Security Agreement dated November 9, 2023, by and between Pacific Energy Development Corp. and Tilloo Exploration and Production, LLC

a.

Status of Debtor. Debtor has the requisite power and authority to own the assets and to transact the business in which he is presently engaged and in which it proposes to engage and to grant to Secured Party the security interests in the Collateral as herein provided.

b.

Binding agreement. This Agreement has been duly authorized and constitutes the legal, valid and binding obligation of Debtor and is enforceable against Debtor in accordance with its terms.

c.

No default or required consent. Neither the execution and delivery of this Agreement by Debtor nor the effectuation by Secured Party of any of its rights and remedies hereunder, whether upon default or otherwise, will result in a breach of, or constitute a default under any agreement or instrument to which the Debtor is a party or by which any of the Collateral is bound, nor violate any law or any rule or regulation of any administrative agency, or any order, writ, injunction or decree of any court or administrative agency, nor does any of the foregoing require the consent of any governmental agency or any notice or filing with any governmental or regulatory body (except as may be required in connection with any sale or disposition of the Collateral by laws affecting the offering and sale of securities generally).

d.

Title to collateral. Except for the security interest granted herein, Debtor has, and will at all times during the term hereof have, good and marketable title to all and every part of the Collateral, free and clear of any mortgage, pledge, lien, security interest, adverse claim, conditional sales contract, lease or other title retention agreement other than those heretofore filed of record.

e.

Priority. Upon the execution and delivery of this Agreement by Debtor and the filing of appropriate financing statements with the proper governmental agencies, or, if applicable, upon Secured Party's taking possession of the Collateral, Secured Party shall have a perfected security interest in and to the Collateral for the full amount of all of the Secured Obligations.

f.

No litigation. There is no action, legal, administrative or other proceeding pending or threatened against Debtor's title to the Collateral or against Debtor’ grant of a security interest hereunder, nor does any of the Debtor know of any basis for the assertion of any such claim.

a.  

Sale or hypothecation of collateral. Debtor shall not directly or indirectly, whether voluntarily or involuntarily, by operation of law or otherwise: (i) sell, assign, transfer, exchange, lease, lend or dispose of any of the Collateral, or any of Debtor’s rights therein; nor (ii) cause, suffer or permit any of the Collateral, or any of Debtor's rights therein, to be affected by any encumbrance, security interest or adverse claim of any kind or nature whatsoever, except:

i. 

the security interests in favor of Secured Party;

ii.

inchoate or statutory liens for taxes which have not been assessed and which are not delinquent or, if assessed, are being contested in good faith by appropriate proceedings and provided that, in any such case, the effect of such proceedings is to stay the enforcement of such liens; and

iii. 

other liens as may from time to time be expressly permitted in writing by Secured Party.

a.  

Default under Note, etc. The default in the prompt and complete payment and performance of the Note, or any of them; the default in the prompt and complete payment and performance of any term, condition or covenant in favor of Secured Party contained in this Agreement or in any other agreement or instrument delivered pursuant thereto or hereto; or the occurrence of any other event of default specified in any of the foregoing agreements or instruments; in each such case where such default is not cured within any grace period which may be granted in any such agreement or instrument with respect to such default or, if no specific grace period is granted with respect to such default, where such default is not cured within ten (10) days after written notice thereof from Secured Party or any successor in interest thereto.

b.  

Bankruptcy. The insolvency, failure in business, or appointment of a receiver to take charge of the business or property of any of the Debtor or of any guarantor of any Secured Obligation, or the commission of an act of bankruptcy, the making of a general assignment for the benefit of creditors or the filing of any petition in bankruptcy by or against any such party or for relief under the federal bankruptcy laws, as amended, or under any other laws, whether federal or state, for the relief of debtor, now or hereafter existing, unless the same is dismissed within thirty (30) days after the filing thereof.

c.  

Liens on collateral. The initiation of steps by any third party to obtain a lien, levy or writ of attachment or garnishment upon any or all of the Collateral or substantially all or any of the other property of the Debtor, unless the same is dismissed within thirty (30) days after the initiation thereof.

d.  

Inability to pay debts. The admission by the Debtor or any guarantor of any Secured Obligation of its inability to pay its debts as they mature.

e.  

Appointment of receiver. The appointment of a receiver, trustee or custodian for the Debtor unless such receiver or trustee is discharged within thirty (30) days of appointment or such proceedings are discharged within thirty (30) days of their commencement.

f.  

Adverse judgment. If final judgment for the payment of money not covered by insurance shall have been rendered by any court of competent jurisdiction against the Debtor, and the same has not been discharged or vacated or execution thereunder stayed, whether pursuant to appeal or otherwise, within thirty (30) days of the entry thereof, or if any final order, ruling or direction of any competent authority is issued with respect to the Debtor which materially adversely affects the Debtor, or which requires a substantial or material adverse change in the business or affairs of the Debtor, or any material disposition of assets of the Debtor.

g.  

Adverse change. If there shall be any material adverse change in the financial condition of the Debtor.

h.  

Termination of Bonds. If there shall be any expiration, termination, revocation, amendment or reduction in financial obligations underlying any of the Bonds (collectively, a “Bond Change”), without prior written approval of Secured Party.

a.  

b.  

Other rights and remedies. Secured Party may exercise in respect of the Collateral, in addition to other rights and remedies provided for herein or otherwise available to it, all the rights and remedies of a secured party under the Uniform Commercial Code (the Code) in effect in the State of New Mexico at that time, and Secured Party may also, without notice except as specified below, sell the Collateral or any part thereof in one or more parcels at public or private sale, at any exchange, brokers board, or at any of Secured Party's offices or elsewhere, for cash, on credit or for future delivery, and upon such other terms as Secured Party, in its sole and absolute discretion, may deem commercially reasonable. Debtor agrees that, to the extent notice of sale shall be required by law, at least ten (10) days' notice to Debtor of the time and place of any public sale or the time after which any private sale is to be made shall constitute reasonable notification. Secured Party shall not be obligated to make any sale of Collateral regardless of notice of sale having been given. Secured Party may adjourn any public or private sale from time to time by announcement at the time and place fixed therefor, and such sale may, without further notice, be made at the time and place to which it was so adjourned. Debtor hereby waives any claims against Secured Party arising by reason of the fact that the price at which any Collateral may have been sold at such a private sale was less than the price which might have been obtained at a public sale, even if Secured Party accepts the first offer received and does not offer such Collateral to more than one offeree, and in all events such sale shall be deemed to be commercially reasonable. At any such public or private sale, Secured Party may be the purchaser of the Collateral.

c.  

Application of proceeds. Any cash held by Secured Party as Collateral and all cash proceeds received by Secured Party in respect of any sale of, collection from, or other realization upon, all or any part of the Collateral shall be applied in whole or in part by Secured Party against, all or any part of the Secured Obligations in such order as Secured Party shall elect. Any surplus of such cash or cash proceeds held by Secured Party and remaining after payment in full of all the Secured Obligations shall be paid over to Debtor or to whomsoever may be lawfully entitled to receive such surplus. In like manner, Debtor shall pay to Secured Party, without demand, whatever amount of the Secured Obligations remains unpaid after the Collateral has been sold and the proceeds applied as aforesaid, together with interest thereon from the date of demand at the highest rate specified in the Note, which interest shall also constitute a part of the Secured Obligations.

d.  

Rights and remedies cumulative. Secured Party shall not be obligated to resort to her rights or remedies with respect to any other security for, or guaranty or payment of, the Secured Obligations before resorting to her rights and remedies against Debtor hereunder. All rights and remedies of Secured Party shall be cumulative and not in the alternative.