EXHIBIT 10.1
 

 
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID
ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE BORROWER THAT SUCH REGISTRATION
IS NOT REQUIRED.
 

 
SECURED SUBORDINATED PROMISSORY NOTE
 
 Danville, California
 Effective Date:  November 1, 2012

This SECURED SUBORDINATED PROMISSORY NOTE (this “Note”) is made this February
14, 2013, with an effective date of November 1, 2012 (the “Effective Date”), by
Pacific Energy Development Corp., a Nevada corporation (the “Borrower”) in favor
of MIE Jurassic Energy Corporation (the “Holder”).  Pursuant to the terms and
conditions of this Note, the Holder shall, from time to time and at the request
of the Borrower, make cash advances to the Borrower in order to fund fees and
expenses allocable to Borrower as:

(A) a holder of 20% of the membership interests of Condor Energy Technology LLC
(“Condor”) for the purposes of funding (i) authorizations for expenditures
(“AFEs”) approved and due and payable by Condor as a working interest owner and
the operator of the Niobrara asset located in Weld and Morgan Counties, Colorado
(the “Niobrara Asset”), including with respect to the  FFT2H well previously
drilled and completed in Weld County, Colorado (the “FFT2H Well”), and future
oil and gas wells to be drilled and completed by Condor in the Niobrara Asset,
and (ii) funding general corporate, operational and Niobrara Asset-related
development expenses due and payable by Condor; and

(B) an 18.75% working interest owner in the Niobrara Asset, including with
respect to the FFT2H well previously drilled and completed (previously funded by
the Holder through advances made to Condor), pursuant to AFEs approved and due
and payable by the Borrower as a working interest owner in the Niobrara Asset
(any such advances made by the Holder being referred to herein as an “Advance”).

Upon each Advance, the parties agree that this Note shall represent the
obligations of the Borrower with respect to such Advance and with respect to any
Advances previously made by the Holder and still outstanding.  Each Advance
shall be reflected on the Payment Schedule attached hereto pursuant to the terms
hereof.  The Borrower and the Holder agree and acknowledge that this Note
represents all principal and accrued interest due and payable by the Borrower to
the Holder with respect to all previous amounts advanced to Condor on behalf of
the Borrower by the Holder with respect to the Niobrara Asset and general
corporate and operational fees and expenses of Condor as of the Effective Date.

Condor Energy Technology (“Condor”) has previously loaned to the Borrower funds
as set forth on the Payment Schedule attached hereto pursuant to a promissory
note entered into between the Holder and Condor dated September 24, 2012, which
promissory note is recapitalized in part hereunder pursuant to and in accordance
with the terms and conditions of that certain Condor Energy Technology LLC
Intra-Company Agreement, entered into by and among the Holder, the Borrower, and
Condor, dated of even date herewith.

 
 

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1. Principal and Interest; Maturity Date.  The Borrower, for value received,
hereby promises to pay to the order of the Holder, in lawful money of the United
States, the principal amount set forth on the Payment Schedule attached hereto
(as such Payment Schedule is adjusted from time to time pursuant to the terms
hereof), together with interest accrued on the unpaid principal of each Advance
at the Agreed Interest Rate (as defined below) commencing on the date of each
such Advance hereunder and compounding annually.  All principal and accrued
interest remaining unpaid and outstanding as of December 31, 2013 (the “Maturity
Date”) shall be due and payable in full within ten (10) business days of such
date, unless the Maturity Date is extended upon mutual written agreement by the
parties.  Notwithstanding the foregoing, the entire unpaid principal amount of
the Note, together with accrued and unpaid interest thereon, shall be due and
payable by the Borrower to the Holder in full within ten (10) business days upon
the earlier to occur of the closing of (A) a Qualified Senior Indebtedness
Transaction, or (B) a Qualified Equity Financing Transaction.
 
“Agreed Interest Rate” means the rate per annum equal to ten percentage points
(10.0%).
 
“Qualified Equity Financing Transaction” means one or more investment
transactions following the date hereof in which the Borrower receives gross
proceeds totaling at least $10,000,000 in exchange for equity securities of the
Borrower.
 
“Qualified Senior Indebtedness” means all indebtedness of the Borrower for money
borrowed from any bank or other non-affiliated financial institution or
investment group (including any indebtedness to any assignees thereof) whether
now existing or hereafter arising, including, without limitation, all principal
and interest (including such interest as may accrue after the initiation of
bankruptcy proceedings), and all premiums, fees and expenses owing by the
Borrower to any such parties in respect of such indebtedness, provided that the
aggregate principal amount of such indebtedness must be at least $10,000,000 to
qualify as “Qualified Senior Indebtedness” (excluding amounts borrowed from the
Holder or its affiliates).
 
"Qualified Senior Indebtedness Transaction" shall mean one or more related
transactions pursuant to which the Borrower incurs Qualified Senior
Indebtedness, excluding amounts borrowed from the Holder or its affiliates.
 
The Borrower may request Advances under this Note at any time and from time to
time by delivering a written request therefor to the Holder, with such
supporting documentation that may be reasonably requested by and in a form to
the reasonable satisfaction of the Holder, and the Holder shall deliver the
requested Advance to the Borrower within ten (10) business days after its
receipt of the Borrower’s request.  Notwithstanding anything to the contrary
expressed or implied herein, any Advances made hereunder, once repaid, may not
be re-borrowed. At no time shall the outstanding principal amount of all
outstanding Advances hereunder exceed US$5,000,000 (Five Million US dollars).
 
2. Adjustments to Note; Payment Schedule.  The Payment Schedule attached hereto
shall reflect, at all times while any amounts are outstanding under this Note,
the total principal amount outstanding under this Note and the amounts and dates
of all Advances made under this Note.  Adjustments to the Payment Schedule shall
be made as follows:
 
(a) Additional Advances.  Upon the funding of each Advance, the Holder and the
Borrower shall execute an “Advance Form” in substantially the form attached
hereto as Exhibit A.  Each such Advance Form shall state the amount and date of
the Advance, and shall include such supporting documentation that may be
reasonably requested by and in a form to the reasonable satisfaction of the
Holder.  Promptly after the execution of the Advance Form by both parties, the
Holder shall update the total principal amount outstanding under this Note as
reflected on the Payment Schedule and sign each such adjustment, shall attach
the executed Advance Form to the Payment Schedule, and shall promptly deliver a
copy of the foregoing to the Borrower.
 
(b) Prepayment Adjustment.  Promptly upon the Holder’s receipt of any repayment
by the Borrower of principal and interest on any Advance, the Holder shall make
the appropriate adjustment to the total principal amount outstanding under this
Note on the Payment Schedule.  The Holder shall sign each such payment
adjustment and attach evidence of such prepayment to the Payment Schedule.  The
Holder shall promptly provide the Borrower with a copy of the adjusted Payment
Schedule.
 
3. Payment Schedule Controls.  At all times while any amounts are outstanding
under this Note, the most recent signed and dated entries on the Payment
Schedule shall, in the absence of manifest error, be conclusive as to the
outstanding balance of this Note; provided, however, that the failure by the
Holder to make the adjustments to the Payment Schedule required by Section 2
hereof with respect to any Advance or repayment shall not limit or otherwise
affect the obligations of the Borrower under this Note.
 
 
 
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4. Prepayment.  This Note may be repaid in whole or in part at any time without
penalty or premium.  For so long as any principal or accrued interest remains
outstanding under this Note, all cash distributions that Borrower receives by
virtue of its membership interest in Condor shall be applied by Borrower toward
repayment of the outstanding principal and accrued interest due under this Note.
 
5. Secured Obligation. Subject to Section 6 and the limitations under this Note
as described in Section 7 below, Borrower hereby grants to the Holder a first
priority lien and security interest in, to and under all of the following assets
of the Borrower (collectively, the “Collateral”):
 
(a)           the Borrower’s ownership and working interest in the FFT2H Well,
and all corresponding leasehold rights pooled with respect to such well; and
 
(b)           the Borrower’s ownership and working interest in each future well
drilled and completed in the Niobrara Asset.
 
6. Other Liens. As of the date hereof, there are no other liens, claims,
security interests or other encumbrances (“Liens”) attaching to the Collateral
except for those in favor of this Note and Esenjay Oil & Gas, Ltd., Winn
Exploration Co., Inc., Lacy Properties, Ltd. and Crain Energy, Ltd as the
“Sellers” under that certain Purchase and Sale Agreement, dated August 23, 2011,
as amended, entered into by and among Pacific Energy Development Corp and the
Sellers, which security interest will be removed upon satisfaction of the
Borrower’s obligation to the Sellers to pay to the Sellers an aggregate of
$1,000,000 on February 18, 2013.
 
At request of the Holder, the Borrower will join with the Holder in executing
one or more financing statements pursuant to the Uniform Commercial Code (the
“Code”) in a form satisfactory to the Holder.  The Borrower hereby authorizes
the Holder to file a financing statement signed only by the Holder in all places
where necessary to perfect the Holder’s security interest in the Collateral in
all jurisdictions where such authorization is permitted by the Code. Without
limiting the foregoing the Borrower agrees that whenever the Code requires the
Borrower to sign a financing statement for filing purposes, the Borrower hereby
appoints the Holder or any of the Holder’s representatives as the Borrower’s
attorney and agent, with full power of substitution, to sign or endorse the
Borrower’s name on any such financing statement or other document and authorizes
the Holder to file such a financing statement in all places where necessary to
perfect the Holder’s security interest in the Collateral; and the Borrower
ratifies all acts of the Holder and said representatives and agrees to hold the
Holder and said representatives harmless from all acts of commission or omission
or any error of judgment or mistake of fact or law pertaining thereto. A carbon,
photographic or other reproduction of this Note or of a financing statement is
sufficient as a financing statement. Upon full payment of all obligations under
this Note, the Lien or charge created hereby or resulting herefrom, shall cease
to exist and the Holder shall file all termination statements requested by the
Borrower necessary to accomplish this purpose.
 
7. Subordination.  Notwithstanding the foregoing, the Borrower agrees, and the
Holder by its acceptance hereof likewise agrees, that the Note shall be
subordinated by the Borrower to Qualified Senior Indebtedness according to the
terms outlined below.  The Holder agrees to enter into a subordination agreement
for Qualified Senior Indebtedness according to standard industry terms and
conditions.
 
8. No Usury. This Note is hereby expressly limited so that in no event
whatsoever, whether by reason of deferment or advancement of loan proceeds,
acceleration of maturity of the loan evidenced hereby, or otherwise, shall the
amount paid or agreed to be paid to the Holder hereunder for the loan, use,
forbearance or detention of money exceed the maximum interest rate permitted by
the laws of any applicable jurisdiction.  If at any time the performance of any
provision involves a payment exceeding the limit of the price that may be
validly charged for the loan, use, forbearance or detention of money under
applicable law, then automatically and retroactively, ipso facto, the obligation
to be performed shall be reduced to such limit, it being the specific intent of
the Borrower and the Holder hereof that all payments under this Note are to be
credited first to interest as permitted by law, but not in excess of (i) the
agreed rate of interest hereunder, or (ii) that permitted by law, whichever is
the lesser, and the balance toward the reduction of principal.
 
9. Attorneys’ Fees.  If the indebtedness represented by this Note or any part
hereof is collected in bankruptcy, receivership or other judicial proceedings or
if this Note is placed in the hands of attorneys for collection after default,
the Borrower agrees to pay, in addition to the principal and interest payable
hereunder, reasonable attorneys’ fees and costs incurred by the Holder.
 
10. Successors and Assigns. The rights and obligations of the Borrower and the
Holder will be binding upon and inure to the benefit of the successors, assigns,
administrators and transferees of the parties hereto.
 
 
 
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11. Events of Default.
 
(a) General.  If an Event of Default (as defined below) occurs, the Holder may
declare the principal amount then outstanding of, and the accrued but unpaid
interest on, this Note to be immediately due and payable.
 
(b) Definition.  For purposes of this Note, an “Event of Default” is any of the
following occurrences:
 
(i) The Borrower shall fail to pay the outstanding principal and all accrued but
unpaid interest under this Note on the Maturity Date;
 
(ii) If the Borrower shall (i) become insolvent or take any action which
constitutes his admission of inability to pay his debts as they mature; or (b)
file a petition in bankruptcy; or
 
(iii) Any event or series of events occurs which has or is reasonably likely to
have a Material Adverse Effect as reasonably determined by Holder.
 
For purposes of this Note, a “Material Adverse Effect” means any effect, change,
event, occurrence, circumstance or state of facts that would reasonably be
expected to (i) be materially adverse to the business, condition (financial or
otherwise), assets, liabilities, prospects or results of operations of the
Borrower, or (ii) materially adversely affect the ability of the Borrower to
perform its obligations hereunder and consummate the transactions contemplated
hereby in a timely manner.
 
(c) Remedies on Default, etc.  In case any one or more Events of Default shall
occur and be continuing, the Holder may proceed to protect and enforce its
rights by an action at law, suit in equity or other appropriate proceeding,
whether for the specific performance of any agreement contained herein, or for
an injunction against a violation of any of the terms hereof, or in aid of the
exercise of any power granted hereby or by law or otherwise.  In case of a
default in the payment of any principal of or interest on this Note, the
Borrower will pay to the Holder such further amount as shall be sufficient to
cover the cost and expenses of collection, including, without limitation,
reasonable attorneys’ fees, expenses and disbursements.  No course of dealing
and no delay on the part of the Holder in exercising any right, power or remedy
shall operate as a waiver thereof or otherwise prejudice the Holder’s rights,
powers or remedies.  No right, power or remedy conferred by this Note upon the
Holder shall be exclusive of any other right, power or remedy referred to herein
or now or hereafter available at law, in equity, by statute or otherwise.
 
12. Waivers and Amendments.  The Borrower hereby waives presentment, demand for
performance, notice of non-performance, protest, notice of protest and notice of
dishonor.  No delay on the part of the Holder in exercising any right hereunder
shall operate as a waiver of such right or any other right.  Any term of this
Note may be amended or waived only with the written consent of the Borrower and
the Holder.
 
13. Governing Law.  This Note is being delivered in, and shall be governed by
and construed in accordance with, the laws of the State of Nevada, without
regard to conflicts of laws provisions thereof.
 
 
 
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IN WITNESS WHEREOF, the Borrower has executed this Secured Subordinated
Promissory Note as of the date first set forth above.
 
 

 
BORROWER
          Pacific Energy Development Corp.                
 
 /s/ Michael L. Peterson    
       Michael L. Peterson
   
       Executive Vice President and
       Chief Financial Officer
         

 
ACCEPTED AND AGREED TO:
     
HOLDER
     
MIE Jurassic Energy Corp.
     
By:
/s/ Andrew S. Harper   Name:
Andrew S. Harper
  Title:
CEO
       

 
 
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PEDCO – MIEJ PROMISSORY NOTE
PAYMENT SCHEDULE

Date
Amount of
Advance
Amount of
Repayment
Adjusted Unpaid
Principal
Balance of Note
Signature, Name and
Title of Holder
November 1, 2012
US$1,141,777.87
(principal - $1,113,749.06
Interest- $28,028.81)
Transfer From Condor-MIEJ Note
US$1,141,777.87
By:  /s/ Andrew S. Harper           
 
Name:  Andrew S. Harper           
 
Title: CEO                                      
November 1, 2012
US$1,028,287.40
(Principal – $1,007,398.31
Interest - $20,889.09)
Debt caused by Transfer from Condor – MIEJ Note  to Condor – PEDCO Note
US$2,170,065.27
By:  /s/ Andrew S. Harper           
 
Name:  Andrew S. Harper           
 
Title: CEO                                      
February 14, 2013
US$2,000,000.00
n/a
US$4,170,065.27
By:  /s/ Andrew S. Harper           
 
Name:  Andrew S. Harper           
 
Title: CEO                                      
       
By:                                                  
 
Name:                                             
 
Title:  
       
By:                                                  
 
Name:                                             
 
Title:                                               
       
By:                                                  
 
Name:                                             
 
Title:                                               
                                                 

 
 
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EXHIBIT A
FORM OF
ADVANCE FORM

This Advance Form (this “Form”) is executed by MIE Jurassic Energy Corp. (the
“Holder”), and Pacific Energy Development Corp. (the “Borrower”), with reference
to the following:
 
A.              The Holder and the Borrower are parties to that certain Secured
Subordinated Promissory Note (the “Note”) effective as of November 1, 2012, as
adjusted, modified, and amended from time to time.
 
B.              The parties desire to increase the total principal amount
outstanding under the Note to reflect an Advance made by the Holder to the
Borrower, as set forth below.
 
NOW, THEREFORE, for good and valuable consideration, the parties hereto agree
that the total principal amount outstanding under the Note shall be increased by
$____________, effective upon receipt by the Borrower of an Advance made by the
Holder to the Borrower following the date hereof.
 
IN WITNESS WHEREOF, the parties hereto have executed this Advance Form as of the
date set forth below.

Date:_________________
 
 

 
BORROWER
          Pacific Energy Development Corp.                
 
     
       
   
    
 

 
 

 
HOLDER
         
MIE Jurassic Energy Corp.
               
 
     
       
       

 
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