Blueprint








Exhibit
10.14







 


NEITHER
THIS 12% 2020 SENIOR UNSECURED PROMISSORY NOTE (THE
“NOTE”) NOR THE SECURITIES ISSUABLE IN CONNECTION WITH
THIS NOTE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (“ACT”), OR THE SECURITIES LAWS OF ANY STATE.
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE IN CONNECTION WITH
THIS NOTE MAY BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
REGISTRATION UNDER THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS
OR DELIVERY TO TORCHLIGHT ENERGY RESOURCES, INC. OF AN OPINION OF
LEGAL COUNSEL SATISFACTORY TO TORCHLIGHT ENERGY RESOURCES, INC.
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE ACT OR ANY
APPLICABLE STATE SECURITIES LAWS.


 


12%
2020 SENIOR UNSECURED PROMISSORY NOTE


OF


TORCHLIGHT ENERGY
RESOURCES, INC.


 


	
NOTE NO.
2020-__

	
   ______,
2017







 


FOR
VALUE RECEIVED, TORCHLIGHT ENERGY RESOURCES, INC., a Nevada
corporation with its principal office located at 5700 Plano
Parkway, Ste. 3600, Plano, Texas 75093 (the “Company” or “Debtor”), unconditionally promises
to pay to ___________ whose address is
______________________________________________________, or the
registered assignee, upon presentation of this 12% 2020 Senior
Unsecured Promissory Note (the “Note”) by the registered holder
hereof (the “Registered
Holder” or “Holder”) at the office of the
Company, the principal amount of $__________ (“Principal Amount”), together with
the accrued and unpaid interest thereon and other sums as
hereinafter provided, subject to the terms and conditions as set
forth below. The effective date of execution and issuance of this
Note is _______, 2017 (“Original Issue
Date”).


 


1.           Series.
This Note is one of a series of duly authorized and issued
promissory notes of the Company designated as its 12% 2020 Senior
Unsecured Promissory Notes in an aggregate principal face value for
all notes of this series of up to a maximum of $10,000,000 (subject
to increase to no more than $12,000,000) with no minimum amount
(each, a “Series
Note,” and collectively, the “Series Notes”). Each Series Notes
is being issued in accordance with that certain Subscription
Agreement, between the Company and each holder of the Series Notes,
and is subject to the terms and conditions set forth in the
Subscription Agreement. The Holder of this Note with the holders of
all of the Series Notes are sometimes hereinafter collectively
referred to as “Series
Holders.”


 

2.           
Schedule for
Payment of Principal and Interest. The Principal Amount outstanding
hereunder shall be paid in one lump sum payment of $__________ on
or before April 10, 2020 (the “Maturity Date”), and the interest
on the Principal Amount outstanding hereunder shall be payable at
the rate of 12% per annum and shall be due and payable monthly, in
arrears, with the initial interest payment due May 10, 2017, and
continuing thereafter on the 10th day of each
successive month during the term of this Note. Accrual of interest
on the outstanding Principal Amount, payable in cash, shall
commence on the date of receipt of funds by the Company and shall
continue until payment in full of the outstanding Principal Amount
has been made hereunder. The interest so payable will be paid to
the person whose name is registered on the records of the Company
regarding registration and transfers of this Note (the
“Note
Register”). Payments made by the Company shall be made
to all Series Holders at the same time.


 



 

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Unsecured Promissory Note - Page 1 of 11







 






 

3.           
Payment.
Payment of any sums due to the Holder under the terms of this Note
shall be made in United States Dollars by check or wire transfer at
the option of the Company. Payments made by the Company shall be
made to all Series Holders at the same time. Payment shall be made
at the address last appearing on the Note Register of the Company
as designated in writing by the Holder hereof from time to time. If
any payment hereunder would otherwise become due and payable on a
day on which commercial banks in Dallas, Texas, are permitted or
required to be closed, such payment shall become due and payable on
the next succeeding day on which commercial banks in Dallas, Texas,
are not permitted or required to be closed (“Business Day”) and, with respect to payments of
Principal Amount, interest thereon shall be payable at the then
applicable rate during such extension, if any. The forwarding of
such funds shall constitute a payment of outstanding principal and
interest hereunder and shall satisfy and discharge the liability
for principal and interest on this Note to the extent of the sum
represented by such payment. Except as provided in Section 4
hereof, this Note may not be prepaid without the prior written
consent of the Holder.

 





 4.            
Company’s
Option to Redeem Note. On or after the Original Issue Date,
up to 100%, in whole or in part, of the outstanding Principal
Amount of the Note, plus any accrued and unpaid interest, will be
subject to redemption at the option of the Company. If the Company
elects to redeem before April 10, 2018, however, the Company shall
pay the Holder all unpaid interest and Stock Payments (as defined
in Section 5) on the portion of the Principal Amount redeemed that
would have been earned from the Redemption Payment Date (as defined
below) through the April 10, 2018. The Stock Payment triggered by a
redemption prior to April 10, 2018 shall be based upon the
Volume-Weighted Average Price (as defined in Section 5) for the 30
consecutive trading days immediately preceding the Redemption
Payment Date. There will be no redemption penalty for any
redemptions occurring after April 10, 2018. Any amount of the Note
subject to redemption, as set forth herein (the “Redemption Amount”), may be
redeemed by the Company at any time and from time to time, upon not
less than 10 nor more than 30 days notice to the Holder. If less
than 100% of the outstanding Principal Amount of each Series Note,
plus any accrued and unpaid interest thereon, is to be redeemed at
any time, the Company must redeem a pro rata amount of each Series
Note. The Company shall deliver to the Holder a written Notice of
Redemption (the “Notice of
Redemption”) specifying the date for the redemption
(the “Redemption Payment
Date”), which date shall be at least 10 but not more
than 30 days after the date of the Notice of Redemption (the
“Redemption
Period”). On the Redemption Payment Date, the
Redemption Amount must be paid in good funds to the Holder. After
the Redemption Payment Date, interest will cease to accrue on the
portion of the Note called for redemption.


 

5.           
2.5%
Annual Stock Payment. The Registered Holders of 2020 Senior
Unsecured Promissory Notes shall be entitled to receive payments of
common stock based on the Principal Amount outstanding on the
Series Notes (the “Stock
Payments”). The Stock Payments shall be calculated and
payable (i) as of April 10th of each year that
the Series Notes remain outstanding, and (ii) as of a Redemption
Payment Date, if applicable, in each case (a “Stock Payment Date”). The number
of shares of common stock that a Registered Holder receives is
determined by multiplying the Principal Amount that is subject to a
Stock Payment by 0.00006849315,1 multiplying that
result by the number of days since the previous Stock Payment Date
that such Principal Amount was subject to, and dividing that result
by the Volume-Weighted Average Price (as defined below) on the
present Stock Payment Date.


 




 






1 0.025
÷ 365 = 0.00006849315





 

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Unsecured Promissory Note - Page 2 of 11







 






 


As used
herein, the “Volume-Weighted
Average Price” means the volume weighted average sale
price of the Company’s common stock on NASDAQ as reported by
NASDAQ for the 30 consecutive Trading Day (as defined below) period
immediately preceding the Stock Payment Date, or, if NASDAQ is not
the principal trading market for the Company’s common stock,
the 30-day volume weighted average sale price of the
Company’s common stock on the principal securities exchange
or trading market where the Company’s common stock is listed
or traded as reported by Bloomberg L.P. or an equivalent, reliable
reporting service. If the Volume-Weighted Average Price cannot be
calculated for the Company’s common stock on such date in the
manner provided above or if the Company’s common stock is not
publicly-traded, the Volume-Weighted Average Price shall be the
fair market value as mutually determined by the Company and the
Registered Holder. “Trading
Day” means any day on which the Company’s common
stock is traded for any period on NASDAQ, or on the principal
securities exchange or other securities market on which the
Company’s common stock is then being traded.


 


6.           Representations
and Warranties of the Company. The Company represents and
warrants to the Holder that:


 

(a)           
Organization. The
Company is validly existing and in good standing under the laws of
the state of Nevada and has the requisite power to own, lease and
operate its properties and to carry on its business as now being
conducted. The Company is duly qualified to do business and is in
good standing in each jurisdiction in which the character or
location of the properties owned or leased by the Company or the
nature of the business conducted by the Company makes such
qualification necessary or advisable, except where the failure to
do so would not have a material adverse effect on the
Company.


 


(b)           Power
and Authority. The Company has the requisite power to
execute, deliver and perform this Note, and to consummate the
transactions contemplated hereby. The execution and delivery of
this Note by the Company and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of the Company. This Note has been
duly executed and delivered by the Company and constitutes a legal,
valid and binding obligation of the Company and is enforceable
against the Company in accordance with its terms except (i) that
such enforcement may be subject to bankruptcy, insolvency,
moratorium or similar laws affecting creditors' rights and (ii)
that the remedy of specific performance and injunctive and other
forms of equitable relief are subject to certain equitable defenses
and to the discretion of the court before which any proceedings
therefor may be brought.


 


(c)           Approvals.
No authorization, approval or consent of any court, governmental
body, regulatory agency, self-regulatory organization, or stock
exchange or market is required to be obtained by the Company for
the issuance and sale of the Notes and common stock as contemplated
by this Note, except such authorizations, approvals and consents
that have been obtained.


 



 

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Unsecured Promissory Note - Page 3 of 11







 






 


(d)           SEC
Documents, Financial Statements. The Common Stock of the
Company is registered pursuant to Section l2(b) of the Securities
Exchange Act of 1934 (“Exchange Act”), and the Company,
to the best of its knowledge, has filed all reports, schedules,
forms, statements and other documents required to be filed by it
with the SEC pursuant to the reporting requirements of Section
13(a) or l5(d) (all of the foregoing including filings incorporated
by reference therein being referenced to herein as the “SEC
Documents”).


 


(e)           As
of their respective dates, to the best of the Company’s
knowledge the SEC Documents complied in all material respects with
the requirements of the Act or the Exchange Act as the case may be
and the rules and regulations of the SEC promulgated thereunder and
other federal, state and local laws, rules and regulations
applicable to such SEC Documents, and none of the SEC Documents
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances
under which they were made, not misleading.


 


(f)           Absence
of Certain Changes. Since the filing of the Company’s
Form 10-K for the year ended December 31, 2016 on March 31, 2017,
there has been no material adverse change and no material adverse
development in the business, properties, operations, financial
condition, or results of operations of the Company.


 


(g)           Liens.
The company has no liens, security interests, mortgages, deeds of
trust that are filed of record encumbering any of its
assets.


 

7.           
Events
of Defaults and Remedies. The following are deemed to be an
event of default (“Event of
Default”) hereunder: (i) the failure by the Company to
pay any installment of interest on this Note or any other Series
Notes as and when due and payable and the continuance of any such
failure for 10 days; (ii) the failure by the Company to pay all or
any part of the principal on this Note or any other Series Notes
when and as the same become due and payable as set forth above, at
maturity, by acceleration or otherwise; (iii) the failure by the
Company to observe or perform any covenant or agreement contained
in this Note, the Subscription Agreement or any other Series Notes
and the continuance of such failure for a period of 30 days after
the written notice is given to the Company; (iv) the assignment by
the Company for the benefit of creditors, or an application by the
Company to any tribunal for the appointment of a trustee or
receiver of a substantial part of the assets of the Company, or the
commencement of any proceedings relating to the Company under any
bankruptcy, reorganization, arrangement, insolvency, readjustment
of debts, dissolution or other liquidation law of any jurisdiction;
or the filing of such application, or the commencement of any such
proceedings against the Company and an indication of consent by the
Company to such proceedings, or the appointment of such trustee or
receiver, or an adjudication of the Company bankrupt or insolvent,
or approval of the petition in any such proceedings, and such order
remains in effect for 60 days; (v) the declaration of an event of
default or default, occurring after the Original Issue Date, under
any other contract, agreement, debt or obligation of the Company
with a monetary amount in excess of $1,000,000; or (vi) the entry
of a judgment against the Company, which is not otherwise
appealable, or for which all appeals have been exhausted and for
which the Company has not posted a bond to satisfy the amount of
the judgment in excess of $2,500,000.


 



 

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Unsecured Promissory Note - Page 4 of 11







 






 

8.           
The
Holder’s Rights and Remedies upon the Occurrence of an Event
of Default.


 


(a)           This
Note is issued under and pursuant to a private placement of Series
Notes and, notwithstanding any other provision to the contrary in
this Note, the Holder agrees that its rights granted hereunder are
on parity with interests of the Series Holders of the other Series
Notes issued pursuant to the private placement and the rights,
powers, privileges and remedies of the Holder of this Note shall be
at parity with the Series Holders of other Series Notes issued
pursuant to this private placement. Notwithstanding any provision
of this Note to the contrary, no Series Holders shall take any
action which would cause that Holder’s interest in the Series
Notes to be superior to that of any other Series Holders.
Series Holders owning a majority of the outstanding principal
amount of the Series Notes (“Acting Holders”) shall
have the right to appoint an agent (“Agent”) on behalf
of all Series Holders upon the occurrence of an Event of Default.
If an Event of Default occurs and the Acting Holders elect to
appoint an Agent, all Series Holders agree that the Agent shall
represent the collective interests of the Series
Holders.


 


(b)           If
any Event of Default occurs and is not otherwise cured, and the
Agent, acting in its capacity as the true and lawful
attorney-in-fact with full irrevocable power and authority, for
purposes of carrying out the terms hereof, shall have, upon the
written request of the Acting Holders, provide written notice to
the Company, that the full unpaid principal amount of this Note,
together with interest owing in respect thereof, is immediately due
and payable, time being of the essence, and said principal sum
shall bear interest from the date of the Event of Default at the
rate per annum 4% in excess of the applicable rate of interest
provided in Section 2. Failure to exercise this option shall not
constitute a waiver of the right to exercise the same in the event
of a subsequent Event of Default. All Series Notes for which the
then outstanding principal amount, together with interest owing in
respect thereof, shall have been paid in accordance herewith shall
promptly be surrendered to or as directed by the
Company.

 




9.           
Application of
Moneys. All moneys received by the Agent pursuant to any
right given or action taken under the provisions of this Note shall
be separately accounted for, and all such moneys shall, after
payment of any costs incurred by Agent in the collection of such
amounts, be applied as follows:


 

(i)           
FIRST, to the payment of all interest then due on the Series Notes
ratably, according to the amounts due, to the persons entitled
thereto without any discrimination or preference; and


 

(ii)           
SECOND, to the payment of all principal then due on the Series
Notes ratably, according to the amounts due, to the persons
entitled thereto without any discrimination or
preference.


 

(iii)           
Whenever moneys are to be applied by the Agent, such moneys shall
be applied by it at such times, and from time to time, as the Agent
shall determine, having due regard to the amount of such moneys
available for application and the likelihood of additional moneys
becoming available for such application in the future. Whenever the
Agent shall apply such funds, it shall fix the date upon which such
application is to be made and upon such date interest on the
amounts of principal to be paid shall cease to accrue. The Agent
shall give such notice as it may deem appropriate of the deposits
with it of any such moneys and of the fixing of any such date, and
shall not be required to make payment to the holder of any unpaid
Series Note until such Series Note shall be presented to the Agent
for appropriate endorsement or for cancellation if fully
paid.


 



 

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Unsecured Promissory Note - Page 5 of 11







 






 

10.           
Limitation on
Merger, Sale or Consolidation. The Company may not, directly
or indirectly, consolidate with or merge into another person or
sell, lease, convey or transfer all or substantially all of its
assets (computed on a consolidated basis), whether in a single
transaction or a series of related transactions, to another person
or group of affiliated persons, unless either (i) in the case of a
merger or consolidation, the Company is the surviving entity or
(ii) the resulting, surviving or transferee entity expressly
assumes by supplemental agreement all of the obligations of the
Company in connection with the Notes. Upon any consolidation or
merger or any transfer of all or substantially all of the assets of
the Company in accordance with the foregoing, the successor entity
formed by such consolidation or into which the Company is merged or
to which such transfer is made, shall succeed to, and be
substituted for, and may exercise every right and power of the
Company under the Note with the same effect as if such successor
entity had been named therein as the Company, and the Company will
be released from its obligations under the Series Notes, except as
to any obligations that arise from or as a result of such
transaction.


 

11.           
Listing
of Registered Holder of Note. This Note will be registered
as to principal amount in the Holder’s name on the books of
the Company at its principal office in Plano, Texas (the
“Note
Register”), after which no transfer hereof shall be
valid unless made on the Company’s books at the office of the
Company, by the Holder hereof, in person, or by attorney duly
authorized in writing, and similarly noted hereon.


 

12.           
Registered Holder
Not Deemed a Stockholder.No Holder, as such, of this Note shall
be entitled to vote or receive dividends or be deemed the holder of
shares of the Company for any purpose, nor shall anything contained
in this Note be construed to confer upon the Holder hereof, as
such, any of the rights of a stockholder of the Company or any
right to vote, give or withhold consent to any corporate action
(whether any reorganization, issue of stock, reclassification of
stock, consolidation, merger, conveyance or otherwise), receive
notice of meetings, receive dividends or subscription rights, or
otherwise.


 

13.           
Waiver
of Demand, Presentment, Etc. The Company hereby expressly waives
demand and presentment for payment, notice of nonpayment, protest,
notice of protest, notice of dishonor, notice of acceleration or
intent to accelerate, bringing of suit and diligence in taking any
action to collect amounts called for hereunder and shall be
directly and primarily liable for the payment of all sums owing and
to be owing hereunder, regardless of and without any notice,
diligence, act or omission as or with respect to the collection of
any amount called for hereunder.


 

14.           
Attorney’s
Fees. The Company
agrees to pay all costs and expenses, including without limitation
reasonable attorney’s fees, which may be incurred by the
Holder in collecting any amount due under this Note.


 

15.           
Enforceability.
In case any provision of this Note is held by a court of competent
jurisdiction to be excessive in scope or otherwise invalid or
unenforceable, such provision shall be adjusted rather than voided,
if possible, so that it is enforceable to the maximum extent
possible, and the validity and enforceability of the remaining
provisions of this Note will not in any way be affected or impaired
thereby.


 


 



 

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Unsecured Promissory Note - Page 6 of 11







 






 


16.           Intent
to Comply with Usury Laws. In no event will the interest to be
paid on this Note exceed the maximum rate provided by law. It is
the intent of the parties to comply fully with the usury laws of
the State of Texas; accordingly, it is agreed that notwithstanding
any provisions to the contrary in this Note, in no event shall such
Note require the payment or permit the collection of interest
(which term, for purposes hereof, shall include any amount which,
under Texas law, is deemed to be interest, whether or not such
amount is characterized by the parties as interest) in excess of
the maximum amount permitted by the laws of the State of Texas. If
any excess of interest is unintentionally contracted for, charged
or received under this Note, or in the event the maturity of the
indebtedness evidenced by the Note is accelerated in whole or in
part, or in the event that all of part of the Principal Amount or
interest of this Note shall be prepaid, so that the amount of
interest contracted for, charged or received under this Note, on
the amount of the Principal Amount actually outstanding from time
to time under this Note shall exceed the maximum amount of interest
permitted by the applicable usury laws, then in any such event (i)
the provisions of this paragraph shall govern and control, (ii)
neither the Company nor any other person or entity now or hereafter
liable for the payment thereof, shall be obligated to pay the
amount of such interest to the extent that it is in excess of the
maximum amount of interest permitted by such applicable usury laws,
(iii) any such excess which may have been collected shall be either
applied as a credit against the then unpaid principal amount
thereof or refunded to the Company at the Holder’s option,
and (iv) the effective rate of interest shall be automatically
reduced to the maximum lawful rate of interest allowed under the
applicable usury laws as now or hereafter construed by the courts
having jurisdiction thereof. It is further agreed that without
limitation of the foregoing, all calculations of the rate of
interest contracted for, charged or received under the Note which
are made for the purpose of determining whether such rate exceeds
the maximum lawful rate of interest, shall be made, to the extent
permitted by applicable laws, by amortizing, prorating, allocating
and spreading in equal parts during the period of the full stated
term of the Note evidenced thereby, all interest at any time
contracted for, charged or received from the Company or otherwise
by the Holders in connection with this Note.


 

17.           
Governing Law;
Consent to Jurisdiction. This Note shall be governed by and
construed in accordance with the laws of the State of Texas without
regard to the conflict of laws provisions thereof. In any action
between or among any of the parties, whether rising out of this
Note or otherwise, each of the parties irrevocably consents to the
exclusive jurisdiction and venue of the federal and/or state courts
located in Dallas County, Texas.


 

18.           
Amendment and
Waiver. Any waiver or amendment hereto shall be in writing
signed by the Holder. No failure on the part of the Holder to
exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof, nor shall any single or partial
exercise by the Holder of any right hereunder preclude any other or
further exercise thereof or the exercise of any other rights. The
remedies herein provided are cumulative and not exclusive of any
other remedies provided by law.


 



 

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Unsecured Promissory Note - Page 7 of 11







 






 

19.           
Restrictions
Against Transfer or Assignment. Neither this Note nor the
shares issuable in connection with this Note may be sold,
transferred, assigned, pledged, hypothecated or otherwise disposed
of by the Registered Holder hereof, in whole or in part, unless and
until either (i) the Note or the shares issuable in connection with
the Note have been duly and effectively registered for resale under
the Securities Act of 1933, as amended, and under any then
applicable state securities laws; or (ii) the Registered Holder
delivers to the Company a written opinion acceptable to the
Company’s counsel that an exemption from such registration
requirements is then available with respect to any such proposed
sale or disposition. Any transfer of this Note otherwise
permissible hereunder shall be made only at the principle office of
the Company upon surrender of this Note for cancellation and upon
the payment of any transfer tax or other government charge
connected therewith, and upon any such transfer a new Series Note
will be issued to the transferee in exchange therefor.


 

20.           
Entire
Agreement; Headings. This Note and Subscription Agreement
constitute the entire agreement between the Holder and the Company
pertaining to the subject matter hereof and supersedes all prior
and contemporaneous agreements, representations and understandings,
written or oral, of such parties. The headings are for reference
purposes only and shall not be used in construing or interpreting
this Note.


 

21.           
Notices. Any
notices or other communications required or permitted hereunder
shall be sufficiently given if in writing and delivered in person,
or sent by registered or certified mail (return receipt requested)
or recognized overnight delivery service, postage pre-paid, or sent
by email addressed as follows, or to such other address as such
party may notify to the other parties in writing:

 




(a)           
If to the Company, to it at the following address:


 


5700
Plano Parkway, Ste. 3600


Plano,
Texas 75093


Attn:
John Brda, President


Email:
john@torchlightenergy.com


 


(b)           If
to Registered Holder, then to the address listed on the front of
this Note, unless changed, by notice in writing as provided for
herein.


 


A
notice or communication will be effective (i) if delivered in
person or by overnight courier, on the Business Day it is
delivered, (ii) if sent by registered or certified mail, the
earlier of the date of actual receipt by the party to whom such
notice is required to be given or three (3) days after deposit in
the United States mail and (iii) if sent by email, on the date
sent. If any notice or other communication is sent by email, the
party providing such notice shall, no later than the next business
day after such emailed notice is sent, send a written notice by
registered or certified mail (return receipt requested) or
recognized overnight delivery service, postage
pre-paid.


 

22.           
Use of
Proceeds. The Company intends to use the net proceeds from
the funds received hereunder for working capital and general
corporate purposes, which includes, without limitation, drilling
capital, lease acquisition capital and repayment of prior
debt.


 



 

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Unsecured Promissory Note - Page 8 of 11







 






 

23.          
Covenants of the
Company.



 

(a)           
Limitation on
Liens/Obligations. So long as any of the Series Notes are
outstanding, neither the Company or any of its subsidiaries will
create, assume, or guarantee any debt, liability or obligation
which is secured by any mortgage, pledge, lien, security interest
or other encumbrance on any assets, capital stock or equity
interest of the Company or its subsidiaries unless:


 

(i)           
such financing arrangements are with an established commercial
banking or financial institution, negotiated on an arm’s
length basis with commercially reasonable terms in light of market
conditions, the proceeds of which are used primarily to finance the
acquisition, exploration, drilling or improvements of the Company
or its subsidiaries oil and gas properties or for other customary
general corporate purposes. Only first priority mortgages,
encumbrances, deeds of trust, security interests or liens shall be
permitted. Second or subordinate security interests, liens,
encumbrances, deeds of trusts or mortgages are not permitted to be
incurred by the Company, unless consented to by the Acting
Holders.


 

(ii)           
Debts and liabilities incurred in the normal course of business,
including those relating to financing the acquisition, the
construction, development, exploration or improvement of the
Company’s oil and gas properties and fixed or capital assets
including capital lease obligations, operating leases and
obligations in connection with drilling and development agreements
or other similar arrangements negotiated on terms no less favorable
as if negotiated on an arm’s length basis.


 

(b)           
Limitations on Disposition
of Stock or Equity Interest of Subsidiaries. So long as the
Series Notes are outstanding and subject to provisions regarding
mergers, consolidations and sales of assets in Section 10, no
subsidiary will sell or otherwise dispose of any shares of capital
stock, equity interest or other assets, unless such transaction is
for at least fair value as determined by a majority of the
Company’s disinterested directors in such transaction acting
in good faith or to otherwise comply with an order of a court or
regulatory authority or pursuant to any contractual obligation
entered into by the Company in the ordinary course of business in
connection with drilling, exploration and development of the
Company’s oil and gas properties.


 

(c)           
Issuance of Disqualified
Stock or Equity Interests. Neither the Company nor any
subsidiary shall issue any preferred stock or any other comparable
equity interest which are mandatorily redeemable at a date prior to
the maturity date of the Series Notes, without the consent or
approval of the Acting Holders, which consent or approval will not
be unreasonably withheld.


 

(d)           
Limitations on Restricted
Payments. Neither the Company nor any of its subsidiaries
shall distribute any cash or other assets to any holders of common
stock in the form of dividends and other distributions (including
repurchase of equity) prior to the payment in full of all Series
Notes, without the consent of the Acting Holders, which consent
will not be unreasonably withheld.


 

(e)           
Transactions with
Affiliates. Neither the Company nor any subsidiary will
enter into any transaction with an affiliate which is defined to
mean any person, corporation or business entity that has a direct
or indirect ownership interest of at least 10% of the equity
interest of such affiliated party unless:


 



 

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Unsecured Promissory Note - Page 9 of 11







 






 

(i)           
such transaction is no less favorable than those that could be
obtained in arm’s length transaction; and


 

(ii)           
the transaction is approved by a majority of the disinterested of
the Company’s board of directors.

 




(f)           
No other Note or Debt
Offering. Except for an obligation permitted under Section
23(a) above, so long as the Series Notes are outstanding, the
Company will not issue any other notes or debt offerings which have
a maturity date prior to the payment in full of all Series Notes,
unless consented to by the Acting Holders, which consent will not
be unreasonably withheld.


 

24.           
Survival.
The representations, warranties, obligations and covenants of the
Company shall survive execution of this Note.


 


[Remainder of page
intentionally left blank. Signature page follows.]


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 




 

12% 2020 Senior
Unsecured Promissory Note - Page 10 of 11








 






 


IN WITNESS WHEREOF, Torchlight Energy
Resources, Inc. has caused this Note to be duly executed in its
corporate name by the manual signature of its
President/CEO.


 


 


	

 

	


TORCHLIGHT ENERGY RESOURCES,
INC.

  


	

 


	

 

	

 

	

 

	

 


	
 

	
By:  

	
 

	

 


	

 

	

 

	

John
Brda, President/CEO  


	

 


	

 

	

 

	

 

	

 







 




 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 




 

12% 2020 Senior
Unsecured Promissory Note - Page 11 of 11