Exhibit 10.2

PROMISSORY NOTE

$1,500,000

May 18, 2012

Fullerton, CA

FOR VALUE RECEIVED, the undersigned, RTG Steel Company, LLC, an Arizona limited
liability company, and Daybreak Oil and Gas, Inc., a Washington corporation
(collectively “Promisor”), promises to pay to the order of Luberski, Inc., a
California corporation (“Promisee”) or its assignee, at 310 N. Harbor Blvd., Ste
205, Fullerton, CA 92832, or at such other place as Promisee may designate in
writing under this Promissory Note (“Note”), the principal sum of One Million
Five Hundred Thousand Dollars ($1,500,000.00), with interest thereon.  All sums
owing hereunder are payable in lawful money of the United State of America.

The principal amount of this Note and all accrued interest thereon shall be due
within 120 days of the Date of this Note.  The sums due under this Note shall
bear interest at a rate of 5% per month.   

The obligation evidenced by this Note shall be secured by certain assets of
Promisors as described in the Security Agreement, which is to be signed
concurrently herewith by Promisor and is incorporated by reference into this
Note, and Promisor shall cause a UCC-1 Financing Statement to be filed and
perfected with the appropriate agency for purposes of such security interest.
 This obligation shall also be secured by a First Deed of Trust to certain real
property and oil leases described more fully in the Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statement to be
executed concurrently herewith by Promisor, Daybreak Oil and Gas, Inc.  In
addition, the obligation evidenced by this Note shall be supported by the Loan
Agreement to be signed concurrently herewith and incorporated by reference into
this Note.

Promisor shall pay to Promisee all sums owing under this Note without deduction,
offset or counterclaim of any kind.  The relationship of Promisor and Promisee
hereunder is solely that of Promisor-Promisee, and the loan evidenced by this
Note shall in no manner constitute Promisee the partner or joint venturer of
Promisor.

In the event of any litigation or other proceeding between the parties
concerning the interpretation or enforcement of any of the provisions of this
Note, the prevailing party in such litigation or proceeding shall be entitled to
its reasonable attorneys’ fees and costs.

No previous waiver and no failure or delay by Promisee in acting with respect to
the terms of this Note shall constitute a waiver of any breach, default or
failure of condition under this Note.  A waiver of any term of this Note must be
made in writing and shall be limited to the express written terms of such
waiver.

All notices required or permitted in connection with this Note shall be in
writing and shall be given at the address set forth above for Promisee and at
principal place of business for Promisor.

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Subject to Promisor’s right to notice prior to acceleration as stated herein,
Promisor waives presentment; demand; notice of dishonor; notice of default or
delinquency; notice of protest and nonpayment; notice of costs, expenses or
losses and interest thereon; notice of interest on interest and late charges;
and diligence in taking any action to collect any sums owing under this Note or
in proceeding against any of the rights or interests in or to properties
securing payment of this Note.  Time is of the essence with respect to every
provision hereof.  This Note shall be construed and enforced in accordance with
the laws of the State of California, except to the extent that Federal laws
preempt the laws of the State of California, and all persons and entities in any
manner obligated under this Note consent to the jurisdiction of any Federal or
State Court within the State of California having proper venue and also consent
to service of process by any means authorized by California or Federal law.

Promisor may prepay the principal outstanding under this Note at any time in
whole or in part without premium; provided, however, that Promisor shall pay all
interest accrued to the date of prepayment.

IN WITNESS WHEREOF, the parties have executed this Agreement under seal.

PROMISORS:

DAYBREAK OIL AND GAS, INC., A Washington corporation

By:

/s/ James F. Westmoreland

 

Date: May 18, 2012

 

Name:

James F. Westmoreland

Title:

President and Chief Executive Officer

RTG STEEL COMPANY, LLC, an Arizona limited liability company

By:

/s/ David Wetmore

 

Date: May 18, 2012

 

Name:

David Wetmore

Title:

Managing Member