten days, LENDER may pursue any
legal or equitable remedies for collection of the amounts due. BORROWER waives presentment, demand
for payment, protest, and notice of nonpayment. BORROWER agrees to pay LENDER all costs and
expenses of collection of the amounts due or to become due under this NOTE, including reasonable
attorneys’ fees. Upon Lender’s declaration of a default, and Borrower’s failure to cure the
default within ten days, the interest rate charged on this NOTE shall be the lesser of 18% per
annum, or the highest rate then allowed by law.

ASSIGNMENT. This NOTE and the Personal Guarantees may be assigned by LENDER to an affiliate
entity, and BORROWER consents to the assignment to such an affiliated entity. Assignment to an
unaffiliated entity may only be done after written consent of BORROWER.

SIGNATURES. This NOTE is executed on December 19, 2005 in Spokane, Washington.

DAYBREAK OIL AND GAS, INC.

/s/
 Thomas C. Kilbourne, Treasurer

WITNESS:

/s/ T. Hayes

Accepted this                     , 2005

GENESIS FINANCIAL, INC.

/s/
 Michael A. Kirk, President/CEO

WITNESS:

/s/ T. Hayes

 

 

EXHIBIT 10.46

Exhibit B

PERSONAL GUARANTY

The undersigned, Terrence J. Dunne, jointly and severally personally and unconditionally guaranties
a portion of the warehousing credit line loan made December 19, 2005 by Genesis Financial Inc.
(Lender) to Daybreak Oil and Gas, Inc. (Borrower) in the original amount of One Hundred Eighty
Thousand Dollars ($180,000). That portion is only the initial draw against the credit line of
Sixty Thousand Dollars ($60,000).

Guarantor is primarily and independently liable for this portion of the debt.

This is not a collateralized loan, and the Lender’s only security is the personal guarantee,
therefore there are no collateral deficiencies to prove prior to calling this guarantee.

This guaranty shall be in effect as long as there is an outstanding balance on the credit line.

Any petition for bankruptcy by the original makers of the loan, or by the Guarantor, shall not make
this guarantee invalid or unenforceable.

Guarantor and Lender hereby knowingly and voluntarily and intentionally waive the right to trial by
jury of all issues related to this guaranty.

This guaranty may be executed/signed in counterparts, each of which shall be deemed an original and
together shall constitute one in the same instrument.

In witness whereof we have set our hands and seals this 19th day of December 2005.

	 	 	 	 	 
	/s/
T. Hayes 

Witness

	 	/s/
 Terrence
J. Dunneexv10w47

EXHIBIT 10.47

SALE AGREEMENT

     THIS AGREEMENT made by and between KIRBY COCHRAN, hereinafter referred to as “SELLER,” and
DAYBREAK OIL AND GAS, INC., a Washington Corporation, herein represented by Thomas C. Kilbourne,
its duly authorized Treasurer, hereinafter referred to as “PURCHASER,”

WITNESSETH:

     WHEREAS, SELLER owns a one-third (1/3) interest in the 2% leasehold of 413294 Alberta, Ltd.,
and Tempest Energy, Inc. for certain leasehold estates and personal property identified and set
forth in that certain Chicago Mill Prospect Operating Agreement dated October 24, 2005, described
with particularity on Exhibit “A,” by this reference incorporated herein; and

     WHEREAS, both SELLER and PURCHASER participated in the drilling of two wells known as the
Tensas Farms et al F-3 and B-l wells, and the F-3 well has been completed as a commercial
producers; and

     WHEREAS, SELLER now wishes to sell and PURCHASER wishes to purchase all of SELLER’S right,
title and interest in and to the aforementioned leasehold estate and rights under the
above-referenced Operating Agreement, along with SELLER’S interest in all the referred to wells,
together with all related surface equipment, storage and pipeline gathering facilities as described
on Exhibit “B” by this reference incorporated herein.

     THEREFORE, know all men by these presents that SELLER does hereby sell, convey and assign unto
PURCHASER any and all right, title and interest owned by SELLER in certain leasehold estates and
identified and set forth under that certain Operating Agreement dated October 24, 2005, and further
described on Exhibit “A”, together with all of SELLER’S interest in and to the Tensas Farms at al
F-3 and B-1 wells and all related surface equipment, storage and pipeline gathering facilities
described on Exhibit “B”.

     1. The purchase price which PURCHASER shall pay to SELLER shall be
$13,209.00 in cash.

     2. SELLER does represent, covenant and warranty to PURCHASER that it is in
compliance with the terms and conditions of and has made all payments required under the
Chicago Mill Operating Agreement dated October 24, 2005, and which agreement is applicable
to the mineral leasehold estates assigned herein.

     3. The effective date of this sale and assignment shall be August 17, 2007. It being
understood by and between the parties herein that PURCHASER shall be entitled to any and all
proceeds of SELLER’S share of all production from the Tensas River Farms F-3 well from first
production.

 

 

EXHIBIT
10.47

     4. For purposes of this agreement, it is understood that the purchase price shall be
allocated as follows:

	 	 	 	 	 
	Equipment (in place relative to the F-3, B-1wells)
	 	$	6,542.00	 
	 
	 	 	 	 
	Mineral Leasehold interest
	 	$	6,667.00	 
	 
	 	 	 
	 
	 	 	 	 
	TOTAL
	 	$	13,209.00	 

     5. By and through the execution of this agreement, both SELLER and
PURCHASER agree to execute any required production assignment(s) (which shall be recorded in
Tensas Parish, Louisiana) in a manner which will set forth PURCHASER as the owner of the equitable
interest of SELLER in said properties. Furthermore, the execution of this agreement by SELLER and
PURCHASER shall also be considered as authority to consider PURCHASER as the owner of SELLER’S
interest in the mineral leasehold interest referenced on Exhibit “A,” and
that any and all subsequent AFE’s or other documentation prepared with regard to lease
maintenance and/or further exploration and development shall be directed to PURCHASER in
the place and stead of SELLER.

     6. The directors of PURCHASER have met and have unanimously
adopted the resolution approving this Agreement, authorizing its execution, and directing the
officers to fulfill the corporation’s obligations hereunder.

     7. As a material inducement to cause the PURCHASER to enter into this
Agreement, the SELLER hereby represents and warrants to the PURCHASER herein that the
following statements are true and correct on the date hereof, and will be true and correct on
the
closing date as though made on such date.

     a. Good Title. PURCHASER is the owner of all right, title and interest of
certain leasehold estates under the above-referenced Operating Agreement dated October
24, 2005, free and clear of all liens, claims or encumbrances, and subject to no
contracts
or agreements and it has the right to sell and assign said interest to the Purchaser.

     b. Disclosure. Neither this Agreement nor the Exhibits annexed contain any
untrue statement of any material fact or omit to state any material fact required to be
stated or necessary in order to make the statements made with respect to SELLER not
misleading.

     c. Prior Agreements. SELLER warrants that there are no prior
enforceable agreements, either written or oral by and between the SELLER and any other third
party in contravention of this Agreement.

 

 

EXHIBIT 10.47

     8. This Agreement constitutes the entire agreement between the parties pertaining to
the subject matter contained herein, which alone fully and completely express their agreement,
and the same is entered into after full investigation, neither party relying on any statement
or representation, not embodied in this agreement, made by the other. This agreement may not be
modified or terminated orally and no modification, termination, or attempted waiver shall be
valid unless in writing and signed by the party against whom the same is sought to be
enforced.

     9. The provisions of this agreement shall be interpreted and enforced in accordance
with the laws of the State of Washington, and venue shall lie in Spokane County. If a court of
competent jurisdiction rules invalid or unenforceable any provisions of this agreement, the
remainder shall nevertheless be given full force and effect. The captions are for convenience
and
reference only, and they shall not define, limit or construe the contents of any provision.
Except
where the context indicates otherwise, words in the singular number shall include the plural,
and
vice versa, and words in the masculine, feminine, or neuter gender shall include each other
gender as well.

     10. This agreement shall be binding upon and inure to the benefit of the parties, their
heirs, legal representative, successors and assigns.

     11. This Agreement may be executed in two or more counterparts, each of which
shall be deemed an original but all of which together shall be one and the same
instrument.

THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK

 

 

     THUS DONE by KIRBY D. COCHRAN, in the presence of the undersigned competent witnesses, and me,
a Notary Public duly commissioned and qualified in and for Salt
Lake County, Utah, on this 21st day of August, 2007.

	 	 	 	 	 
	BY:

	 	/s/ Kirby Cochran
 

KIRBY D. COCHRAN
	 	 

	 	 	 	 	 
	 

	 	      /s/ Jonathan Holmes
 

	 	 
	 

	 	NOTARY PUBLIC	 	 
	 
	 	 	 	 
	 

	 	Printed Name Jonathan Holmes	 	 
	 

	 	Notray / Bar Roll No.                                         	 	 

     THUS DONE AND PASSED by DAYBREAK OIL AND GAS, INC., in the presence of the undersigned
competent witnesses, and me, a Notary Public duly commissioned and qualified in and for Spokane
County, State of Washington, on this 17th day of August, 2007.

     DAYBREAK OIL AND GAS, INC.

	 	 	 	 	 
	BY:

	 	/s/ Thomas C. Kilbourne
	 	 
	 

	 	 	 	 

	 	 	 	 	 
	 

	 	/s/ Kara L. Lee
 

	 	 
	 

	 	NOTARY PUBLIC	 	 
	 
	 	 	 	 
	 

	 	Printed Name Kara L. Lee	 	 
	 

	 	Notary / Bar Roll No. 128104

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