DAYBREAK OIL & GAS INC (Form: 8-K, Received: 04/09/2008 17:01:16)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): April 3, 2008

DAYBREAK OIL AND GAS, INC.

(Exact Name of Registrant as Specified in its Charter)

Washington	000-50107	91-0626366
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

601 W. Main Ave., Suite 1012 Spokane, WA		99201
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (509) 232-7674

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

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Written communications pursuant to Rule 425 under the Securities Act (17CFR230.425)

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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17CFR 240.14a-12)

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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

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Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On April 3, 2008, the Board of Directors of Daybreak Oil and Gas, Inc. (the “ Company ”) appointed Mr. James F. Westmoreland to the position of Executive Vice President and Chief Financial Officer of the Company. With this appointment, Mr. Westmoreland will no longer hold the position of Interim Chief Financial Officer.

The following is a synopsis of Mr. Westmoreland’s business experience:

James F. Westmoreland, 52, has served as the Interim Chief Financial Officer of the Company since December 17, 2007 and previously consulted with the Company on various accounting and finance matters commencing in August 2007. Prior to that time, Mr. Westmoreland served in various financial and accounting capacities for The Houston Exploration Company for 21 years, including Vice President, Controller and Corporate Secretary, serving as its Vice President and Chief Accounting Officer from October 1995 until its acquisition by Forest Oil Company in June 2007. Mr. Westmoreland has over 25 years of experience in oil and gas accounting, finance, corporate compliance and governance, both in the public and private sector. He earned his B.A. in accounting from the University of Houston.

There are no family relationships between Mr. Westmoreland and any of the other members of the Board of Directors or the Company’s officers.

Other than his employment by the Company as a consultant and then as Interim Chief Financial Officer, Mr. Westmoreland has not been involved in any transactions with the Company since the beginning of the Company’s last fiscal year.

Item 5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

On April 3, 2008, the Board of Directors amended and restated the Company’s Bylaws. Set forth below is a summary of the changes to the Company’s previous Bylaws (the “ Previous Bylaws ”) by adoption of the Amended and Restated Bylaws (the “ Amended Bylaws ”), which summary is qualified in its entirety by reference to the full text of the Amended and Restated Bylaws of the Company filed as Exhibit 3.1 to this Form 8-K and incorporated herein by reference.

Article I (Name, Seal and Offices)

●	The Amended Bylaws reflect the change in the name of the Company from Daybreak Uranium, Inc. to Daybreak Oil and Gas, Inc.

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The Amended Bylaws provide that the principal office and place of business of the Company will be located at either the principal place of business of the Company, or the office of the Company’s registered agent, in the State of Washington. The Previous Bylaws had provided that the Company’s registered office would be in the Town of Opportunity, Washington.

Article II (Shareholders)

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Under the Amended Bylaws, the annual meeting of the shareholders will be held each year on the date and at the time as determined by the Board of Directors. The Previous Bylaws set the annual meeting date as the first Friday in the month of June each year. In addition, the Amended Bylaws provide that, except as provided by law, special meetings of shareholders shall be held whenever called by the Board of Directors. The Previous Bylaws stated that special meetings of the shareholders could be called by the Board of Directors, any director, or any shareholder(s) holding one-fifth of the voting power of all shareholders, or by any shareholder if more than 18 months elapsed without the annual shareholders’ meeting being held.

●

The Amended Bylaws provide for not less than 10 nor more than 60 days notice of each shareholders’ meetings (subject to applicable law), which may be given in any manner and by any means permitted under Title 23B of the Revised Code of Washington (the “ WBCA ”). The Previous Bylaws contained only the ten-day reference. The Amended Bylaws also clarify and expand the procedures set forth in the Previous Bylaws for shareholders to waive notice of meetings.

●

The Amended Bylaws change the time period with respect to which the Board of Directors may fix a record date for a shareholders meeting from not more than 40 days prior to the date of the meeting, as provided in the Previous Bylaws, to not less than ten nor more than 70 days prior to the date of the meeting.

●

The Amended Bylaws provide that director nominations for election to the Board of Directors must be made by the Board of Directors or a Board of Directors committee or by any shareholder entitled to vote for the election of directors, and set forth the procedures and time limits for nominations by shareholders. The Amended Bylaws also set forth the procedures pursuant to which business may be properly brought before any shareholders meeting, including the time limits for proposals by shareholders. The Previous Bylaws did not contain any provisions relating to these matters.

Article III (Directors)

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Consistent with the Articles of Incorporation of the Company (the “ Articles ”), the Amended Bylaws provide that the Board of Directors will consist of not less than three nor more than nine directors, subject to increases or decreases as determined by the Board of Directors in accordance with the Articles and applicable law. The Previous Bylaws provided for a Board of Directors of at least five directors, or such other number as determined by the Board of Directors, but which could not be less than three nor more than five directors.

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The Amended Bylaws also provide for the election of a Chair of the Board of Directors to preside at meetings of the Board of Directors and have such other powers as the Board of Directors determines. The Previous Bylaws did not contain any provision regarding the election of a Chair, but provided that the President would preside at all meetings of the shareholders and the Board of Directors.

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While the Previous Bylaws provided for annual meetings and special meetings as called by the President or any Vice-President or any director, the Amended Bylaws provide that (i) regular meetings of the Board of Directors are to be held at such times as the Board of Directors may determine, (ii) an annual meeting of the Board of Directors will be held each year on the day of the Annual Meeting of Shareholders and (iii) special meetings may be called by the President or any Vice President or by any two or more members of the Board of Directors. The Amended Bylaws also provide that notice of special meetings shall be given at least two days prior to the date of the meeting (while the Previous Bylaws provided for one day), and permit notice by various means of communication, including by facsimile, email or telephone (which were not included in the Previous Bylaws). The Amended Bylaws also provide that meetings of the Board of Directors may be held via telephone or similar communications equipment.

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The Amended Bylaws provide that any action permitted or required to be taken at a meeting of the Board of Directors may be taken without a meeting if one or more consents are executed by all of the directors in a tangible written form, in an electronic transmission or in any other form then allowed under the WBCA or other applicable law. The Previous Bylaws did not contain any provisions relating to these matters.

●	The Amended Bylaws also provide that a director who is present at a Board of Directors meeting at which action on any matter is taken shall be presumed to have assented to the action taken unless he or she takes certain specified actions, which was not included in the Previous Bylaws.

●	The Amended Bylaws clarify that the Board of Directors may designate committees with powers as delegated by the Board of Directors, and set forth procedures with respect to the meetings and actions of the committee. The Previous Bylaws did not contain any provisions relating to these matters.

Article IV (Officers)

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The Amended Bylaws clarify that the officers of the Company may be a President, one or more Vice Presidents, a Secretary, and a Treasurer, and such other officers and assistant officers as may be necessary. Under the Amended Bylaws, the officers are to be appointed annually and hold office until a successor shall have been appointed and qualified or until said officer’s earlier death, resignation, or removal, which was not expressly provided for in the Previous Bylaws. The Amended Bylaws also set forth specific powers and duties with respect to the President, Vice Presidents, Secretary and Treasurer that expand and clarify the powers and duties set forth in the Previous Bylaws.

Article V (Certificates of Shares and Their Transfer)

●	The Amended Bylaws provide that no shares of the Company shall be issued unless authorized by the Board of Directors. Additionally, the Amended Bylaws provide for the form and contents of stock certificates, but state that shares may but need not be represented by certificates.

●	The Amended Bylaws also provide for the procedures for stock transfers, and the provision of duplicate stock certificates in case of the loss, mutilation, or destruction of certificates.

The Previous Bylaws did not contain any provisions covering the items above.

Article VI (Books and Records)

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The Amended Bylaws set forth the Company’s responsibilities with respect to maintaining books and records of the Company, including minutes and records relating to meetings and actions of the shareholders and Board of Directors, accounting and financial records, and other corporate information. The Previous Bylaws did not contain any provisions relating to these items, other than with respect to the maintenance of the Company’s Bylaws.

Article VII (Indemnification of Officers, Directors, Employees and Agents)

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The Amended Bylaws provide for indemnification by the Company for any person against liability arising out of any action, suit, or proceeding to which such person was made a party because the individual is or was a person serving as a director or officer of the Company, or serving as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise at the request of the Company, to the full extent permitted by applicable law. The Amended Bylaws expressly provide that the Company may maintain insurance to protect against any liability, enter into contracts with any indemnitee in furtherance of such indemnification rights and consistent with the WBCA, and create a trust fund, grant a security interest, or use other means to ensure the payment of such indemnification amounts.

●	The Amended Bylaws also provide for advances of expenses incurred by indemnitees under certain specified circumstances, and set forth the procedures with respect to the payment of indemnification claims.

The Previous Bylaws did not contain any provisions covering the items above.

Article VIII (Amendment of Bylaws)

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The Amended Bylaws provide that, in accordance with the WBCA and the Articles, the Amended Bylaws may be amended or repealed (a) at any regular or special meeting of the shareholders and (b) by the affirmative vote of a majority of the whole Board of Directors of any meeting of the Board of Directors, in each case if notice of the amendment is contained in the notice of the meeting. The Previous Bylaws did not contain any provisions relating to these items.

Item 5.05. Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

On April 3, 2008, the Board of Directors adopted amendments to the Company’s Ethical Business Conduct Policy Statement (the “ Ethical Conduct Policy ”), which applies to each director, officer, employee and private contractor of the Company, and adopted a new Code of Ethics for Senior Financial Officers (the “ Code of Ethics ”), which applies to all individuals designated as senior financial officers of the Company. Senior financial officers consist of the Company’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller, and other persons whom the Audit Committee of the Board of Directors designates as such. The Code of Ethics relates to ethical conduct in the financial and accounting areas of the Company and promotes honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, proper disclosure of financial information in the Company’s periodic reports, and compliance with applicable laws, rules, and regulations by the Company’s senior financial officers.

The Ethical Conduct Policy was amended, among other things:

(i) to define certain terms, including "family member" and "significant financial interest;"

(ii) to clarify the Company's prohibition on facilitating payments;

(iii) to cover violations of antitrust and competition laws;

(iv) to expressly prevent retaliation against anyone that in good faith reports a possible violation of law or of the Ethical Conduct Policy;

(v) to provide for regular, annual certification of compliance with the Ethical Conduct Policy;

(vi) to provide that exceptions to the Ethical Conduct Policy must be approved by the Nominating and Corporate Governance Committee of the Board of Directors;

(vii) to expressly prohibit discrimination and harassment in the workplace and the employment process; and

(viii) to express the Company's commitment to providing safe and healthy working conditions and compliance with laws relating to health, safety and the environment.

A copy of the Ethical Conduct Policy, as amended, is attached hereto as Exhibit 99.1 and is incorporated herein by reference. In addition, the Ethical Conduct Policy is available on the Company’s website at www.daybreakoilandgas.com .

A copy of the newly adopted Code of Ethics is attached hereto as Exhibit 99.2 and is available on the Company’s website at www.daybreakoilandgas.com .

Item 7.01. Regulation FD Disclosure.

Also on April 3, 2008, the Company’s Board of Directors adopted charters for its Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee, as well as numerous new guidelines and policies, including Corporate Governance Guidelines, Qualifications for Nominations to the Board of Directors, Related Party Transactions Policy, Securities Compliance Policy, Fair Disclosure Policy, Director Education Policy and Audit Committee Fee Pre-Approval Policy. Each of these charters, guidelines and policies is available on the Company’s website at www.daybreakoilandgas.com .

3.1

Amended and Restated Bylaws

99.1

Ethical Business Conduct Policy Statement, as amended

99.2

Code of Ethics for Senior Financial Officers

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	DAYBREAK OIL AND GAS, INC.

	By:	/s/ James F. Westmoreland
		James F. Westmoreland, Executive Vice President and Chief Financial Officer

	Date:	April 9, 2008

3.1	Amended and Restated Bylaws

99.1	Ethical Business Conduct Policy Statement, as amended

99.2	Code of Ethics for Senior Financial Officers

Exhibit 3.1

AMENDED AND RESTATED

BYLAWS

DAYBREAK OIL AND GAS, INC.

ARTICLE I

NAME, SEAL AND OFFICES

Section 1. Name . The name of the Corporation is DAYBREAK OIL AND GAS, INC.

Section 2. Seal . The seal of the Corporation shall be in such form as the Board of Directors shall from time to time prescribe.

Section 3. Offices . The principal office and place of business of the Corporation shall be located at either the principal place of business of the Corporation in the State of Washington or the office of the corporation or individual acting as the Corporation’s registered agent in Washington. The Corporation may also have offices at such other places within or without the State of Washington as the Board of Directors may from time to time establish.

ARTICLE II

SHAREHOLDERS

Section 1. Annual Meetings of Shareholders . The annual meeting of the shareholders of the Corporation for the election of directors and for such other business as may properly be brought before the meeting shall be held each year on the date and at the time as determined by the Board of Directors.

Section 2. Special Meetings of Shareholders . Except as otherwise provided by law, special meetings of shareholders of the Corporation shall be held whenever called by the Board of Directors.

Section 3. Adjourned Meetings . A majority of the shares represented at a meeting of shareholders, even if less than a quorum, may adjourn the meeting from time to time. At such reconvened meeting at which a quorum is present any business may be transacted at the meeting as originally notified. If a meeting is adjourned to a different date, time or place, notice need not be given of the new date, time or place if a new date, time, or place is announced at the meeting before adjournment; however, if a new record date for the adjourned meeting is or must be fixed in accordance with the Title 23B of the Revised Code of Washington (the “Washington Business Corporation Act”), notice of the adjourned meeting must be given to persons who are shareholders as of the new record date.

Section 4. Notice of Meetings . Notice of each shareholders’ meeting stating the date, time, and place and, in case of a special meeting, the purpose(s) for which such meeting is called, shall be given by the Corporation not less than ten (10) (unless a greater period of notice is required by law in a particular case) nor more than sixty (60) days prior to the date of the meeting, to each shareholder of record entitled to vote at such meeting unless required by law to send notice to all shareholders (regardless of whether or not such shareholders are entitled to vote), which notice may be given in any manner and by any means permitted under the Washington Business Corporation Act.

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Section 5. Waiver of Notice . A shareholder may waive any notice required to be given by these Bylaws, the Articles of Incorporation of the Corporation, or any of the corporate laws of the State of Washington, before or after the meeting that is the subject of such notice. A valid waiver is created by any of the following three methods: (a) by transmission of a record in a form permitted by the Washington Business Corporation Act; (b) by attendance at the meeting, unless the shareholder at the beginning of the meeting objects to holding the meeting or transacting business at the meeting; or (c) by failure to object at the time of presentation of a matter not within the purpose or purposes described in the meeting notice.

Section 6. Action Without Formal Meeting . Any action which may be taken at a meeting of the shareholders may be taken without a meeting by unanimous consent if one or more written consents setting forth the action so taken shall be signed by all shareholders entitled to vote with respect to the matter.

Section 7. Voting . Every shareholder shall have the right at every shareholder meeting to one vote for every share of stock standing in his or her name on the books of the Corporation on the record date fixed as hereinafter provided, or, if no such date has been fixed, ten (10) days prior to the time of the meeting, and in voting for directors, but not otherwise, he may cumulate his votes in the manner and to the extent permitted by the laws of the State of Washington.

The Board of Directors may fix a time not less than ten (10) nor more than seventy (70) days prior to the date of any meeting of the shareholders as the record date as of which shareholders entitled to notice of and to vote at such meeting will be determined. At each meeting of the shareholders a full, true and complete list, in alphabetical order, of all the shareholders entitled to vote at such meeting, and indicating the number of shares held by each, certified by the Secretary or Transfer Agent, shall be furnished, which list shall be open to the inspection of the shareholders.

Shareholders may vote at all meetings either in person or by proxy. A shareholder or the shareholder’s duly authorized agent or attorney-in-fact may appoint a proxy by (a) executing a proxy in writing or (b) transmitting or authorizing the transmission of an electronic proxy in any manner permitted by law. Such proxy shall be filed with the Secretary of the Corporation at least twenty-four (24) hours prior to the meeting.

Section 8. Quorum . Except as otherwise provided in the Articles of Incorporation or the Washington Business Corporation Act, at any meeting of the shareholders, the presence, in person or by proxy, of the holders of a majority of the voting power of all shareholders shall constitute a quorum.

The shareholders present at a duly organized meeting can continue to do business until adjournment, notwithstanding the withdrawal of enough shareholders to leave less than a quorum. If a shareholders’ meeting cannot be organized because a quorum has not attended, those shareholders present may adjourn the meeting to such time and place as they may determine, but in case of any meeting called for the Election of Directors, those who attend the second of such adjourned meetings, although less than a majority of the voting power of all shareholders, shall nevertheless, constitute a quorum for the purpose of electing directors.

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Section 9. Place of Meetings . Meetings of the shareholders shall be held at either the principal office of the Corporation or at such other place within or without the state of Washington as the person or persons calling the meeting may designate.

Section 10. Director Nomination Procedures . Nominations for election to the Board of Directors must be made by the Board of Directors or by a committee appointed by the Board of Directors for such purpose or by any shareholder of any outstanding class of capital stock of the Corporation entitled to vote for the election of directors. Nominations by shareholders must be preceded by notification in writing received by the Secretary of the Corporation (a) with respect to an election to be held at an annual meeting of the shareholders, not fewer than one hundred twenty (120) days nor more than one hundred fifty (150) days prior to the anniversary date of the prior year's annual meeting of shareholders; provided that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year's annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting and not later than the close of business on the later of (i) the ninetieth (90th) day prior to such annual meeting or (ii) the tenth (10th) day following the day on which the notice of the date of the annual meeting was mailed or such public disclosure was made, and (b) with respect to an election to be held at a special meeting of the shareholders for the election of directors, the close of business on the seventh (7th) business day following the date on which notice of such meeting is first given to shareholders. Such notification shall contain the written consent of each proposed nominee to serve as a director if so elected and the following information as to each proposed nominee and as to each person, acting alone or in conjunction with one or more other persons as a partnership, limited partnership, syndicate or other group, who participates or is expected to participate in making such nomination or in organizing, directing or financing such nomination or solicitation of proxies to vote for the nominee:

(A) the name, age, residence, personal address and business address of each proposed nominee and of each such person;

(B) the principal occupation or employment, the name, type of business and address of the corporation or other organization in which such employment is carried on of each proposed nominee and of each such person;

(C) the amount of capital stock of the Corporation owned beneficially, either directly or indirectly, by each proposed nominee and each such person;

(D) a description of any arrangement or understanding of each proposed nominee and of each such person with each other or any other person regarding future employment or any future transaction to which the Corporation will or may be a party; and

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(E) any other information concerning the nominee that must be disclosed regarding nominees in proxy solicitations pursuant to Section 14(a) of the Securities Exchange Act of 1934, as amended, and the rules under such section.

The presiding officer of the meeting shall have the authority to determine and declare to the meeting that a nomination not preceded by notification made in accordance with the foregoing procedure shall be disregarded. Notwithstanding the foregoing provisions, a shareholder shall also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 10. The procedures set forth in this Section 10 for nomination for the election of directors by shareholders are in addition to, and not in limitation of, any procedures now in effect or hereafter adopted by or at the discretion of the Board of Directors or any committee thereof.

Section 11. Proposal Procedures . At any meeting of the shareholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before the meeting, business must be (a) specified in the Corporation's notice of meeting (or any supplement thereto), (b) by or at the direction of the Board of Directors or (c) by any shareholder of the Corporation who is a shareholder of record at the time of giving of the notice provided for in this Section, who shall be entitled to vote at such meeting and who complies with the notice procedures set forth in this Section.

For business to be properly brought before any meeting by a shareholder pursuant to clause (c) above of this Section, the shareholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a shareholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation (i) with respect to an annual meeting of the shareholders, not fewer than one hundred twenty (120) days nor more than one hundred fifty (150) days prior to the anniversary date of the prior year's annual meeting of shareholders; provided that if the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year's annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the one hundred twentieth (120th) day prior to such annual meeting of shareholders and not later than the close of business on the later of (x) the ninetieth (90th) day prior to such annual meeting or (y) the tenth (10th) day following the day on which the notice of the date of the annual meeting was mailed or such public disclosure was made, and (ii) with respect to an election to be held at a special meeting of the shareholders for the election of Directors, the close of business on the seventh (7th) business day following the date on which notice of such meeting is first given to shareholders. A shareholder's notice to the Secretary shall set forth as to each matter the shareholder proposes to bring before the meeting (a) a brief description of the business desired to be brought before the meeting and the reasons for conducting such business at the meeting, (b) the name and address, as they appear on the Corporation's books, of the shareholder proposing such business, and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (c) the class and number of shares of the Corporation which are owned beneficially and of record by such shareholder of record and by the beneficial owner, if any, on whose behalf the proposal is made and (d) any material interest of such shareholder of record and the beneficial owner, if any, on whose behalf the proposal is made in such business.

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Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at a meeting except in accordance with the procedures set forth in this Section 11. The presiding officer of the meeting shall, if the facts warrant, determine and declare to the meeting that business was not properly brought before the meeting and in accordance with the procedures prescribed by this Section 11, and if such person should so determine, such person shall so declare to the meeting and any such business not properly brought before the meeting shall not be transacted. Notwithstanding the foregoing provisions of this Section 11, a shareholder desiring to include a proposal in the Corporation's proxy statement must also comply with all applicable requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder with respect to the matters set forth in this Section 11.

ARTICLE III

DIRECTORS

Section 1. General Powers, Number and Elections . The business and affairs of the Corporation shall be managed by a Board of Directors of not less than three (3) directors nor more than nine (9) directors. Subject to the Articles of Incorporation and applicable law, the number of directors may at any time be increased or decreased by the Board of Directors at any regular or special meeting. The Board of Directors in its discretion may elect a Chair from amongst its members to serve as Chair of the Board of Directors, who, when present shall preside at all meetings of the Board of Directors, and who shall have such other powers as the Board of Directors may determine.

The directors shall be elected by the shareholders at each annual shareholders’ meeting to hold office until the next annual meeting of the shareholders and until their respective successors are elected and qualified. If, for any reason, the directors shall not have been elected at any annual meeting, they may be elected at a special meeting of shareholders called for that purpose in the manner provided by these Bylaws.

Section 2. Annual and other Regular Meetings . Regular meetings of the Board of Directors shall be held at such places, and at such times as the Board of Directors by vote may determine. In each year, the regular meeting on the day of the Annual Meeting of Shareholders shall be known as the Annual Meeting of the Board of Directors.

Section 3. Special Meetings . Special meetings of the Board of Directors may be called by the President or any Vice President or by any two (2) or more members of the Board of Directors, notice thereof being given to each director by the officer calling or by the officer directed to call the meeting. Notice of special meetings of the Board of Directors, stating the date, time, and place thereof, shall be given at least two (2) days prior to the date of the meeting. The purpose of the meeting need not be given in the notice. Notice may be given (a) in writing and sent by hand delivery, through the United States mail, or by a nationally recognized overnight delivery service for next day delivery, (b) by means of facsimile, email or other form of electronic transmission, or (c) by oral notice given personally or by telephone.

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Section 4. Waiver of Notice . A director may waive notice of a special meeting of the Board of Directors either before of after the meeting, and such waiver shall be deemed to be the equivalent of giving notice. The waiver must be delivered to the Corporation for inclusion in its corporate records in any manner and by any means permitted under the Washington Business Corporation Act. Attendance of a director at a meeting shall constitute waiver of notice of that meeting unless said director attends for the express purpose of objecting to the transaction of business because the meeting has not been lawfully called or convened.

Section 5. Quorum of Directors/Adjournment . At all meetings of the Board of Directors, a majority of the Directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the acts of a majority of the Directors present at any meeting at which a quorum is present shall be the acts of the Board of Directors, except as may be otherwise specifically provided for by the Articles of Incorporation or by these Bylaws.

A majority of the directors present, even if less than a quorum, may adjourn a meeting and continue it to a later time. Notice of the adjourned meeting or of the business to be transacted thereat, other than by announcement, shall not be necessary. At any adjourned meeting at which a quorum is present, any business may be transacted which could have been transacted at the meeting as originally called.

Section 6. Resignation and Removal . Any director of the Corporation may resign at any time by giving written notice to the Board of Directors. Any such resignation is effective when the notice is delivered, unless the notice specifies a later effective date. A Director may be removed either with or without cause, by two-thirds (2/3) of the vote of the shareholders at a special meeting called for that purpose.

Section 7. Vacancies . Any vacancy in the Board of Directors occurring during the year may be filled for the unexpired portion of the term and until a successor is elected and qualified, either (a) at the next annual meeting of shareholders or at any special meeting of shareholders duly called for that purpose and held prior thereto or (b) by a majority of the remaining members of the Board provided there are not less than three (3) remaining members qualified to act. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director.

Section 8. Action by Board without a Meeting . Any action permitted or required to be taken at a meeting of the Board of Directors may be taken without a meeting if one or more consents setting forth the action so taken, shall be executed by all of the directors, either before or after the action taken, and delivered to the Corporation. Such consents may be set forth in a tangible written form, in an electronic transmission or in any other form then allowed under the Washington Business Corporation Act or other applicable law. Action taken by consent is effective when the last director executes the consent, unless the consent specifies a later effective date.

Section 9. Conference Telephone . Meetings of the Board of Directors may be effectuated by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other during the meeting. Participation by such means shall constitute presence in person at such meeting.

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Section 10. Presumption of Assent . A director of the Corporation who is present at a meeting of the Board of Directors at which action on any corporate matter is taken shall be presumed to have assented to the action taken unless (a) the director objects at the beginning of the meeting, or promptly upon the director’s arrival, to holding it or transacting business at the meeting; (b) the director’s dissent or abstention from the action taken is entered in the minutes of the meeting; or (c) the director shall file a written dissent or abstention with the presiding officer of the meeting before its adjournment or shall forward such dissent by registered mail to the secretary of the Corporation immediately after adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action.

Section 11. Board Committees . The Board may designate one or more committees, each committee to consist of one or more of the directors. Each committee shall keep regular minutes of its meetings and report the same to the Board when required. The Board shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. Any committee established pursuant hereto, to the extent permitted by applicable law and by resolution of the Board, shall have and may exercise all of the powers and authority of the Board in the management of the business and affairs of the Corporation. Unless the Board otherwise provides, the time, date, place, if any, and notice of meetings of a committee shall be determined by such committee. Unless the Board otherwise provides and except as provided in these By-Laws, each committee designated by the Board may make, alter, amend and repeal rules for the conduct of its business. In the absence of such rules each committee shall conduct its business in the same manner as the Board is authorized to conduct its business pursuant to these By-Laws.

ARTICLE IV

OFFICERS

Section 1. Positions . The officers of the Corporation may be a President, one or more Vice Presidents, a Secretary, and a Treasurer, as appointed by the Board. Such other officers and assistant officers as may be necessary may be appointed by the Board of Directors or by a duly appointed officer to whom such authority has been delegated by Board resolution. No officer need be a shareholder or a director of the Corporation. Any two or more offices may be held by the same person.

Section 2. Appointment and Term of Office . The officers of the Corporation shall be appointed annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If officers are not appointed at such meeting, such appointment shall occur as soon as possible thereafter. Each officer shall hold office until a successor shall have been appointed and qualified or until said officer’s earlier death, resignation, or removal.

Section 3. Powers and Duties . If the Board of Directors appoints persons to fill the following officer positions, such officer shall have the powers and duties set forth below:

(a) President . The President shall be the chief executive officer of the Corporation and, subject to the direction and control of the Board of Directors, shall have general supervision of the business of the Corporation. Unless a Chair of the Board of Directors has been elected and is present, the President shall preside at meetings of the Board of Directors.

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The President, or any Vice President or such other person(s) as are specifically authorized by vote of the Board of Directors, shall sign all bonds, deeds, mortgages, and any other agreements, and such signature(s) shall be sufficient to bind the Corporation. The President shall perform such other duties as the Board of Directors shall designate.

(b) Vice President . During the absence or disability of the President, the Vice President (or in the event that there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors) shall exercise all functions of the President, except as limited by resolution of the Board of Directors. Each Vice President shall have such powers and discharge such duties as may be assigned from time to time to such Vice President by the President or by the Board of Directors.

(c) Secretary . The Secretary shall: (i) prepare minutes of the directors’ and shareholders’ meetings and keep them in one or more books provided for that purpose; (ii) authenticate records of the Corporation; (iii) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (iv) be custodian of the corporate records and of the seal of the Corporation (if any), and affix the seal of the Corporation to all documents as may be required; (v) keep a register of the post office address of each shareholder which shall be furnished to the Secretary by such shareholder; (vi) sign with the President, or a Vice President, certificates for shares of the Corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (vii) have general charge of the stock transfer books of the Corporation; and (viii) in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the President or by the Board of Directors. In the Secretary’s absence, an Assistant Secretary shall perform the Secretary’s duties.

(d) Treasurer . The Treasurer shall be the custodian of the Corporation’s moneys and securities, shall account for the same, and shall have and exercise, under the supervision of the Board of Directors, all the powers and duties commonly incident to this office.

Section 4. Resignation or Removal . Any officer of the Corporation may resign at any time by giving notice to the Board of Directors in any manner and by any means permitted under the Washington Business Corporation Act. Any such resignation is effective when the notice is delivered, unless the notice specifies a later date, and shall be without prejudice to the contract rights, if any, of such officer.

The Board of Directors, by majority vote of the entire Board of Directors, may remove any officer or agent appointed by it, with or without cause. The removal shall be without prejudice to the contract rights, if any, of the person so removed.

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Section 5. Vacancies . If any office becomes vacant by any reason, the directors may appoint a successor or successors who shall hold office for the unexpired term.

ARTICLE V

CERTIFICATES OF SHARES AND THEIR TRANSFER

Section 1 . Issuance; Certificates of Shares. No shares of the Corporation shall be issued unless authorized by the Board of Directors. Such authorization shall include the maximum number of shares to be issued, the consideration to be received, and a statement that the Board of Directors considers the consideration to be adequate. Shares may but need not be represented by certificates. Certificates for shares of the Corporation shall be in such form as is consistent with the provisions of the Washington Business Corporation Act and shall state (a) the name of the Corporation and that the Corporation is organized under the laws of the State of Washington, (b) the name of the person to whom issued and (c) the number and class of shares and the designation of the series, if any, which such certificate represents. The certificate shall be signed by original or facsimile signature of two officers of the Corporation, and the seal of the Corporation may be affixed thereto.

Section 2 . Transfer of Stock. Shares of stock may be transferred, and such transfers shall be made on the books of the Corporation, by delivery of the certificate accompanied by either an assignment in writing on the back of the certificate or by a written power of attorney to assign and transfer the same on the books of the Corporation, signed by the record holder of the certificate.

Section 3. Loss or Destruction of Certificates . In case of the loss, mutilation, or destruction of a certificate of stock, a duplicate certificate may be issued upon such terms as the Board of Directors shall prescribe.

ARTICLE VI

BOOKS AND RECORDS

Section 1. Books of Accounts, Minutes, and Share Register . The Corporation:

(a) shall keep as permanent records minutes of all meetings of its shareholders and Board of Directors, a record of all actions taken by the shareholders or Board of Directors without a meeting, and a record of all actions taken by a committee of the Board of Directors exercising the authority of the Board of Directors on behalf of the oration;

(b) shall maintain appropriate accounting records;

(c) or its agent shall maintain a record of its shareholders, in a form that permits preparation of a list of the names and addresses and electronic addresses for those shareholders who have consented to receipt of electronic notice pursuant to the Washington Business Corporation Act, of all shareholders, in alphabetical order by class of shares showing the number and class of shares held by each; and

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(d) shall keep a copy of the following records at its principal office:

(i) The Articles or Restated Articles of Incorporation and all amendments to them currently in effect;

(ii) The Bylaws or Restated Bylaws and all amendments to them currently in effect;

(iii) The minutes of all shareholders’ meetings, and records of all actions taken by shareholders without a meeting, for the past three (3) years;

(iv) Its financial statements for the past three (3) years, including balance sheets showing in reasonable detail the financial condition of the Corporation as of the close of each fiscal year, and an income statement showing the results of its operations during each fiscal year prepared on the basis of generally accepted accounting principles or, if not, prepared on a basis explained therein;

(v) all written and electronic communications to shareholders generally within the past three (3) years;

(vi) a list of the names and business addresses of its current directors and officers; and

(vii) its most recent annual report delivered to the Secretary of State of Washington.

Section 2 . Copies of Resolutions . Any person dealing with the Corporation may rely upon a copy of any of the records of the proceedings, resolutions, or votes of the Board of Directors or shareholders, when certified by the President or Secretary.

ARTICLE VII

INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS

Section 1. Indemnification Rights of Directors, Officers, Employees and Agents . The Corporation shall indemnify any person against liability arising out of any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and whether formal or informal (each, a “Proceeding”), to which such person was made a party because the individual is or was a person serving as a director or officer of the Corporation, or serving as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to an employee benefit plan, at the request of the Corporation (each, an “Indemnitee”), to the full extent permitted by applicable law as then in effect. The Corporation shall advance all expenses, including without limitation fees and expenses of counsel (collectively, “Expenses”), incurred by Indemnitees who are parties to a Proceeding in advance of final disposition of the Proceeding; provided, however, that the payment of such expenses in advance of the final disposition shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined that such Indemnitee is not entitled to be indemnified under this Article or otherwise.

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Section 2 . Burden of Proof and Procedure for Payment .

(a) An Indemnitee shall be presumed to be entitled to indemnification under this Article upon submission of a written claim (and, in an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition, where the undertaking in (b) below has been tendered to the Corporation) and thereafter the Corporation shall have the burden of proof to overcome the presumption that the claimant is so entitled.

(b) If a claim under this Article is not paid in full by the Corporation within sixty (60) days after a written claim has been received by the Corporation, except in the case of a claim for expenses incurred in defending a Proceeding in advance of its final disposition, in which case the applicable period shall be twenty (20) days, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, to the extent successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. Neither the failure of the Corporation (including its board of directors, its shareholders or independent legal counsel) to have made a determination prior to the commencement of such action that indemnification of or reimbursement or advancement of Expenses to the Indemnitee is proper in the circumstances nor an actual determination by the Corporation (including its board of directors, its shareholders or independent legal counsel) that the Indemnitee is not entitled to indemnification or to the reimbursement or advancement of expenses shall be a defense to the action or create a presumption that the Indemnitee is not so entitled.

(c) The right to indemnification and the payment of Expenses incurred in defending a proceeding in advance of its final disposition conferred in this Article shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Articles of Incorporation, Bylaws, agreement, vote of shareholders or disinterested directors or otherwise.

Section 3. Contract and Related Rights .

(a) Contract Rights . The right of an Indemnitee to indemnification and advancement of Expenses is a contract right upon which the Indemnitee shall be presumed to have relied in determining to serve or to continue to serve in his or her capacity with the Corporation. Such right shall continue as long as the Indemnitee shall be subject to any possible Proceeding. Any amendment to or repeal of this Article shall not adversely affect any right or protection of an Indemnitee with respect to any acts or omissions of such Indemnitee occurring prior to such amendment or repeal.

(b) Optional Insurance, Contracts, and Funding . The Corporation may: (i) maintain insurance, at its expense, to protect itself and any Indemnitee against any liability, whether or not the Corporation would have power to indemnify the individual against the same liability under RCW 23B.08.510 or .520, or a successor statute; (ii) enter into contracts with any Indemnitee in furtherance of this Article and consistent with the Washington Business Corporation Act; and (iii) create a trust fund, grant a security interest, or use other means (including without limitation a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided in this Article.

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(c) Severability . If any provision or application of this Article shall be invalid or unenforceable, the remainder of this Article and its remaining applications shall not be affected thereby, and shall continue in full force and effect.

Section 4. Exceptions . Any other provision herein to the contrary notwithstanding, the Corporation shall not be obligated pursuant to the terms of these Bylaws to indemnify or advance Expenses to Indemnitee with respect to any Proceeding:

(a) initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to Proceedings brought to establish or enforce a right to indemnification under these Bylaws or any other statute or law or as otherwise required under the statute; but such indemnification or advancement of Expenses may be provided by the Corporation in specific cases if the Board of Directors finds it to be appropriate.

(b) instituted by Indemnitee to enforce or interpret these Bylaws, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such Proceeding was not made in good faith or was frivolous.

(c) for which any of the Expenses for which indemnification is being sought have been paid directly to Indemnitee by an insurance carrier under a policy of officers’ and directors’ liability insurance maintained by the Corporation.

(d) if the Corporation is prohibited by the Washington Business Corporation Act or other applicable law as then in effect from paying such indemnification and/or advancement of Expenses.

ARTICLE VIII

AMENDMENT OF BYLAWS

Section 1. By the Shareholders . In accordance with the Washington Business Corporation Act and the Articles of Incorporation, these Bylaws may be amended or repealed at any regular or special meeting of the shareholders if notice of the proposed amendment is contained in the notice of the meeting.

Section 2 . By the Board of Directors . In accordance with the Washington Business Corporation Act and the Articles of Incorporation, these Bylaws may be amended or repealed by the affirmative vote of a majority of the whole Board of Directors of any meeting of the Board, if notice of the proposed amendment is contained in the notice of the meeting.

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Daybreak Oil and Gas, Inc.

601 West Main Ave Suite 1012 Spokane, WA 99201

Office: (509) 232-7674 Fax: (509) 455-8483

ETHICAL BUSINESS CONDUCT

"Quality and Integrity" has been a part of Daybreak Oil and Gas, Inc. (hereinafter called the Company) since its inception. Truthfulness, honesty, fairness, to each other, our Company, and to our investors, customers and suppliers are the ethical standards, by which we live and work. Each person who is an officer, director, employee or private contractor of the Company is a Company "associate" and has a responsibility to deal ethically in all aspects of the Company's business and to comply fully with all laws, regulations, and Company policies. Anyone who is an officer, director, employee or private contractor of the Company is expected to assume the responsibility for applying these standards of ethical conduct. When in doubt, any future officers, directors, employees or private contractors will have the responsibility to seek clarification from the appropriate Company representative. (See Disclosure, Guidance and Approvals below).

Each director, officer, employee and private contractor of the Company is required to comply with this Ethical Business Conduct Policy Statement (the “Ethics Policy Statement”). Individuals who violate the policies will be subject to disciplinary action and/or discharge. Counsel concerning these policies can be obtained from the Chief Financial Officer or Chief Compliance Officer (“Compliance Officer”). In any questionable area, you should obtain advice in advance of any action. (See the Administration section of this Policy Statement for details.)

Please note that this code is not an employment contract and does not modify the employment relationship between us and you. We do not create any contractual or legal rights or guarantees by issuing these policies, and we reserve the right to amend, alter and terminate policies at any time and for any reason.

CONFLICTS OF INTEREST

A CONFLICT OF INTEREST EXISTS WHEN AN INDIVIDUAL'S PRIVATE INTEREST CONFLICTS WITH THE INTERESTS OF THE COMPANY. WHEN AN INDIVIDUAL'S LOYALTY TO THE COMPANY AND CONDUCT OF RESPONSIBILITIES AND DUTIES TOWARDS THE COMPANY IS PREJUDICED BY ACTUAL OR POTENTIAL BENEFIT FROM ANOTHER SOURCE, A CONFLICT OF INTEREST EXISTS .

We are confident of the individual loyalty and honesty of our associates. Good relations with investors, customers and suppliers and the integrity of our associates are critical sources of goodwill and absolutely necessary to our success. Associates should never be in a position where their personal interests or third parties inappropriately influence their judgment on Company matters, or create the perception of impropriety.

No associate should be subject, or even reasonably appear to be subject to, influences, interests or relationships that conflict with the best interests of the Company. This means avoiding any activity that might compromise or seem to compromise the integrity of the Company or the associate. An associate shall avoid conflicts of interests in connection with the conduct of the Company's business except as expressly permitted by this Ethics Policy Statement.

Common Sources of Conflicts

Although it is impossible to prepare a list of all conflict of interest situations, potential conflicts of interest generally arise in four situations:

●

INTEREST OF ASSOCIATE - When an associate, a member of the associate's family or a trust in which the associate is involved, has a significant direct or indirect financial interest in, or obligation to, a joint venture partner, an actual or potential competitor, supplier, lender, service provider or customer of the Company.

●	INTEREST OF RELATIVE - When an associate conducts business on behalf of the Company with a joint venture partner, supplier or customer of whom a relative by blood or marriage is a principal, partner, shareholder, officer, employee or representative.

●

GIFTS - When an associate, a member of the associate’s household, a trust in which the associate is involved, or any other person or entity designated by the associate, accepts gifts, credits, payments, services or anything else of more than token or nominal value from an actual or potential joint interest partner, competitor, supplier or customer.

●	MISUSE OF INFORMATION - When an employee or consultant misuses information obtained in the course of employment or consulting work with Daybreak.

While it is not possible to describe every situation, it is useful to consider a few examples in which clear conflicts of interest are present so that ground rules can be established:

●

POSITION OF INFLUENCE - If an associate or a member of that associate's family has a financial or other beneficial interest in an actual or potential joint interest partner, supplier or customer, the associate may not, without full disclosure and specific written clearance by appropriate Company representatives, influence decisions with respect to business with such joint interest partner, supplier or customer. Such positions include situations where associates recommend oil and gas joint venture partnerships, the use of financial services (including investor relations and brokerage services), create specifications for suppliers' raw materials, products or services; recommend, evaluate, test or approve such raw materials, products or services; or participate in the selection of, or negotiating arrangements with, suppliers.

●

OTHER POSITIONS - It is expressly acceptable for individuals of this Company to serve as officers, directors or principals of other companies at their discretion. If the other company is in the oil and gas industry or the financial services industry (including investor relations or brokerage business) then the Board of Directors of Daybreak will need to grant specific written permission for any individual to serve as an officer, director or principal of the company.

Because conflicts of interest have the potential of serious abuse, all conflict of interest circumstances affecting any associate should be disclosed to the appropriate Company representative and Board of Directors in writing. While transactions affected by a conflict of interest must generally be avoided, there may be times when such transactions are nevertheless fair and appropriate and in the Company's best interest. When an associate believes a potential transaction that may be affected by a conflict of interest should nevertheless be pursued, they must disclose all material terms of the proposed matter to the appropriate Company representative in advance in writing so that it may be brought to the Board of Directors’ attention. No such transaction may be pursued, however, unless it is approved in advance by the appropriate, duly authorized and disinterested officers of the Company, the board of directors or an appropriate committee thereof.

All associates shall carry on the business of the Company in compliance with all applicable laws. Without limiting this obligation, the following conduct is prohibited:

●	Officer, director, employee or private contractor theft, fraud, embezzlement, misappropriation, or any form of wrongful conversion of property belonging to the Corporation or another employee.

●	Any act of fraud, deception or intentional misrepresentation against or involving the Corporation, an investor, a customer, a supplier or any other party.

●	Any act of bribery, including a promise, offer or gift of money or anything of value made or offered by an employee to:

A government official or someone acting for the government. In some countries it is permissible to pay government employees for performing certain required duties. These facilitating payments, as they are known, are small sums paid to facilitate or expedite routine, non-discretionary government actions, such as obtaining phone service or an ordinary license, or

2.	A person employed by, or acting on behalf of, an investor, a customer, supplier or other organization, with which the Corporation does business or has prospective business, (except in the case of certain permitted gifts described below).

●	The destruction or alteration of Corporation records in order to falsify, conceal or misrepresent information for any purpose including any motivation to:

1.	Avoid criticism for errors of judgment or to conceal failure to follow a supervisor's instructions.

2.	Show a performance record better than, or different from, performance actually achieved.

3.	Misrepresent the employee's performance, activities, or other transactions, or those of another employee.

●	Political contributions of money, services, or other property of the Corporation that are in violation of the law when the contributions are made.

●	Violations of securities laws rules or regulations, including concealment of information required to be disclosed in filings the Corporation makes with the Securities and Exchange Commission.

●

Antitrust laws are designed to ensure a fair and competitive marketplace by prohibiting various types of anticompetitive behavior. Some of the most serious antitrust offenses occur between competitors, such as agreements to fix prices or to divide customers, territories or markets. Accordingly, it is important to avoid discussions with our competitors regarding pricing, terms and conditions, costs, marketing plans, customers and any other proprietary or confidential information. Foreign countries often have their own body of antitrust laws, so our international operations may also be subject to antitrust laws of other foreign countries.

●

Unlawful agreements need not be written. They can be based on informal discussions or the mere exchange of information with a competitor. If you believe that a conversation with a competitor enters an inappropriate area, end the conversation at once. Membership in trade associations is permissible only if approved in advance by our Compliance Officer.

●	Whenever any question arises as to application of antitrust laws, you should consult with legal counsel, and any agreements with possible antitrust implications should be made only with the prior approval of legal counsel.

This discussion is not comprehensive and you are expected to familiarize yourself with all laws and regulations relevant to your position with us, as well as all our related written policies on these laws and regulations. To this end, our Compliance Officer is available to answer your calls and questions. If you have any questions concerning any possible reporting or compliance obligations, or with respect to your own duties under the law, you should not hesitate to call and seek guidance from our Compliance Officer.

Associates and their families generally shall not solicit or accept gifts, fees, bequests, services or entertainment from investors, customers, suppliers or prospective customers. A gift is regarded as any type of gratuity, favor, loan, legacy, fee, compensation, or anything of monetary value. All such gifts are prohibited except:

●

Business entertainment and other courtesies such as meals, sporting events, and the like, that involves no more than ordinary amenities, and can be properly reciprocated by the employee and charged as a business expense. Lavish or extravagant entertainment, such as weekend trips, etc., should not be accepted unless full reimbursement is made by the recipient to the donor.

●	Gifts received because of kinship, marriage, or social relationships and not because of any business relationship.

●	Unsolicited advertising or promotional materials that are made widely available.

●	Customer or supplier paid travel or lodging where the trip has a legitimate business purpose. An appropriate Company representative must approve any such trips in advance in writing.

●	Fees or other compensation received from an organization in which membership or an official position is held, subject to prior written approval by an appropriate Company representative.

Associates who believe that acceptance of a permitted gift might make them feel obligated and therefore improperly influenced in the performance of their duties should not accept it, or turn it over to the Company. Associates, who are unsure whether a gift is a violation of the law and the Code, should seek guidance from an appropriate Company representative.

Likewise, no associate of the Company or members of his or her family may extend a gift to any existing or prospective investor, customer or supplier that will not meet these same criteria.

MISUSE OF INFORMATION

No information obtained as a result of employment or association with the Company may be used for personal profit or as the basis for a "tip" to others unless the Company has made such information generally available to the public. This is true whether or not direct injury to the Company appears to be involved. The requirement is not limited to transactions relating to the Company stock but also applies to securities of any other company and includes any situation in which information may be used as the basis for unfair bargaining with an outsider. The public disclosure of confidential data and trade secrets relating to our business can have a material adverse effect on the Company and is prohibited.

For more information about our policies concerning the securities laws, you should refer to our more detailed Securities Law Compliance Policy.

CORPORATE OPPORTUNITIES

A CORPORATE OPPORTUNITY IS AN OPPORTUNITY USEFUL TO THE COMPANY THAT IS DISCOVERED THROUGH THE USE OF COMPANY PROPERTY, OPPORTUNITY OR POSITION AS A COMPANY ASSOCIATE.

Associates are prohibited from taking corporate opportunities for themselves. When an associate uses corporate property, corporate information or corporate position for personal gain, he or she is taking a corporate opportunity. You must use corporate opportunities only for advancing the legitimate business interests of the Company.

COMPLETE TRUTHFUL AND FULL DISCLOSURES IN PUBLIC FILINGS

The Company's filings made under the Securities Exchange Act of 1934, such as quarterly and annual reports and proxy statements, are to contain all required disclosures. All such filings shall provide required information in a full, fair, accurate, timely, and understandable manner. The Company has procedures in place to achieve these goals with respect to securities reports and shareholder communications. Any employee who has concerns about the accuracy or adequacy of disclosures being made in these documents should feel free to contact the Chief Financial Officer. No employee shall engage in any conduct with the intent of impairing the Company’s compliance with this provision.

The Company's financial statements and books and records on which they are based must accurately reflect all corporate transactions. All receipts and disbursements of corporate funds shall be promptly and properly recorded on the Company's books. The Company's records must disclose the nature and purpose of the transactions. The Company's investors, creditors and other decision makers rely on its records and have a right to information which is timely and accurate.

●	All employees and private contractors shall cooperate fully with the independent auditors of the Company and under no circumstances withhold any information from them.

●	A director, officer, employee or private contractor may not maintain the Company's accounting or other records, or cause them to be maintained, in such a way that they do not reflect the true nature of transactions, account balances or other matters with clarity and completeness.

●	A director, officer, employee or private contractor may not establish for any purpose an unauthorized, undisclosed, or unrecorded fund or asset account involving Company assets.

●	A director, officer, employee or private contractor may not allow transactions with an investor, supplier, agent, or customer to be structured or recorded in a way not consistent with normal business practice or generally accepted accounting principles.

●	No false, incomplete, misleading or artificial entries or records shall be made on the books or records of the Company or its subsidiaries for any reason. The shifting of charges or costs to inappropriate accounts is prohibited.

●	No payment on behalf of the Company shall be made or approved with the understanding that it will or might be used for something other than the stated purposes.

●	Undisclosed or unrecorded corporate funds shall not be established for any purpose, nor shall the Company funds be placed in any personal or non-corporate account.

●	"Slush funds" or similar off-book accounts, where there is no accounting for receipts or expenditures on corporate books, are prohibited.

A system of internal accounting controls shall be maintained which is sufficient to provide reasonable assurances that transactions:

●	are executed in accordance with management's authorization.

●	are recorded in a manner that permits preparation of the Company's financial statements in conformity with generally accepted accounting principles and applicable regulations.

●	are recorded so as to maintain accountability for the Company's assets.

No director, officer, employee or private contractor acting on behalf of the Company shall engage in any activity that circumvents or seeks to circumvent the Company's systems of internal controls.

Directors, Officers, employees and private contractors may be required periodically to certify their understanding of and intent to comply with or their past compliance with this Code.

Any employee or private contractor who violates this Ethics Policy Statement is subject to possible suspension or other disciplinary action, including discharge. Any employee or private contractor who assists in, or knowingly fails to report, a violation of this Code is also subject to suspension, discharge or other appropriate action. Any employee or private contractor who suspects a violation of these policies (including any material transaction or relationship that gives rise to a conflict of interest which to the knowledge of such employee or private contractor has not been disclosed to the appropriate persons) should inform the appropriate Company representatives.

Failure to read the code or sign a confirmation does not excuse you from complying with this code.

A copy of the Ethical Business Conduct Policy Statement is provided to each new associate and is available at all times to any associate on the Company website.

Disclosure, Guidance and Approvals

This Ethics Policy Statement permits or requires associates in various situations to disclose certain facts to, and seek guidance or obtain approval from "appropriate Company representatives." If any associate should have reason to believe that any situation, occurrence or event violates this Ethical Business Conduct Policy Statement, the associate shall bring the matter to the appropriate Company representative.

For each associate, the "appropriate Company representative" is as follows:

●	In the case of any non-officer employee, such employee's supervisor. If such employee has concerns regarding the supervisor's objectivity or independence with respect to the matter, the appropriate Company representative is the Chief Financial Officer or the Chief Compliance Officer.

●

In the case of any officer, private contractor or management employee (other than the CEO, President, CFO or Controller) the appropriate Company representative is the Chief Financial Officer. If such employee has concerns regarding the Chief Financial Officer's objectivity or independence with respect to the matter, the appropriate Company representative is the Chief Executive Officer or the President.

●	In the case of the Chief Executive Officer, the President, the Chief Financial Officer or the Controller, and any director, the appropriate Company representative is the Chairman of the Audit Committee of the Board of Directors or, if the Chairman so determines, the full Audit Committee.

These are the persons associates should contact to seek guidance, to clarify issues and to obtain confirmation that a particular course of conduct or transaction is permissible or impermissible under this Ethics Policy Statement.

In order to audit compliance with this Ethics Policy Statement, each associate shall furnish to the Compliance Officer of the Company an “Annual Affirmation Certificate” (see Annex “A”). All such Annual Affirmation Certificates shall be maintained in the files of the Compliance Officer of the Company.

The Compliance Officer shall keep a list from year to year of any on-going actual or potential violations and shall review such a list at the time of each annual audit and furnish a copy thereof to the independent auditors of the Company and the Subsidiaries and to the Audit Committee of the Board of Directors of the Company.

Any exceptions or material changes to the Ethical Business Conduct Policy Statement must be approved by the Nominating and Corporate Governance Committee and reported accordingly.

We will not retaliate against anyone who, in good faith, notifies us of a possible violation of law or this code, nor will we tolerate any harassment or intimidation of any employee who reports a suspected violation. In addition, there are federal “whistleblower” laws that are designed to protect employees from discrimination or harassment for providing information to us or governmental authorities, under certain circumstances, with respect to certain laws such as those governing workplace safety, the environment, securities fraud and federal law relating to fraud against shareholders.

We are committed to providing equal employment opportunities for all our employees and will not tolerate any speech or conduct that is intended to, or has the effect of, discriminating against or harassing any qualified applicant or employee because of his or her race, color, religion, sex (including pregnancy, childbirth or related medical conditions), national origin, age, physical or mental disability, veteran status or any characteristic protected by law. We will not tolerate discrimination or harassment by anyone – managers, supervisors, co-workers, vendors or our customers. This policy extends to every phase of the employment process, including: recruiting, hiring, training, promotion, compensation, benefits, transfers, discipline and termination, layoffs, recalls, and company-sponsored educational, social and recreational programs, as applicable. If you observe conduct that you believe is discriminatory or harassing, or if you feel you have been the victim of discrimination or harassment, you should notify our compliance officer immediately.

Not only do we forbid unlawful discrimination, we take affirmative action to ensure that applicants are employed, and employees are treated during employment, without regard to their race, color, religion, sex (including pregnancy, childbirth or related medical conditions), national origin, age, physical or mental disability, veteran status or any characteristic protected by law.

One of the tenants of this code, however, is that all employees are accountable for promoting equal opportunity practices within our company. We must do this not just because it is the law, but because it is the right thing to do.

We will not retaliate against any employee for filing a good faith complaint under our anti-discrimination and anti-harassment policies or for cooperating in an investigation and will not tolerate or permit retaliation by management, employees or co-workers. To the fullest extent possible, the Company will keep complaints and the terms of their resolution confidential. If an investigation confirms harassment or discrimination has occurred, the Company will take corrective action against the offending individual, including such discipline up to and including immediate termination of employment, as appropriate.

We are committed to providing safe and healthy working conditions by following all occupational health and safety laws governing our activities.

We believe that management and each and every employee have a shared responsibility in the promotion of health and safety in the workplace. You should follow all safety laws and regulations, as well as company safety policies and procedures. You should immediately report any accident, injury or unsafe equipment, practices or conditions.

You also have an obligation to carry out company activities in ways that preserve and promote a clean, safe, and healthy environment. You must strictly comply with the letter and spirit of applicable environmental laws and the public policies they represent.

The consequences of failing to adhere to environmental laws and policies can be serious. Our company, as well as individuals, may be liable not only for the costs of cleaning up pollution, but also for significant civil and criminal penalties. You should make every effort to prevent violations from occurring and report any violations to your immediate supervisor or our Compliance Officer.

Our records should be retained or discarded in accordance with our record retention policies and all applicable laws and regulations. From time to time we are involved in legal proceedings that may require us to make some of our records available to third parties. Our legal counsel will assist us in releasing appropriate information to third parties and provide you (or your immediate supervisor) with specific instructions. It is a crime to alter, destroy, modify or conceal documentation or other objects that are relevant to a government investigation or otherwise obstruct, influence or impede an official proceeding. The law applies equally to all of our records, including formal reports as well as informal data such as e-mail, expense reports and internal memos. If the existence of a subpoena or a pending government investigation is known or reported to you, you should immediately contact our Compliance Officer and you must retain all records that may pertain to the investigation or be responsive to the subpoena.

ADOPTED AND ACCEPTED ON APRIL 3, 2008 BY THE DIRECTORS OF DAYBREAK OIL and GAS, INC.

DAYBREAK OIL AND GAS, INC.

ETHICAL BUSINESS CONDUCT POLICY STATEMENT

ANNUAL AFFIRMATION CERTIFICATE

Dear Chief Compliance Officer:

I acknowledge receipt of and/or availability on the Company Website of, and I have read and am familiar with, the Company’s Ethical Business Conduct Policy Statement, and I further acknowledge that:

(a)	The Company’s Ethical Business Conduct Policy Statement has been adopted as the official policy of the Company by its Board; and

(b)	It is my responsibility to comply fully with the Policy Statement in all of my activities on behalf of the Company and its Subsidiaries; and

(c)	As an employee of the Company or its Subsidiaries, it is my responsibility to help advise and instruct Employees that the business and operations of the Company and its Subsidiaries are to be conducted in full compliance with the Policy Statement.

Check the appropriate box below in Section 1:
1. (a.) I have not violated, and to the best of my knowledge, the members of my family, as defined in the Ethics Policy Statement, did not have any significant financial interest in violation of, the Ethical Business Conduct Policy Statement during the fiscal year ended February 29, 200___.	_______________

-or-

(b.) I may have violated, or a member of my family may have had a significant financial interest in violation of, the Ethical Business Conduct Policy Statement during the fiscal year ended February 29, 200____, as disclosed on the attached statement.	_______________

Check the appropriate box below in Section 2:
2. (a.) I do not have knowledge of any unethical or fraudulent practices at the Company that are in violation of the Ethical Business Conduct Policy Statement.	_______________

-or-

(b.) I am aware of unethical or fraudulent practices that are in violation of the Ethical Business Conduct Policy Statement and wish to report suspected violation(s) as disclosed on the attached statement.	_______________



Print Name			Title/Position

Family members include your spouse, parents, children, brothers, sisters, in-laws, and life partner.

Two tests determine if a “significant financial interest” exists:

●	You or a family member owns more than 1% of the outstanding stock of a business or you or a family member has or shares discretionary authority with respect to the decisions made by that business, or

●	The investment represents more than 5% of your total assets or of your family member’s total assets.

DAYBREAK OIL AND GAS, INC.

Code of Ethics for Senior Financial Officers

This Code of Ethics for Senior Financial Officers has been adopted by the Board of Directors of Daybreak Oil and Gas, Inc. to promote honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships, proper disclosure of financial information in the Company’s periodic reports, and compliance with applicable laws, rules, and regulations by the Company’s senior financial officers. This Code is posted on the Company’s website.

Full Compliance with this Code of Ethics for Senior Financial Officers and with the Company’s Ethical Business Conduct Policy Statement is required of all individuals designated as senior financial officers of the Company. Senior financial officers consist of the Company’s Chief Executive Officer, Chief Financial Officer, Chief Accounting Officer, Controller, and other persons whom the Audit Committee of the Board of Directors designates as such.

Principles and Practices

In performing their duties, senior financial officers must:

●	Maintain high standards of honest and ethical conduct and avoid any actual or apparent conflict of interest as defined in the Company’s Ethical Business Conduct Policy Statement, including conflicts between personal and professional relationships;

●	Report to the Audit Committee of the Board of Directors any conflict of interest that may arise and any material transaction or relationship that reasonably could be expected to give rise to a conflict;

●

Take all steps reasonably necessary to ensure the Company’s full, fair, accurate, timely, and understandable disclosure of financial and other information required to be filed with the Securities and Exchange Commission, including without limitation, taking reasonable steps to ensure that the Company’s internal accounting controls are followed at all times;

●

Take all steps reasonably necessary to ensure the Company’s compliance with all applicable governmental laws, rules, and regulations relating to financial reporting, accounting and related controls, including without limitation, taking reasonable steps to ensure the Company’s familiarity with all such laws, rules and regulations through the retention of qualified legal, financial and accounting experts or other means;

●	Comply in his or her personal conduct with all applicable governmental laws, rules, and regulations relating to financial reporting, accounting and related controls, and never intentionally and willfully violate any such law, rule or regulation in the course of his or her employment;

●	Comply with this Code and the Company’s Ethical Business Conduct Policy Statement with an understanding that violation of either may result in disciplinary action including termination of employment; and

●	Promptly report violations of this Code to the Audit Committee.

Exceptions and Waivers

Any request for a waiver of any provision of this Code must be submitted in writing to the Audit Committee. Any waiver of this Code will be disclosed promptly on a Current Report on Form 8-K or any other means approved by the Securities and Exchange Commission.

Compliance and Accountability

This Code incorporates by reference the Company’s Ethical Business Conduct Policy Statement that applies to all directors, officers, and employees. Transgressions under this Code shall be treated as violations of the Company’s Ethical Business Conduct Policy Statement.

If there is a conflict between this Code and the Company’s Ethical Business Conduct Policy Statement, or any applicable law, rule, or regulation, then the Company’s compliance officer must be consulted.