Exhibit 10.2

PROMISSORY NOTE
$4,000,000.00  August 15, 2016
FOR VALUE RECEIVED, BLUE DOLPHIN PIPE LINE COMPANY, a Delaware corporation
(“Debtor”), unconditionally promises to pay to the order of LAZARUS ENERGY
HOLDINGS, LLC, a Delaware corporation (together with its successors and assigns,
“Lender”), without setoff, at its offices at 801 Travis, Suite 2100 Houston,
Texas 77002, or at such other place as may be designated by Lender, the
principal amount of FOUR MILLION AND NO/100 DOLLARS ($4,000,000.00), together
with interest computed daily on the outstanding principal balance hereunder, at
an annual interest rate (the “Rate”), and in accordance with the payment
schedule indicated below. This PROMISSORY NOTE (this “Note”) is executed
pursuant to and evidences a loan funded by Lender under that certain LOAN AND
SECURITY AGREEMENT dated as of even date herewith (the “Effective Date”),
between Debtor and Lender (as amended, restated or otherwise modified from time
to time, the “Loan Agreement”), to which reference is made for a statement of
the collateral, rights and obligations of Debtor and Lender in relation thereto,
but neither this reference to the Loan Agreement nor any provision thereof shall
affect or impair the absolute and unconditional obligation of Debtor to pay
unpaid principal of and interest on this Note when due. Capitalized terms not
otherwise defined herein shall have the same meanings as in the Loan Agreement.
1. Rate. Prior to the Maturity Date or an Event of Default, the Rate shall be
the LESSER of (a) the MAXIMUM RATE (defined below), or (b) SIXTEEN PERCENT
(16.0%). From and after the Maturity Date, the Rate shall be the Maturity Rate.
Notwithstanding any provision of this Note or any other agreement or commitment
between Debtor and Lender, whether written or oral, express or implied, Lender
shall never be entitled to charge, receive or collect, nor shall amounts
received hereunder be credited so that Lender shall be paid, as interest a sum
greater than interest at the Maximum Rate. It is the intention of the parties
that this Note, and all instruments securing the payment of this Note or
executed or delivered in connection therewith, shall comply with applicable law.
If Lender ever contracts for, charges, receives or collects anything of value
which is deemed to be interest under applicable law, and if the occurrence of
any circumstance or contingency, whether acceleration of maturity of this Note,
prepayment of this Note, delay in advancing proceeds of this Note or any other
event, should cause such interest to exceed the Maximum Rate, any amount which
exceeds interest at the Maximum Rate shall be applied to the reduction of the
unpaid principal balance of this Note or any other Indebtedness, and if this
Note and such other Indebtedness are paid in full, any remaining excess shall be
paid to Debtor. In determining whether the interest exceeds interest at the
Maximum Rate, the total amount of interest shall be spread, prorated and
amortized throughout the entire term of this Note until its payment in full. The
term “Maximum Rate” as used in this Note means the maximum nonusurious rate of
interest per annum permitted by whichever of applicable United States federal
law or Texas law permits the higher interest rate, including to the extent
permitted by applicable law, any amendments thereof hereafter or any new law
hereafter coming into effect to the extent a higher Maximum Rate is permitted
thereby. If at any time the Rate shall exceed the Maximum Rate, the Rate shall
be automatically limited to the Maximum Rate until the total amount of interest
accrued hereunder equals the amount of interest which would have accrued if
there had been no limitation to the Maximum Rate. To the extent, if any, that
Chapter 303 of the Texas Finance Code, as amended, (the “Act”) is relevant to
Lender for purposes of determining the Maximum Rate, the parties elect to
determine the Maximum Rate under the Act pursuant to the “weekly ceiling” from
time to time in effect, as referred to and defined in §303.001-303.016 of the
Act; subject, however, to any right Lender subsequently may have under
applicable law to change the method of determining the Maximum Rate.
2. Accrual Method. Interest on the Indebtedness evidenced by this Note shall be
computed on the basis of a THREE HUNDRED SIXTY (360) day year and shall accrue
on the actual number of days elapsed for any whole or partial month in which
interest is being calculated. In computing the number of days during which
interest accrues, the day on which funds are initially advanced shall be
included regardless of the time of day such advance is made, and the day on
which funds are repaid shall be included unless repayment is credited prior to
the close of business on the Business Day received as provided herein.
3. Payment Schedule. Except as expressly provided herein to the contrary, all
payments on this Note shall be applied in the following order of priority:
(a) the payment or reimbursement of any expenses, costs or obligations (other
than the outstanding principal balance hereof and interest hereon) for which
either Debtor shall be obligated or Lender shall be entitled pursuant to the
provisions of this Note or the other Loan Documents, (b) the payment of accrued
but unpaid interest hereon, and (c) the payment of all or any portion of the
principal balance hereof then outstanding hereunder, in the direct order of
maturity. If an Event of Default exists under any of the other Loan Documents,
then Lender may, at the sole option of Lender, apply any such payments, at any
time and from time to time, to any of the items specified in clauses (a), (b) or
(c) above without regard to the order of priority otherwise specified herein and
any application to the outstanding principal balance hereof may be made in
either direct or inverse order of maturity. If any payment of principal or
interest on this Note shall become due on a day other than a Business Day, such
payment shall be made on the next succeeding Business Day and such extension of
time shall be included in computing interest in connection with such payment.
This Note shall be due and payable as follows:
 
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(a) ONE (1) principal and interest payment in the amount of FIVE HUNDRED
THOUSAND DOLLARS ($500,000), the amount due to Debtor under that Certain
Easement Agreement dated as of December 11, 2013 by and between Debtor and FLNG
Land II, Inc. (a true, correct and complete copy of said Easement Agreement is
attached hereto as Exhibit A, as amended, the “Easement Agreement”), shall be
paid by November 15th, 2016 (“Interim Payment”); and
(b) ONE (1) final payment of the outstanding principal balance of this Note,
including all accrued and unpaid interest thereon, on the earlier of (i) the
acceleration of the Indebtedness pursuant to the terms of the Loan Documents; or
(ii) AUGUST 15, 2018 (the earlier of such dates being the “Maturity Date”).
4. Waivers, Consents and Covenants. Debtor (a) waives presentment, demand,
protest, notice of demand, notice of intent to accelerate, notice of
acceleration of maturity, notice of protest, notice of nonpayment, notice of
dishonor, and any other notice required to be given under the law in connection
with the delivery, acceptance, performance, default or enforcement of this Note
or any other documents executed in connection with this Note or any other Loan
Documents now or hereafter executed in connection with any obligation of Debtor
to Lender; (b) consents to all delays, extensions, renewals or other
modifications of this Note or the Loan Documents, or waivers of any term hereof
or of the Loan Documents, or release or discharge by Lender, or release,
substitution or exchange of any security for the payment hereof, or the failure
to act on the part of Lender, or any indulgence shown by Lender (without notice
to or further assent); (c) agrees that no such action, failure to act or failure
to exercise any right or remedy by Lender shall in any way affect or impair the
obligations of Debtor or be construed as a waiver by Lender of, or otherwise
affect, any of Lender’s rights under this Note or under any of the Loan
Documents; and (d) agrees to pay, on demand, all costs and expenses of
collection or defense of this Note and/or the enforcement or defense of Lender’s
rights with respect to, or the administration, supervision, preservation, or
protection of, or realization upon, any property securing payment hereof,
including, without limitation, reasonable attorney’s fees, including fees
related to any suit, mediation or arbitration proceeding, out of court payment
agreement, trial, appeal, bankruptcy proceedings or other proceeding, in such
amount as may be determined reasonable by any arbitrator or court, whichever is
applicable.
5. Prepayments. Prepayments may be made in whole or in part at any time without
premium or penalty.
6. Remedies Upon Default. Whenever there is an Event of Default under the Loan
Documents the entire balance outstanding hereunder and all other obligations of
Debtor to Lender (however acquired or evidenced) shall, at the option of Lender,
become immediately due and payable and any obligation of Lender to permit
further borrowing under this Note shall immediately cease and terminate. From
and after (a) an Event of Default, or (b) the Maturity Date (whether by
acceleration or otherwise), the Rate on the unpaid principal balance of this
Note shall be increased at Lender’s discretion up to the lesser of (i) EIGHTEEN
PERCENT (18.00%), or (ii) the MAXIMUM RATE (the lesser of such rates being the
“Maturity Rate”). The provisions herein for a Maturity Rate (a) shall not be
deemed to extend the time for any payment hereunder or to constitute a “grace
period” giving Debtor a right to cure any default, and (b) shall be deemed the
contract rate of interest applicable to the outstanding principal balance of the
Note from and after the occurrence of one of the events set forth in this
Section. At Lender’s option, any accrued and unpaid interest, fees or charges
may, for purposes of computing and accruing interest on a daily basis after the
due date of this Note or any installment thereof, be deemed to be a part of the
principal balance, and interest shall accrue on a daily compounded basis after
such date at the Maturity Rate provided in this Note until the entire
outstanding balance of principal and interest is paid in full. Upon an Event of
Default, Lender is hereby authorized at any time, at its option and without
notice or demand, to set off and charge against any deposit accounts of the
Debtor (as well as any money, instruments, securities, documents, chattel paper,
credits, claims, demands, income and any other property, rights and interests of
Debtor), which at any time shall come into the possession or custody or under
the control of Lender or any of its agents, affiliates or correspondents, any
and all obligations due hereunder. Additionally, Lender shall have all rights
and remedies available under each of the Loan Documents, as well as all rights
and remedies available at law or in equity.
 
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7. Waiver. The failure at any time of Lender to exercise any of its options or
any other rights hereunder shall not constitute a waiver thereof, nor shall it
be a bar to the exercise of any of its options or rights at a later date. All
rights and remedies of Lender shall be cumulative and may be pursued singly,
successively or together, at the option of Lender. The acceptance by Lender of
any partial payment shall not constitute a waiver of any default or of any of
Lender’s rights under this Note. No waiver of any of its rights hereunder, and
no modification or amendment of this Note, shall be deemed to be made by Lender
unless the same shall be in writing, duly signed on behalf of Lender; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Lender or the obligations of Debtor to
Lender in any other respect at any other time.
8. Applicable Law, Venue and Jurisdiction. Debtor agrees that this Note shall be
deemed to have been made in the State of Texas at Lender’s address indicated at
the beginning of this Note and shall be governed by, and construed in accordance
with, the laws of the State of Texas and is performable in the City and County
of Texas indicated at the beginning of this Note. In any litigation in
connection with or to enforce this Note or any Loan Documents, Debtor
irrevocably consents to and confers personal jurisdiction on the courts of the
State of Texas or the United States courts located within the State of Texas.
Nothing contained herein shall, however, prevent Lender from bringing any action
or exercising any rights within any other state or jurisdiction or from
obtaining personal jurisdiction by any other means available under applicable
law.
9. Partial Invalidity. The unenforceability or invalidity of any provision of
this Note shall not affect the enforceability or validity of any other provision
herein and the invalidity or unenforceability of any provision of this Note or
of the Loan Documents to any person or circumstance shall not affect the
enforceability or validity of such provision as it may apply to other persons or
circumstances.
10. Binding Effect. This Note shall be binding upon and inure to the benefit of
Debtor and Lender and their respective successors, assigns, heirs and personal
representatives, provided, however, that no obligations of Debtor hereunder can
be assigned without prior written consent of Lender.
11. Controlling Document. To the extent that this Note conflicts with or is in
any way incompatible with any other document related specifically to the loan
evidenced by this Note, this Note shall control over any other such document,
and if this Note does not address an issue, then each other such document shall
control to the extent that it deals most specifically with an issue.
12. Commercial Purpose. DEBTOR REPRESENTS TO LENDER THAT THE PROCEEDS OF THIS
LOAN ARE TO BE USED PRIMARILY FOR BUSINESS, COMMERCIAL OR AGRICULTURAL PURPOSES
AND NOT FOR PERSONAL, FAMILY OR HOUSEHOLD PURPOSES. DEBTOR ACKNOWLEDGES HAVING
READ AND UNDERSTOOD, AND AGREES TO BE BOUND BY, ALL TERMS AND CONDITIONS OF THIS
NOTE.
13. Collection. If this Note is placed in the hands of an attorney for
collection, or if it is collected through any legal proceeding at law or in
equity or in bankruptcy, receivership or other court proceedings, Debtor agrees
to pay all costs of collection, including, but not limited to, court costs and
reasonable attorneys’ fees.
14. Notice of Balloon Payment. At maturity (whether by acceleration or
otherwise), Debtor must repay the entire remaining principal balance of this
Note and unpaid interest then due. Lender is under no obligation to refinance
the outstanding principal balance of this Note (if any) at that time. Debtor
will, therefore, be required to make payment out of other assets Debtor may own;
or Debtor will have to find a lender willing to lend Debtor the money at
prevailing market rates, which may be higher than the interest rate on the
outstanding principal balance of this Note.
15. Waiver of Jury Trial. DEBTOR HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES
ALL RIGHT TO TRIAL BY JURY IN ANY ACTION, SUIT, PROCEEDING, OR COUNTERCLAIM THAT
RELATES TO OR ARISES OUT OF THIS NOTE OR ANY OF THE LOAN DOCUMENTS OR THE ACTS
OR FAILURE TO ACT OF OR BY LENDER IN THE ENFORCEMENT OF ANY OF THE TERMS OR
PROVISIONS OF THIS NOTE OR THE OTHER LOAN DOCUMENTS.
REMAINDER OF PAGE LEFT INTENTIONALLY BLANK
 
 
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EXECUTED as of the Effective Date.
 

DEBTOR:
 
ADDRESS:
 
 
 
BLUE DOLPHIN PIPE LINE COMPANY
 
801 Travis Street, Suite 2100
 
 
Houston, TX 77002
By: BLUE DOLPHIN ENERGY COMPANY
 
 
Its: Sole Shareholder
 
 
 
 
 
By:/s/ TOMMY L. BYRD
 
 
Name: Tommy L. Byrd
 
 
Title: CFO
 
 

  
 
 
 
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