THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS DOCUMENT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD,
TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
(B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER AND
REASONABLY APPROVED BY THE COMPANY), IN A GENERALLY ACCEPTABLE FORM, THAT
REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE
144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR
FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

 

PROMISSORY NOTE

 

September 29, 2017 $250,000.00

 

FOR VALUE RECEIVED, Foothills Exploration, Inc., a Delaware corporation (the
“Company”), located at 633 17th Street, Suite 1700, Denver, CO 80202, hereby
unconditionally promises to pay to the order of Elliot G. Freier, trustee of the
Elliot G. Freier Revocable Trust U/A 9/6/06, located at 1800 Avenue of the
Stars, Suite 900, Los Angeles, CA 90067, or its successors or assigns (the
“Holder”), the principal amount of Two Hundred Fifty Thousand and 00/100 United
States Dollars (USD $250,000.00) on or prior to January 2, 2018 (the “Maturity
Date”). This Note evidences a term loan made to the Company on September 22,
2017, in the principal amount of $45,000.00 and an additional term loan made on
the date of this Note (as defined below) in the principal amount of $205,000.00.

 

1. Payments of Principal, Interest and Warrants.

 

(a) Payment of Principal. The principal amount of this promissory note (the
“Note”) shall be paid to the Holder on or prior to the Maturity Date.

 

(b) Payment of Interest. The principal amount of this Note shall bear no
interest if paid in cash in full on or before the Maturity Date.

 

(c) Payment of Default Interest. Any amount of principal due under this Note
which is not paid on or before the Maturity Date shall thereafter bear interest
at 15% per annum until collected (the “Default Rate”). Interest at the Default
Rate shall be payable upon demand.

 

(d) Mandatory Prepayment. The Company shall prepay the then outstanding
principal balance of this Note, together with all accrued and unpaid interest
thereon and all other sums due under the Note, with the proceeds of any
Indebtedness incurred by the Company or any of its subsidiaries. For purposes of
this Note, the term “Indebtedness” of a person shall mean (a) all obligations of
such person for borrowed money, (b) all obligations of such person evidenced by
bonds, debentures, notes or similar instruments, (c) all obligations of such
person issued or assumed as the deferred purchase price of property or services
(excluding trade accounts payable and accrued obligations incurred in the
ordinary course of business), (d) all Indebtedness of others secured by any lien
on property owned or acquired by such person; (e) capitalized lease obligations
of such person, (f) all net obligations of such person in respect of swap
obligations or hedging obligations and (g) the issuance of equity interests of
such person that by its terms (or the terms of any security into which it is
convertible or exchangeable), or upon the happening of any event, matures or is
mandatorily redeemable or redeemable at the option of the holder thereof, or
exchangeable or convertible into debt securities of such person at the option of
the holder thereof, in whole or in part, prior to the date that is 181 days
after the Maturity Date.

 

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(e) General Payment Provisions. All payments of principal, interest on and other
amounts due under this Note shall be made in lawful money of the United States
of America by certified bank check or wire transfer to such account as the
Holder may designate by written notice to the Company in accordance with the
provisions of this Note. Whenever any amount expressed to be due by the terms of
this Note is due on any day which is not a Business Day, the same shall instead
be due on the next succeeding Business Day. For purposes of this Note, “Business
Day” shall mean any day other than a Saturday, Sunday, or a day on which
commercial banks in the States of [California] or [Colorado] are authorized or
required by law or executive order to remain closed.

 

(f) No Breach. The Company represents and warrants to the Holder that: none of
the execution, delivery and performance (including, without limitation, the
incurrence and repayment of the Indebtedness evidenced by this Note) by the
Company of this Note, the Warrants (as defined below), the registration rights
agreement in favor of the Holder to be entered into in connection with the
Warrants and other related documents (collectively, the “Transaction Documents”)
to which it is a party nor the consummation of the transactions contemplated
herein and therein do or will (i) conflict with or result in a breach of, or
require any consent (which has not been obtained and is in full force and
effect) under (x) any organizational document of the Company or any of its
subsidiaries or (y) any applicable requirement of law or (z) any order, writ,
injunction or decree of any governmental authority binding on the Company or any
of its subsidiaries, or (ii) result in a breach of, or require termination of,
any term or provision of any contractual obligation of the Company or any of its
subsidiaries or (iii) constitute (with due notice or lapse of time or both) a
default under any such contractual obligation or (iv) result in or require the
creation or imposition of any lien upon any property of the Company or any of
its subsidiaries pursuant to the terms of any such contractual obligation.

 

(g) Warrants. Holder shall be entitled to receive the following three (3)
tranches of Warrants (collectively, the “Warrants”) as additional consideration
for the term loans evidenced hereby:

 

i Tranche 1: 375,000 warrants; each warrant to purchase one share of common
stock of the Company at a strike price of $0.665 per share, with a 24-month
exercise term, without a cashless exercise provision. A form of Tranche 1
warrant is attached hereto as Exhibit A.

 

ii Tranche 2: 375,000 warrants; each warrant to purchase one share of common
stock of the Company at a strike price of $1.25 per share, with a 36-month
exercise term, without a cashless exercise provision. A form of Tranche 2
warrant is attached hereto as Exhibit B.

 

iii Tranche 3: 185,000 warrants; each warrant to purchase one share of common
stock of the Company at a strike price of $2.00 per share, with a 36-month
exercise term, without a cashless exercise provision. A form of Tranche 3
warrant is attached hereto as Exhibit C.

 

By accepting this Note, the Holder acknowledges that the foregoing warrants are
speculative securities subject to very high risks including the risk of complete
loss.

 

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2. Defaults and Remedies.

 

(a) Events of Default. The occurrence of any of the following events shall
constitute an “Event of Default” hereunder: (i) the Company shall fail to pay
any installment of interest, principal or other sums due under this Note when
any such payment shall be due and payable; (ii) the Company makes an assignment
for the benefit of creditors; (iii) any order or decree is rendered by a court
which appoints or requires the appointment of a receiver, liquidator or trustee
for the Company, and the order or decree is not vacated within sixty (60) days
from the date of entry thereof; (iv) any order or decree is rendered by a court
adjudicating the Company insolvent, and the order or decree is not vacated
within sixty (60) days from the date of entry thereof; (v) the Company files a
petition in bankruptcy under the provisions of any Debtor Relief Law; (vi) the
Company admits, in writing, its inability to pay its debts as they become due
(provided, however, that receipt by the Company of an audit letter from its
accountants questioning the viability of the Company as a going concern shall
not, in and of itself, be construed as an admission by the Company of its
inability to pay its debts as they become due); (vii) a proceeding or petition
in bankruptcy is filed against the Company and such proceeding or petition is
not dismissed within ninety (90) days from the date it is filed; (viii) the
Company files a petition or answer seeking reorganization or arrangement under
any Debtor Relief Law or similar law of any other foreign country; (ix) the
Company shall fail to perform, comply with or abide by any of the stipulations,
agreements, conditions and/or covenants contained in this Note on the part of
the Company to be performed complied with or abided by (other than a payment
covered by clause (i) above), and such failure is not cured within thirty (30)
days after written notice of such failure is delivered by Holder to the Company,
(x) the Company or any of its subsidiaries shall fail to pay any Indebtedness
(excluding Indebtedness evidenced by this Note) having a principal amount
outstanding in excess of $100,000, or any payment of principal, interest or
premium thereon, when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Indebtedness, or any other default under any agreement or
instrument relating to any such Indebtedness, or any other event, shall occur
and shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such default or event is to
accelerate, or to permit the acceleration of, the maturity of such Indebtedness;
or any such Indebtedness shall be declared to be due and payable, or required to
be prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased or an offer to prepay, redeem, purchase or defease such
Indebtedness shall be required to be made, in each case, prior to the stated
maturity thereof and (xi) any representation or warranty made by the Company
under this Note shall prove to have been false or misleading when made.. “Debtor
Relief Law” means the Bankruptcy Code of the United States (Title 11), and all
other liquidation, conservatorship, bankruptcy, assignment for the benefit of
creditors, moratorium, rearrangement, receivership, insolvency, reorganization,
or similar debtor relief laws of the United States or other applicable
jurisdictions from time to time in effect and affecting the rights of creditors
generally.

 

(b) Default Fee. Upon the occurrence of an Event of Default under Section
2(a)(i), the Company shall pay Holder a default fee of $25,000 (“Default Fee”).

 

(c) Remedies. Upon the occurrence of one or more Events of Default, the Holder,
at its option and without further notice, demand or presentment for payment to
the Company or others, may declare the then outstanding principal balance of
this Note, together with all accrued and unpaid interest at the Default Rate and
other sums due under the Note, immediately due and payable, together with all
reasonable attorneys’ fees, paralegals’ fees and costs and expenses incurred by
the Holder in collecting or enforcing payment thereof (whether such reasonable
fees, costs or expenses are incurred in negotiations, all trial and appellate
levels, administrative proceedings, bankruptcy proceedings or otherwise), and
all other sums due by the Company hereunder, all without any relief whatsoever
from any valuation or appraisement laws and payment thereof may be enforced and
recovered in whole or in part at any time by one or more of the remedies
provided to the Holder at law, in equity, or under this Note; provided, however,
that the occurrence of any Event of Default described in clauses (iii) through
(viii) above shall make this Note immediately due and payable, without any
action on the part of any Person. The Company hereby waives all presentment for
payment, demand, protest, notice of protest and notice of dishonor, and all
other notices of any kind to which they may be entitled under applicable Laws or
otherwise. This provision shall be in addition to, and shall not limit, any
other remedies the Holder may have at law or equity.

 

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3. Lost or Stolen Note. Upon notice to the Company of the loss, theft,
destruction or mutilation of this Note, and, in the case of loss, theft or
destruction, of an indemnification undertaking by the Holder to the Company in a
form reasonably acceptable to the Company and customary for similar
circumstances in commercial lender/borrower circumstances, and, in the case of
mutilation, upon surrender and cancellation of the Note, the Company shall
execute and deliver a new Note of like tenor and date and in substantially the
same form as this Note.

 

4. Cancellation. After all principal, accrued interest and all other sums at any
time owed on this Note have been paid in full, this Note shall automatically be
deemed canceled, shall be surrendered to the Company for cancellation and shall
not be re-issued.

 

5. Governing Law. This Note shall be construed and enforced in accordance with,
and all questions concerning the construction, validity, interpretation and
performance of this Note shall be governed by, the laws of the State of
Colorado, without giving effect to provisions thereof regarding conflict of
laws. Each party hereto hereby irrevocably submits to the non-exclusive
jurisdiction of the state and federal courts sitting in the County of Los
Angeles in the State of California for the adjudication of any dispute hereunder
or in connection herewith or with any transaction contemplated hereby or
discussed herein, and hereby irrevocably waives, and agrees not to assert in any
suit, action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper, provided, however, nothing contained herein shall limit the Holder’s
ability to bring suit or enforce this Note in any other jurisdiction. Each party
hereto hereby irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by sending by
certified mail or overnight courier a copy thereof to such party at the address
indicated in the preamble hereto and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law.

 

6. Remedies, Characterizations, Other Obligations, Breaches and Injunctive
Relief. The remedies of the Holder as provided herein shall be cumulative and
concurrent and may be pursued singly, successively or together, at the sole
discretion of the Holder, and may be exercised as often as occasion therefor
shall occur; and the failure to exercise any such right or remedy shall in no
event be construed as a waiver or release thereof.

 

7. Specific Shall Not Limit General; Construction. No specific provision
contained in this Note shall limit or modify any more general provision
contained herein. This Note shall be deemed to be jointly drafted by the Company
and the Holder and shall not be construed against any person as the drafter
hereof.

 

8. Failure or Indulgence Not Waiver. Holder shall not be deemed, by any act of
omission or commission, to have waived any of its rights or remedies hereunder,
unless such waiver is in writing and signed by Holder, and then only to the
extent specifically set forth in the writing. A waiver on one event shall not be
construed as continuing or as a bar to or waiver of any right or remedy to a
subsequent event. No failure to exercise and no delay in exercising on the part
of the Holder, of any right, remedy, power or privilege hereunder shall operate
as a waiver thereof; nor shall any single or partial exercise of any right,
remedy, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, remedy, power or privilege.

 

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9. Notice. Notice shall be given to each party at the address indicated in the
preamble hereto or at such other address as provided to the other party in
writing.

 

10. Usury Savings Clause. Notwithstanding any provision in this Note, the total
liability for payments of interest and payments in the nature of interest,
including, without limitation, all charges, fees, exactions, or other sums which
may at any time be deemed to be interest, shall not exceed the limit imposed by
the usury laws of the jurisdiction governing this Note or any other applicable
law. In the event the total liability of payments of interest and payments in
the nature of interest, including, without limitation, all charges, fees,
exactions or other sums which may at any time be deemed to be interest, shall,
for any reason whatsoever, result in an effective rate of interest, which for
any month or other interest payment period exceeds the limit imposed by the
usury laws of the jurisdiction governing this Note, all sums in excess of those
lawfully collectible as interest for the period in question shall, without
further agreement or notice by, between, or to any party hereto, be applied to
the reduction of the outstanding principal balance of this Note immediately upon
receipt of such sums by the Holder hereof, with the same force and effect as
though the Company had specifically designated such excess sums to be so applied
to the reduction of such outstanding principal balance and the Holder hereof had
agreed to accept such sums as a penalty-free payment of principal; provided,
however, that the Holder of this Note may, at any time and from time to time,
elect, by notice in writing to the Company, to waive, reduce, or limit the
collection of any sums in excess of those lawfully collectible as interest
rather than accept such sums as a prepayment of the outstanding principal
balance. It is the intention of the parties that the Company does not intend or
expect to pay nor does the Holder intend or expect to charge or collect any
interest under this Note greater than the highest non-usurious rate of interest
that may be charged under applicable law.

 

11. Binding Effect. This Note shall be binding upon the Company and the
successors and assigns of the Company and shall inure to the benefit of Holder
and the successors and assigns of Holder.

 

12. Severability. In the event any one or more of the provisions of this Note
shall for any reason be held to be invalid, illegal, or unenforceable, in whole
or in part, in any respect, or in the event that any one or more of the
provisions of this Note operates or would prospectively operate to invalidate
this Note, then and in any of those events, only such provision or provisions
shall be deemed null and void and shall not affect any other provision of this
Note. The remaining provisions of this Note shall remain operative and in full
force and effect and shall in no way be affected, prejudiced, or disturbed
thereby.

 

13. Assignability. Holder may from time to time sell or assign, in whole or in
part, or grant participations in this Note and/or the obligations evidenced
hereby (separate from or including any of the Warrants described herein, in
Holders discretion), subject, however, to first obtaining the Company’s written
consent, which consent shall not be unreasonably withheld, conditioned or
delayed. The holder of any such sale, assignment or participation, if the
applicable agreement between Holder and such holder so provides, shall be: (a)
entitled to all of the rights, obligations and benefits of Holder (to the extent
of such holder’s interest or participation); and (b) deemed to hold and may
exercise the rights of setoff or banker’s lien with respect to any and all
obligations of such holder to the Company (to the extent of such holder’s
interest or participation) set forth herein through paragraph 14 below; in each
case as fully as though the Company was directly indebted to such holder.

 

14. Amendments. The provisions of this Note may be changed only by a written
agreement executed by the Company and Holder.

 

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IN WITNESS WHEREOF, the Company has caused this Note to be executed on and as of
the date set forth above.

 

  FOOTHILLS EXPLORATION, INC.,   a Delaware corporation     By:
                                Name: B. P. Allaire   Title: Chief Executive
Officer

 

[Signature Page to Promissory Note]

 

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