EXHIBIT 10.2

PRODUCTION PAYMENT INTEREST PURCHASE AGREEMENT

This Production Payment Interest Purchase Agreement (this "Agreement") is
entered into among Daybreak Oil and Gas, Inc., a Washington corporation (the
"Company"), and the persons and entities (each individually a "Purchaser," and
collectively, the "Purchasers") named on the Schedule of Purchasers attached
hereto (the "Schedule of Purchasers").

WHEREAS, subject to the terms and conditions set forth herein, the Company
wishes to issue and sell to the Purchasers, and the Purchasers wish to purchase
from the Company, one or more interests in its production payments (as described
herein) of the Company in exchange for the consideration (the "Consideration")
set forth opposite each Purchaser's name on the Schedule of Purchasers.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
hereinafter set forth and for other good and valuable consideration, the receipt
and sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:

1.

Purchase and Sale of Production Payment Interest. In exchange for the
Consideration paid by each Purchaser, the Company hereby sells and issues to
such Purchaser, on the terms and conditions set forth in this Agreement, a
percentage of the Company’s Subject Production Payments (such interest, a
“Production Payment Interest”), calculated as follows:

1.1

Until such Purchaser shall have received payments totaling in the aggregate the
Repayment Amount, such Purchaser’s Production Payment Interest shall be a
percentage calculated by dividing such Purchaser’s Consideration by $1,300,000,
and multiplying the quotient by 50%; provided, however, that if such Purchaser
has not received payments totaling in the aggregate the Repayment Amount on or
before the third anniversary of such Purchaser’s Effective Date, then from the
third anniversary until such Purchaser shall have received payments totaling in
the aggregate the Repayment Amount, such Purchaser’s Production Payment Interest
shall be a percentage calculated by dividing such Purchaser’s Consideration by
$1,300,000, and multiplying the quotient by 75%; and

1.2

Beginning when such Purchaser shall have received payments totaling in the
aggregate the Repayment Amount, such Purchaser’s Production Payment Interest
shall thereafter be a percentage calculated by dividing such Purchaser’s
Consideration by $1,300,000, and multiplying the quotient by 8%.

1.3

Definitions.  As used herein:

(a)

“Effective Date” shall mean, with respect to each Purchaser, the date reflected
on the Schedule of Purchasers for such Purchaser, which Effective Date shall be
designated by the Company but may not be more than 30 days after the date on
which such Purchaser paid the Consideration.

(b)

“Repayment Amount” shall mean an amount equal to such Purchaser’s Consideration
plus an additional amount equal to 100% of such Consideration.

(c)

“Subject Production Payment” shall mean the revenue actually received by the
Company to the extent of its working interest, from the sale of oil, gas and
other minerals produced from Subject Wells, minus lease operating expenses and
all gross production taxes, severance taxes, pipeline regulating taxes and ad
valorem taxes (including ad valorem taxes on the production payment) or other
similar costs or taxes now or hereafter levied and paid with respect to such
oil, gas and other minerals.  Notwithstanding anything to the contrary contained
herein, all payments pursuant to this Agreement shall be calculated only with
respect to the Company’s working interest, as applicable.

(d)

“Subject Wells” shall mean wells drilled by the Company or its partners in
California or Michigan during the time period beginning on the Effective Date
and ending on the date that each Purchaser shall have received payments totaling
in the aggregate its Repayment Amount.

2.

Timing of Production Payment Interest Payments.  No less frequently than once
per month, the Company shall calculate and pay any accrued unpaid Production
Payment Interests to the Purchasers.  Payments may be made in the form of a
check mailed to the Purchaser at its address for notices set forth on such
Purchaser’s signature page hereto, or other address as subsequently modified by
written notice given in accordance with Section 8.5.

3.

Contractual Right.  Each Purchaser’s rights pursuant to this Agreement and its
Production Payment Interest are contractual in nature.  This Agreement, and the
Production Payment Interests, do not convey any interest in real property.

4.

Use of Proceeds.  The Company shall use all proceeds from the sale of the
Production Payment Interests to repay indebtedness and to drill new well(s) in
California or Michigan.

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5.

Closings.  The closing of the sale of a Production Payment Interest in return
for the Consideration paid by each Purchaser (each, a "Closing") will take place
remotely via the exchange of documents and signatures with such Purchaser.  At
each Closing, the Purchaser will deliver the Consideration and a copy of this
Agreement executed by the Purchaser to the Company and the Company will deliver
to the Purchaser a copy of this Agreement executed by the Company.  The Company
may hold multiple Closings to accomplish the sales of Production Payment
Interests to multiple Purchasers on the terms and conditions of this Agreement.
 The Schedule of Purchasers may be updated by the Company from time to time to
reflect the Purchasers who are party to this Agreement.

6.

Representations and Warranties of the Company. In connection with the
transactions contemplated by this Agreement, the Company hereby represents and
warrants to the Purchasers as follows:

6.1

Due Organization; Qualification and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Washington and has all requisite corporate power and authority to carry
on its business as now conducted. The Company is duly qualified to transact
business and is in good standing in each jurisdiction in which the failure to so
qualify or to be in good standing would have a material adverse effect on the
Company.

6.2

Authorization and Enforceability. All corporate action has been taken on the
part of the Company and its officers, directors and stockholders necessary for
the authorization, execution and delivery of this Agreement. Except as may be
limited by applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights, the Company has
taken all corporate action required to make all of the obligations of the
Company reflected in the provisions of this Agreement valid and enforceable in
accordance with their terms.

7.

Representations and Warranties of the Purchasers. In connection with the
transactions contemplated by this Agreement, each Purchaser, severally and not
jointly, hereby represents and warrants to the Company as follows:

7.1

Authorization. Each Purchaser has full power and authority (and, if such
Purchaser is an individual, the capacity) to enter into this Agreement and to
perform all obligations required to be performed by it hereunder. This
Agreement, when executed and delivered by each Purchaser, will constitute such
Purchaser's valid and legally binding obligation, enforceable in accordance with
its terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent conveyance and any other laws of general
application affecting enforcement of creditors' rights generally, and (b) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies.

7.2

Purchase Entirely for Own Account. Each Purchaser acknowledges that this
Agreement is made with such Purchaser in reliance upon such Purchaser's
representation to the Company, which such Purchaser confirms by executing this
Agreement, that the Production Payment Interest will be acquired for such
Purchaser's own account, not as a nominee or agent (unless otherwise specified
on such Purchaser's signature page hereto), and not with a view to the resale or
distribution of any part thereof, and that such Purchaser has no present
intention of selling, granting any participation in, or otherwise transferring
or distributing the same. By executing this Agreement, each Purchaser further
represents that such Purchaser does not have any contract, undertaking,
agreement or arrangement with any person to sell, transfer or grant
participations to such person or to any third person, with respect to the
Production Payment Interest.

7.3

Disclosure of Information; Non-Reliance. Each Purchaser acknowledges that it has
received all the information it considers necessary or appropriate to enable it
to make an informed decision concerning a purchase of a Production Payment
Interest. Each Purchaser further represents that it has had an opportunity to
ask questions and receive answers from the Company regarding the terms and
conditions of the Production Payment Interests. Each Purchaser confirms that the
Company has not given any guarantee or representation as to the potential
success, return, effect or benefit (either legal, regulatory, tax, financial,
accounting or otherwise) of the Production Payment Interest.  In deciding to
purchase the Production Payment Interest, each Purchaser is not relying on the
advice or recommendations of the Company and such Purchaser has made its own
independent decision that the purchase of a Production Payment Interest is
suitable and appropriate for such Purchaser.

7.4

Financial and Investment Experience. Each Purchaser acknowledges that it is able
to fend for itself, can bear the economic risk of its purchase of a Production
Payment Interest and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the Production
Payment Interest.

8.

Miscellaneous.

8.1

Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement will inure to the benefit of, and be binding upon,
the respective successors and assigns of the parties; provided, however, that
the Purchaser may not assign its obligations under this Agreement without the
written consent of the Company, which may not be unreasonably withheld; and the
Company may not assign its obligations under this Agreement unless the successor
agrees in writing to be bound by the terms and conditions hereof.  Further, the
Company may not sell or assign any interest held by it in a Subject Well unless
the purchasing party agrees to continue to pay the applicable Production Payment
Interests with respect to

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such acquired interest.  This Agreement is for the sole benefit of the parties
hereto and their respective successors and permitted assigns, and nothing
herein, express or implied, is intended to or will confer upon any other person
or entity any legal or equitable right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.

8.2

Choice of Law. This Agreement, and all matters arising out of or relating to
this Agreement, whether sounding in contract, tort, or statute, will be governed
by and construed in accordance with the internal laws of the State of
Washington, without giving effect to the conflict of laws provisions thereof to
the extent such principles or rules would require or permit the application of
the laws of any jurisdiction other than those of the State of Washington.

8.3

Counterparts. This Agreement may be executed in counterparts, each of which will
be deemed an original, but all of which together will be deemed to be one and
the same agreement. Counterparts may be delivered via facsimile, email
(including PDF or any electronic signature complying with the U.S. federal ESIGN
Act of 2000, e.g., www.docusign.com) or other transmission method, and any
counterpart so delivered will be deemed to have been duly and validly delivered
and be valid and effective for all purposes.

8.4

Titles and Subtitles. The titles and subtitles used in this Agreement are
included for convenience only and are not to be considered in construing or
interpreting this Agreement.

8.5

Notices. All notices, payments and other communications given or made pursuant
hereto will be in writing and will be deemed effectively given: (a) upon
personal delivery to the party to be notified; (b) when sent by email if the
recipient affirmatively acknowledges receipt; (c) five (5) days after having
been sent by registered or certified mail, return receipt requested, postage
prepaid; or (d) one (1) day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of receipt. All
communications will be sent to the respective parties at the addresses shown on
the signature pages hereto (or to such email address, facsimile number or other
address as subsequently modified by written notice given in accordance with this
Section 8.5).

8.6

Expenses. Each party will pay all costs and expenses that it incurs with respect
to the negotiation, execution, delivery and performance of this Agreement.

8.7

Attorneys' Fees. If any action at law or in equity is necessary to enforce or
interpret the terms of this Agreement, the prevailing party will be entitled to
reasonable attorneys' fees, costs and necessary disbursements in addition to any
other relief to which such party may be entitled.

8.8

Entire Agreement; Amendments and Waivers. This Agreement constitutes the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof. The Company's agreements with each of the
Purchasers are separate agreements, and the sales of the Production Payment
Interests to each of the Purchasers are separate sales.

8.9

Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provisions will be excluded from this
Agreement and the balance of the Agreement will be interpreted as if such
provisions were so excluded and this Agreement will be enforceable in accordance
with its terms.

8.10

Further Assurances. From time to time, the parties will execute and deliver such
additional documents and will provide such additional information as may
reasonably be required to carry out the terms of this Agreement and any
agreements executed in connection herewith or therewith.

8.11

Waiver of Jury Trial. EACH PARTY HEREBY WAIVES ITS RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS AGREEMENT OR THE
SUBJECT MATTER HEREOF OR THEREOF. THE SCOPE OF THIS WAIVER IS INTENDED TO BE
ALL-ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT
RELATE TO THE SUBJECT MATTER OF THIS TRANSACTION, INCLUDING, WITHOUT LIMITATION,
CONTRACT CLAIMS, TORT CLAIMS (INCLUDING NEGLIGENCE), BREACH OF DUTY CLAIMS, AND
ALL OTHER COMMON LAW AND STATUTORY CLAIMS. THIS SECTION HAS BEEN FULLY DISCUSSED
BY EACH OF THE PARTIES HERETO AND THESE PROVISIONS WILL NOT BE SUBJECT TO ANY
EXCEPTIONS. EACH PARTY HERETO HEREBY FURTHER REPRESENTS AND WARRANTS THAT SUCH
PARTY HAS REVIEWED THIS WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY
KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS FOLLOWING CONSULTATION
WITH LEGAL COUNSEL.

[SIGNATURE PAGES FOLLOW]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth above.

 

DAYBREAK OIL AND GAS, INC.

By:  /s/JAMES F. WESTMORELAND

Name:

James F. Westmoreland

Title: President and Chief Executive Officer

Address:

1101 N. Argonne Road
Suite A 211
Spokane Valley, WA

Date: 12/27/18

 

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date set forth above.

 

 

 

If an individual:

 

_________________________________
Name:

Address:

 

 

Email Address:

 

 

 

Date:

 

 

 

If an entity:

 

 

_________________________________

By: _________________________

Name:

Title:

Address:

Email Address:

Date:

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SCHEDULE OF PURCHASERS

Purchaser

Consideration

Effective Date

 

 

 

 

 

TOTAL

$            

 

 

 

 

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