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EXHIBIT
10.12

 

AGREEMENT AND

PLAN OF REORGANIZATION

 

This
Agreement and Plan of Reorganization (the “Agreement”) is made and entered
into effective this 30th day of January,
2017 (the “Effective
Date”), by and among Line Drive Energy, LLC, a Texas
limited liability company (the “Company”), Greg McCabe, Sr., an
individual (the “Seller”), Torchlight Energy
Resources, Inc., a Nevada corporation (the “Purchaser”), and Torchlight
Acquisition Corporation, a Texas corporation (the
“Merger Sub”).
The Company, the Seller, the Purchaser, and the Merger Sub are
sometimes hereinafter collectively referred to as the
“Parties.”

 

WHEREAS, the respective Boards of
Directors of Purchaser and Merger Sub and the Seller, as both the
Manager and sole Member of the Company, have each determined that
the merger of the Merger Sub with and into the Company (the
“Merger”) upon
the terms and subject to the conditions set forth in this Agreement
is advisable, fair to and in the best interests of the Company and
Merger Sub, as the “Parties
to the Merger” and their respective owners and have
approved the Merger pursuant to the Plan of Merger attached hereto
as Exhibit A (the “Plan of
Merger”);

 

NOW, THEREFORE, in consideration of the
premises, the mutual covenants and agreements and the respective
representations and warranties herein contained, and on the terms
and subject to the conditions herein set forth, the parties hereto,
intending to be legally bound, hereby agree as
follows:

 

ARTICLE I

THE MERGER

 

1.1           The
Merger.  At the Effective Time (as defined in
Section 1.2) and subject to the terms and conditions of this
Agreement and the Plan of Merger, Merger Sub shall be merged with
and into the Company and the separate existence of Merger Sub shall
thereupon cease, in accordance with the applicable provisions of
the Texas Business Organizations Code (the “Act”). the Company shall be the
surviving organization in the Merger (sometimes referred to herein
as the “Surviving
Organization”) and will continue to be governed by the
laws of the State of Texas, and the existence of the Company will
continue. The Merger will have the effects specified by the
Act.

 

1.2           Closing
and Effective Time of the Merger.  The closing
(the “Closing”)
will take place at the Purchaser’s offices or at such other
place as agreed upon among the Parties on the later of (a) the
Effective Date or (b) as soon as practicable following fulfillment
or waiver of the conditions specified in Article VII of this
Agreement (the “Closing
Date”). In addition to the other actions contemplated
hereunder, the Parties to the Merger will cause a Certificate of
Merger (the “Certificate of
Merger”) to be filed with the office of the Secretary
of State of the State of Texas as provided in Section 10.151 of the
Act, and will cause this Plan of Merger to be on file at the
principal place of business of the Company. Subject to and in
accordance with the laws of the State of Texas, the Merger will
become effective upon the filing of the Certificate of Merger with
the office of the Secretary of State of the State of Texas, or such
later time or date as may be specified in the Certificate of Merger
(the “Effective
Time”).

 

 

1

 

 

ARTICLE II

THE SURVIVING ORGANIZATION

 

2.1           Certificate
of Formation. The Certificate of Formation of
the Company, as in effect immediately prior to the Effective Time
shall be the Certificate of Formation of the Surviving Organization
until the same shall be altered or amended.

 

2.2.           Company
Agreement. The
Company Agreement of the Company, as in effect immediately prior to
the Effective Time shall be the Company Agreement of the Surviving
Organization until the same shall be altered or
amended.

 

2.3.           Manager. The
Manager of the Company, as the Surviving Organization, immediately
after the Effective Time shall be John Brda.

 

ARTICLE III

CONVERSION OF SECURITIES

 

3.1           Conversion
of Capital Stock of Merger Sub. As of the Effective Time, by
virtue of the Merger and without any action on the part of
Purchaser, Merger Sub, the Company or the respective shareholders
of members thereof, each share of the capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time
shall be automatically converted into and become one (1) validly
issued membership interest in the Surviving Organization, and such
membership interest in the Surviving Organization shall constitute
all of the issued and outstanding membership interests in the
Surviving Organization immediately following the Effective
Time.

 

3.2           Conversion
of Membership Interest in the Company.

 

(a)           Aggregate
Merger Consideration. The aggregate merger consideration
payable for the issued and outstanding membership interest in the
Company (the “Merger
Consideration”) shall be 3,301,739 restricted shares
of common stock, par value $0.001 per share, of Purchaser (the
“Purchaser Common
Stock”). The issuance of the Purchaser Common Stock
will not be registered.

 

(b)           Cancellation
of the Company Membership Interest. As of the Effective
Time, by virtue of the Merger and without any action on the part of
Purchaser, Merger Sub, the Company or the respective shareholders
of members thereof, the membership interest in the Company issued
and outstanding immediately prior to the Effective Time (the
“Company Membership
Interest”) shall cease to exist; provided, however,
that the holder of the Company Membership Interest shall be
entitled to the Merger Consideration in the form of Purchaser
Common Stock.

 

(c)           
Payment of Merger
Consideration. At the Closing, Purchaser will deliver to
Seller stock certificates evidencing the Purchaser Common
Stock.

 

 

2

 

 

3.3           Tax
Consequences. The Parties intend for the Merger
to constitute a reorganization within the meaning of Sections
368(a)(1)(A) and (a)(2)(E) of the Internal Revenue Code of 1986, as
amended (the “Code”). The Parties adopt this
Agreement as a plan of reorganization with the meaning of Treasury
Regulations Section 1.368-2(g). “Treasury Regulations”
shall mean the temporary and final Income Tax Regulations
promulgated under the Code, as such regulations may be amended from
time to time (including corresponding provisions of succeeding
Treasury Regulations). The Parties agree to satisfy the tax return
reporting requirements of Treasury Regulations
§1.368-3.

 

ARTICLE
IV

REPRESENTATIONS
AND WARRANTIES

OF
THE COMPANY AND THE SELLER

 

The
Company and the Seller, jointly and severally, hereby represent and
warrant to Purchaser as follows:

 

Section
4.1.         Organization, Good Standing and
Qualification of the Company.

 

(i)           The
Company is a Texas limited liability company, duly organized and
validly existing under the laws of the state of Texas, (ii) has all
requisite power and authority to carry on its business, and (iii)
is duly qualified to transact business and is in good standing in
all jurisdictions where its ownership, lease or operation of
property or the conduct of its business requires such
qualification, except where the failure to do so would not have a
material adverse effect to the Company.

 

(ii)           The
Company Membership Interest is the sole ownership interest in the
Company. There is no other class of equity interest authorized or
issued by the Company. The Company Membership Interest is owned
beneficially and of record by the Seller free and clear of any
liens, claims, equities, charges, options, rights of first refusal
or encumbrances. The Company has no obligation to repurchase,
reacquire, or redeem any of its outstanding equity interests. There
are no outstanding securities convertible into or evidencing the
right to purchase or subscribe for any equity interests of the
Company, there are no outstanding or authorized options, warrants,
calls, subscriptions, rights, commitments or any other agreements
of any character obligating the Company to issue any securities
convertible into or evidencing the right to purchase or subscribe
for any security of the Company, and there are no agreements or
understandings with respect to the voting, sale, transfer or
registration of any equity interests of the Company.

 

Section
4.2            
Subsidiaries. The
Company does not own any subsidiaries.

 

Section
4.3            
Ownership of the
Assets. Subject to that certain Participation Agreement set
forth in Schedule 4.16, at Closing, the Company will own all of the
assets listed in Schedule
4.3 (“Assets”).

 

Section
4.4            Ownership
of the Company Membership Interest. The Seller has the
unrestricted right and power to transfer, convey and deliver full
ownership of the Company Membership Interest without the consent or
agreement of any other person and without any designation,
declaration or filing with any governmental authority. Upon the
transfer of the Company Membership Interest to Purchaser as
contemplated herein, Purchaser will receive good and valid title
thereto, free and clear of any liens, claims, equities, charges,
options, rights of first refusal, encumbrances or other
restrictions.

 

 

3

 

 

Section
4.5             
Authorization.

 

(i)           All
action on the part of the Company necessary for the authorization,
execution, delivery and performance of this Agreement and all
documents related to consummate the transactions contemplated
herein have been taken by the Company. The Company has the
requisite power and authority to execute and deliver this Agreement
and to perform its obligations hereunder and to consummate the
transactions contemplated hereby. This Agreement, when duly
executed and delivered in accordance with its terms, will
constitute a valid and binding obligation of the Company,
enforceable against each in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, and other
similar laws of general application relating to or affecting
creditors’ rights and to general equitable
principles.

 

(ii)           The
Seller represents that he is a person of full age of majority, with
full power, capacity, and authority to enter into this Agreement
and perform the obligations contemplated hereby by and for himself.
All action on the part of the Seller necessary for the
authorization, execution, delivery and performance of this
Agreement by him has been taken, or will be taken by them prior to
the Closing Date. This Agreement, when duly executed and delivered
in accordance with its terms, will constitute legal, valid and
binding obligation of the Seller enforceable against him in
accordance with the terms, except as may be limited by bankruptcy,
insolvency, reorganization and other similar laws of general
application affecting creditors’ rights generally or by
general equitable principles.

 

Section
4.6             
No Breaches or
Defaults. The execution, delivery, and performance of this
Agreement by the Company and the Seller does not: (i) conflict
with, violate, or constitute a breach of or a default under any
other outstanding agreements or the constituent documents of the
Company, (ii) result in the creation or imposition of any lien,
claim, or encumbrance of any kind upon the Company or the Assets or
(iii) require any authorization, consent, approval, exemption, or
other action by or filing with any third party or Governmental
Authority (as defined below) under any provision of: (a) any
applicable Legal Requirement (as defined below), or (b) any credit
or loan agreement, promissory note, or any other agreement or
instrument to which the Seller or the Company is a party or by
which the Company or the Assets may be bound or affected. For
purposes of this Agreement, “Governmental Authority” means any
foreign governmental authority, the United States of America, any
state of the United States, and any political subdivision of any of
the foregoing, and any agency, department, commission, board,
bureau, court, or similar entity, having jurisdiction over the
parties hereto or their respective assets or properties. For
purposes of this Agreement, “Legal Requirement” means any law,
statute, injunction, decree, order or judgment (or interpretation
of any of the foregoing) of, and the terms of any license or permit
issued by, any Governmental Authority.

 

Section
4.7              
Consents. No
permit, consent, approval or authorization of, or designation,
declaration or filing with, any Governmental Authority or any other
person or entity is required on the part of the Seller or the
Company in connection with the execution and delivery by the Seller
or the Company of this Agreement or the consummation and
performance of the transactions contemplated hereby.

 

 

4

 

 

Section
4.8              
Pending Claims.
There is no claim, suit, arbitration, investigation, action,
litigation or other proceeding, whether judicial, administrative or
otherwise, now pending or, to the Seller’s or the
Company’s knowledge, contemplated or threatened against the
Seller, the Company or the Assets before any court, arbitration,
administrative or regulatory body or any governmental agency which
may result in any judgment, order, award, decree, liability or
other determination which will or could reasonably be expected to
have any material effect upon the Seller, the Company, or the
Assets, and there is no basis known to the Seller or the Company
for any such action. No litigation is pending, or, to the
Seller’s or the Company’s knowledge, threatened against
the Seller or the Company, or the Assets which seeks to restrain or
enjoin the execution and delivery of this Agreement or any of the
documents referred to herein or the consummation of any of the
transactions contemplated thereby or hereby. Neither the Seller nor
the Company is subject to any judicial injunction or mandate or any
quasi-judicial or administrative order or restriction directed to
or against them or which would affect the Company or the
Assets.

 

Section
4.9             
Taxes. Tthe Company
has timely and accurately prepared and filed all federal, state,
foreign and local tax returns and reports required to be filed
prior to such dates and has timely paid all taxes shown on such
returns as owed for the periods of such returns, including all
sales taxes and withholding or other payroll related taxes shown on
such returns. The Company is not delinquent in the payment of any
tax or governmental charge of any nature. Neither the Company nor
the Seller have any knowledge of any liability for any tax to be
imposed by any taxing authorities upon the Company as of the
Effective Date and as of the Closing that is not adequately
provided for. No assessments or notices of deficiency or other
communications have been received by the Seller or the Company with
respect to any tax return which has not been paid, discharged or
fully reserved against and no amendments or applications for refund
have been filed or are planned with respect to any such return.
None of the federal, state, foreign and local tax returns of the
Company have been audited by any taxing authority. Neither the
Seller nor the Company have any knowledge of any additional
assessments, adjustments or contingent tax liability (whether
federal or state) of any nature whatsoever, whether pending or
threatened against the Company for any period, nor of any basis for
any such assessment, adjustment or contingency. There are no
agreements between the Company and any taxing authority, including,
without limitation, the Internal Revenue Service, waiving or
extending any statute of limitations with respect to any tax
return.

 

Section
4.10          
Acquisition of Stock for
Investment. The Seller understands that the issuance of the
Purchaser Common Stock (as referenced in Section 3.2 herein) will
not have been registered under the Securities Act of 1933, as
amended (the “Securities
Act”), or any state securities acts, and accordingly,
are restricted securities, and the Seller represents and warrants
to the Purchaser that the present intention of the Seller is to
receive and hold the Purchaser Common Stock for investment only and
not with a view to the distribution or resale thereof.  Additionally, the Seller
understands that any sale of any of the issued Purchaser Common
Stock will require, under current law, either (a) the registration
of the such Purchaser Common Stock under the Securities Act and
applicable state securities acts; (b) compliance with Rule 144 of
the Securities Act; or (c) the availability of an exemption from
the registration requirements of the Securities Act and applicable
state securities acts.

 

 

5

 

 

To
assist in implementing the above provisions, the Seller hereby
consents to the placement of the legend, or a substantially similar
legend, set forth below, on all certificates representing ownership
of the Purchaser Common Stock acquired hereby until the Purchaser
Common Stock have been sold, transferred, or otherwise disposed of,
pursuant to the requirements hereof. The legend shall read
substantially as follows:

 

“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES ACTS. THESE
SECURITIES HAVE 
BEEN ACQUIRED FOR INVESTMENT, ARE RESTRICTED AS TO
TRANSFERABILITY, AND MAY NOT BE SOLD, HYPOTHECATED, OR OTHERWISE
TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION AND
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES
LAWS OR APPLICABLE EXEMPTIONS THEREFROM.”

 

Section
4.11           
Access to
Information. The Seller hereby confirms and represents that
he (a) has access to and has reviewed all current information about
the Purchaser filed with the Securities and Exchange Commission
(the “SEC”)
(which filings can be accessed by going to
www.sec.gov/edgar/searchedgar/companysearch.html, typing
“Torchlight Energy Resources” in the “Company
name” field, and clicking the “Search” button)
(collectively, the “SEC
Reports”); (b) has been afforded the opportunity to
ask questions of and receive answers from representatives of the
Purchaser concerning the business and financial condition,
properties, operations and prospects of the Purchaser and all such
questions have been answered to the full satisfaction of the
Seller; (c) has such knowledge and experience in financial and
business matters so as to be capable of evaluating the relative
merits and risks of the transactions contemplated hereby; (d) has
had an opportunity to engage and is represented by an attorney of
his choice; (e) has had an opportunity to negotiate the terms and
conditions of this Agreement; (f) has been given adequate time to
evaluate the merits and risks of the transactions contemplated
hereby; and (g) has been provided with and given an opportunity to
review all current information about the Purchaser.

 

Section
4.12            
Purchase for Investment
– Accredited Investor. The Seller is acquiring the
Purchaser Common Stock for his own account, for investment purposes
only and not with view to any public resale or other distribution
thereof. The Seller represents and warrants that it is an
“accredited investor” as that term is defined in Rule
501(a) of Regulation D of the Securities Act. The Seller and/or his
representatives have received, or have had access to, and have had
sufficient opportunity to review, all books, records, financial
information and other information which each of them consider
necessary or advisable to enable them to make a decision concerning
its acquisition of the Purchaser Common Stock, and that each of
them possesses such knowledge and experience in financial and
business matters that each is capable of evaluating the merits and
risks of his investment hereunder.

 

Section
4.13            
Labor Matters. The
Company is not a party or otherwise subject to any collective
bargaining agreement with any labor union or association. There are
no discussions, negotiations, demands or proposals that are pending
or have been conducted or made with or by any labor union or
association, and there are not pending or threatened against the
Company any labor disputes, strikes or work stoppages. To the
Company’s and the Seller’s knowledge, the Company is in
compliance with all federal and state laws respecting employment
and employment practices, terms and conditions of employment and
wages and hours, and, to their knowledge, is not engaged in any
unfair labor practices. The Company is not a party to any written
or oral contract, agreement or understanding for the employment of
any officer, director or employee of the Company.

 

 

6

 

 

Section
4.14              
Compliance with
Laws. To Sellers knowledge, the Company is in compliance
with all statutes, orders, rules, ordinances and regulations
applicable to it or to the ownership of its assets or the operation
of its businesses. Neither the Seller nor the Company has any basis
to expect, nor have they received, any order or notice of any such
violation or claim of violation of any such statute, order, rule,
ordinance or regulation by the Company. The Company owns, holds,
possesses or lawfully uses in the operation of its business all
permits and licenses which are in any manner necessary or required
for it to conduct its operation and business as now being
conducted.

 

Section
4.15               
No Conflicts. The
execution and delivery of this Agreement by the Company does not,
and the performance and consummation of the transactions
contemplated hereby by the Company, will not (i) conflict with the
articles of organization or regulations of the Company as
appropriate; (ii) conflict with or result in a breach or violation
of, or default under, or give rise to any right of acceleration or
termination of, any of the terms, conditions or provisions of any
note, bond, lease, license, agreement or other instrument or
obligation to which the Company is a party or by which the
Company’s assets or properties are bound; or (iii) result in
the creation of any encumbrance on any of the assets or properties
of the Company.

 

Section
4.16             
Title to Properties;
Encumbrances. At Closing, to Seller’s knowledge, the
Assets are free and clear of all mortgages, claims, liens, security
interests, charges, leases, encumbrances and other restrictions of
any kind and nature, except (i) as disclosed in Schedule 4.16, (ii) statutory
liens not yet delinquent, and (iii) such liens consisting of zoning
or planning restrictions, imperfections of title, easements and
encumbrances, if any, as do not materially detract from the value
or materially interfere with the present use of the property or
assets subject thereto or affected thereby.

 

Section
4.17              
No Liabilities. As
of the Closing Date, the Company does not and shall not have any
obligation or liability (contingent or otherwise) or unpaid bill to
any third party, except as set forth herein in Schedule 4.17.

 

Section
4.18              
Contracts
and Leases. Except as shown on
Exhibit 4.18, the Company does not (i) have any leases of personal
property relating to the Assets, whether as lessor or lessee; (ii)
have any contractual or other obligations relating to the Assets,
whether written or oral; and (iii) have given any power of attorney
to any person or organization for any purpose relating to the
Assets. The Company shall provide to Purchaser prior to the Closing
Date each and every contract, lease or other document relating to
the Assets to which it is subject or is a party or a beneficiary.
To the Company’s and the Seller’s knowledge, such
contracts, leases or other documents are valid and in full force
and effect according to their terms and constitute legal, valid and
binding obligations of the Company and the other respective parties
thereto and are enforceable in accordance with their terms. The
Seller and the Company have no knowledge of any default or breach
under such contracts, leases or other documents or of any pending
or threatened claims under any such contracts, leases or other
documents. Neither the execution of this Agreement, nor the
consummation of all or any of the transactions contemplated under
this Agreement, will constitute a breach or default under any such
contracts, leases or other documents which would have a material
adverse effect on the financial condition of the Company or the
Assets after the Closing.

 

 

7

 

 

Section
4.19              
No Pending
Transactions. Except for the transactions contemplated by
this Agreement, the Company is not a party to or bound by or the
subject of any agreement, undertaking, commitment or discussions or
negotiations with any person that could result in: (i) the sale,
merger, consolidation or recapitalization of the Company; (ii) the
sale of any of the Assets; (iii) the sale of any outstanding equity
interest of the Company; (iv) the acquisition by the Company of any
operating business or the capital stock of any other person or
entity; (v) the borrowing of money; (vi) any agreement with any of
the respective officers, managers or affiliates of the Company; or
(vii) any expenditures or the performance by the Company extending
for a period more than one year from the date hereof.

 

Section
4.20              
Material Agreements;
Action. Except for the transactions contemplated by this
Agreement and as set forth in Schedule 4.16, there are no
contracts, agreements, commitments, understandings or proposed
transactions, whether written or oral, to which the Company is a
party or by which it is bound that involve or relate to (i) any of
the respective officers, directors, stockholder or partners of the
Company or (ii) covenants of the Seller or the Company not to
compete in any line of business or with any person in any
geographical area or covenants of any other person not to compete
with the Company in any line of business or in any geographical
area.

 

Section
4.21                   
Insurance
Policies.
Copies of all insurance policies maintained by the Company have
been or will be delivered or made available to Purchaser. The
policies of insurance held by the Company are in such amounts, and
insure against such losses and risks, as the Company reasonably
deems appropriate for their property and business operations. All
such insurance policies are in full force and effect and all
premiums due thereon have been paid and will be paid through the
Closing.

 

Section
4.22                 
No Default. The
Company is not in default under any term or condition of any
instrument evidencing, creating or securing any indebtedness of the
Company, and there has been no default in any material obligation
to be performed by the Company under any other contract, lease,
agreement, commitment or undertaking to which the Company is a
party or by which it or its assets or properties are bound, nor has
the Company waived any material right under any such contract,
lease, agreement, commitment or undertaking.

 

Section
4.23                 
Books and Records.
The books of account, minute books, stock record books and other
records of the Company, all of which have been made available to
Purchaser, are accurate and complete and have been maintained in
accordance with sound business practices.

 

Section
4.24     
          Environmental. To
Seller’s knowledge, the Company is not in violation of any
state, local or federal statutes, laws, regulations, ordinances, or
rules pertaining to health or the environment requirements
affecting the Assets. Neither the Company nor the Seller have
received any citation, directive, letter or other communication,
written or oral, or any notice of any proceeding, claim or lawsuit
relating to any environmental issue arising out of the ownership of
any of the Assets, and there is no basis known to the Company or
the Seller for any such action.

 

 

8

 

 

Section
4.25           
       Disclosure. No representation
or warranty of the Seller or the Company contained in this
Agreement (including the exhibits hereto) contains any untrue
statement or omits to state a material fact necessary in order to
make the statements contained herein or therein, in light of the
circumstances under which they were made, not
misleading.

 

Section
4.26                     
Employee Benefit
Plans. The Company is not a party to any employee-benefit
plan.

 

Section
4.27                   
Brokerage
Commission. No broker or finder has acted on behalf of the
Seller or the Company in connection with this Agreement or the
transactions contemplated hereby and no person is entitled to any
brokerage or finder’s fee or compensation in respect thereto
based in any way on agreements, arrangements or understandings made
by or on behalf of the Seller or the Company.

 

ARTICLE
V

REPRESENTATIONS
AND WARRANTIES

OF
PURCHASER AND MERGER SUB

 

The
Purchaser and Merger Sub hereby represent and warrant to the
Company and the Seller as follows:

 

Section
5.1                         
Organization, Good
Standing and Qualification.

 

(a)           The
Purchaser (i) is a corporation duly organized, validly existing and
in good standing under the laws of the state of Nevada, (ii) has
all requisite power and authority to carry on its business, and
(iii) is duly qualified to transact business and is in good
standing in all jurisdictions where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except where the failure to do so would not have a
material adverse effect to the Purchaser.

 

(b)           The
Merger Sub (i) is a corporation duly organized, validly existing
and in good standing under the laws of the state of Texas, (ii) has
all requisite power and authority to carry on its business, and
(iii) is duly qualified to transact business and is in good
standing in all jurisdictions where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, except where the failure to do so would not have a
material adverse effect to the Merger Sub.

 

Section
5.2                Authorization.
All action on the part of the Purchaser and the Merger Sub
necessary for the authorization, execution, delivery and
performance of this Agreement and all documents related to
consummate the transactions contemplated herein has been taken by
the respective corporation. Each of the Purchaser and the Merger
Sub has the requisite power and authority to execute and deliver
this Agreement and to perform its obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement,
when duly executed and delivered in accordance with its terms, will
constitute a valid and binding obligation of each of the Purchaser
and the Merger Sub, enforceable against such corporation in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, and other similar laws of general
application relating to or affecting creditors’ rights and to
general equitable principles.

 

 

9

 

 

Section 5.3               
No Breaches or
Defaults. The execution, delivery, and performance of this
Agreement by each of Purchaser and Merger Sub does not: (i)
conflict with, violate, or constitute a breach of or a default
under or (ii) require any authorization, consent, approval,
exemption, or other action by or filing with any third party or
Governmental Authority under any provision of: (a) any applicable
Legal Requirement, or (b) any credit or loan agreement, promissory
note, or any other agreement or instrument to which any of
Purchaser and Merger Sub is a party.

 

Section
5.4              
Consents. No
permit, consent, approval or authorization of, or designation,
declaration or filing with, any Governmental Authority or any other
person or entity is required on the part of any of Purchaser and
Merger Sub in connection with the execution and delivery by
Purchaser and Merger Sub of this Agreement or the consummation and
performance of the transactions contemplated hereby.

 

Section
5.5           
  Disclosure.
No representation or warranty of Purchaser and Merger Sub contained
in this Agreement (including the exhibits hereto) contains any
untrue statement or omits to state a material fact necessary in
order to make the statements contained herein or therein, in light
of the circumstances under which they were made, not
misleading.

 

Section
5.6              
Brokerage
Commission. No broker or finder has acted on behalf of any
of Purchaser and Merger Sub in connection with this Agreement or
the transactions contemplated hereby and no person is entitled to
any brokerage or finder’s fee or compensation in respect
thereto based in any way on agreements, arrangements or
understandings made by or on behalf of any of Purchaser and Merger
Sub.

 

ARTICLE VI

 

[INTENTIONALLY
OMITTED]

 

ARTICLE VII

CONDITIONS TO CLOSING OF

THE SELLER AND THE COMPANY

 

Each
obligation of the Seller and the Company to be performed on the
Closing Date shall be subject to the satisfaction of each of the
conditions stated in this Article VII, except to the extent that
such satisfaction is waived by the Seller and the Company in
writing:

 

Section
7.1              
Payment of Merger
Consideration. Purchaser shall have tendered the Merger
Consideration as referenced in Section 3.2 hereof to the Company
concurrently with the Closing, in the form of certificates
evidencing the Purchaser Common Stock duly endorsed to Seller or
accompanied by duly executed stock powers in form and substance
satisfactory to the Seller.

 

Section
7.2           
Corporate
Resolutions. Purchaser and Merger Sub shall provide a
corporate resolution of its respective Board of Directors which
approves the transactions contemplated herein and authorizes the
execution, delivery and performance of this Agreement and the
documents referred to herein to which it is or is to be a party
dated as of the Closing Date.

 

 

10

 

 

Section
7.3           
Absence of
Proceedings. No action, suit or proceeding by or before any
court or any governmental or regulatory authority shall have been
commenced and no investigation by any governmental or regulatory
authority shall have been commenced seeking to restrain, prevent or
challenge the transactions contemplated hereby or seeking judgments
against Purchaser.

 

ARTICLE
VIII

CONDITIONS
TO CLOSING OF

THE
PURCHASER AND MERGER SUB

 

Each
obligation of Purchaser and Merger Sub to be performed on the
Closing Date will be subject to the satisfaction of each of the
conditions stated in this Article VIII, except to the extent that
such satisfaction is waived by Purchaser in writing.

 

Section
8.1              
Delivery of Purchaser
Warrants. The Company shall have delivered certificates
evidencing the Warrants to acquire shares of common stock of the
Purchaser held by the Company and listed on Schedule 4.3 duly
endorsed to the Company.

 

Section
8.2              
Company
Resolutions. The Company shall provide to Purchaser
resolutions of its sole Member and Manager, the Seller, which
approves all of the transactions contemplated herein and authorizes
the execution, delivery and performance of this Agreement and the
documents referred to herein to which it is or is to be a party
dated as of the Closing Date.

 

Section
8.3                
No Assumption of
Liabilities. The Purchaser will not assume any liabilities
of the Company as of the Closing Date.

 

Section
8.4            
Absence of
Proceedings. No action, suit or proceeding by or before any
court or any governmental or regulatory authority will have been
commenced and no investigation by any governmental or regulatory
authority will have been commenced seeking to restrain, prevent or
challenge the transactions contemplated hereby or seeking judgments
against the Company or any of the Assets.

 

ARTICLE IX

INDEMNIFICATION

 

Section
9.1              
Indemnification from the
Seller. Seller hereby agrees to and shall indemnify, defend
(with legal counsel reasonably acceptable to Purchaser), and hold
Purchaser, its officers, directors, shareholders, employees,
affiliates, parent, agents, legal counsel, successors and assigns
(collectively, the “Purchaser
Group”) harmless at all times after the date of this
Agreement, from and against any and all actions, suits, claims,
demands, debts, liabilities, obligations, losses, damages, costs,
expenses, penalties or injury (including reasonable
attorneys’ fees and costs of any suit related thereto)
suffered or incurred by any of the Purchaser Group arising from:
(a) any misrepresentation by, or breach of any covenant or warranty
of the Seller or the Company contained in this Agreement, or any
exhibit, certificate, or other instrument furnished or to be
furnished by the Seller or the Company hereunder; (b) any
nonfulfillment of any agreement on the part of the Seller under
this Agreement; or (c) any suit, action, proceeding, claim or
investigation against Purchaser Group which arises from or which is
based upon or pertaining to the Seller’s or the
Company’s conduct or the operation or liabilities of the
business of the Company or the Assets prior to the Closing
Date.

 

 

11

 

 

Section
9.2              
Indemnification from
Purchaser. Purchaser agrees to and shall indemnify, defend
(with legal counsel reasonably acceptable to the Seller) and hold
the Seller and its officers, directors, affiliates, agents, legal
counsel, successors and assigns (collectively, the
“Seller Group”)
harmless at all times after the date of the Agreement from and
against any and all actions, suits, claims, demands, debts,
liabilities, obligations, losses, damages, costs, expenses,
penalties or injury (including reasonable attorney’s fees and
costs of any suit related thereto) suffered or incurred by any of
Seller Group, arising from (a) any misrepresentation by, or breach
of any covenant or warranty of Purchaser contained in this
Agreement or any exhibit, certificate, or other agreement or
instrument furnished or to be furnished by Purchaser hereunder or;
(b) any nonfulfillment of any agreement on the part of Purchaser
under this Agreement.;

 

Section
9.3             
Defense of Claims.
If any lawsuit enforcement action or any attempt to collect on an
alleged liability is filed against any party entitled to the
benefit of indemnity hereunder, written notice thereof shall be
given to the indemnifying party within ten (10) business days after
receipt of notice or other date by which action must be taken;
provided that the failure of any indemnified party to give timely
notice shall not affect rights to indemnification hereunder except
to the extent that the indemnifying party demonstrates damage
caused by such failure. After such notice, the indemnifying party
shall be entitled, if it so elects, to take control of the defense
and investigation of such lawsuit or action and to employ and
engage attorneys of its own choice to handle and defend the same,
at the indemnifying party's cost, risk and expense; and such
indemnified party shall cooperate in all reasonable respects, at
its cost, risk and expense, with the indemnifying party and such
attorneys in the investigation, trial and defense of such lawsuit
or action and any appeal arising therefrom; provided, however, that
the indemnified party may, at its own cost, participate in such
investigation, trial and defense of such lawsuit or action and any
appeal arising therefrom. The indemnifying party shall not, without
the prior written consent of the indemnified party, effect any
settlement of any proceeding in respect of which any indemnified
party is a party and indemnity has been sought hereunder unless
such settlement of a claim, investigation, suit, or other
proceeding only involves a remedy for the payment of money by the
indemnifying party and includes an unconditional release of such
indemnified party from all liability on claims that are the subject
matter of such proceeding.

 

Section
9.4            
Default of Indemnification
Obligation. If an entity or individual having an
indemnification, defense and hold harmless obligation, as above
provided, shall fail to assume such obligation, then the party or
entities or both, as the case may be, to whom such indemnification,
defense and hold harmless obligation is due shall have the right,
but not the obligation, to assume and maintain such defense
(including reasonable counsel fees and costs of any suit related
thereto) and to make any settlement or pay any judgment or verdict
as the individual or entities deem necessary or appropriate in such
individuals or entities absolute sole discretion and to charge the
cost of any such settlement, payment, expense and costs, including
reasonable attorneys’ fees, to the entity or individual that
had the obligation to provide such indemnification, defense and
hold harmless obligation and same shall constitute an additional
obligation of the entity or of the individual or both, as the case
may be.

 

 

12

 

 

Section
9.5               
Survival of
Representations and Warranties. The respective
representations, warranties and indemnities given by the parties to
each other pursuant to this Agreement shall survive the Closing for
a period ending twelve (12) months from the Closing Date
(“Survival
Date”). Notwithstanding anything to the contrary
contained herein, no claim for indemnification may be made against
the party required to indemnify (the “Indemnitor”)
under this Agreement unless the party entitled to indemnification
(the “Indemnitee”) shall have given the Indemnitor
written notice of such claim as provided herein on or before the
Survival Date. Any claim for which notice has been given prior to
the expiration of the Survival Date shall not be barred
hereunder.

 

ARTICLE X

MISCELLANEOUS

 

Section
10.1            
Amendment; Waiver.
Neither this Agreement nor any provision hereof may be amended,
modified or supplemented unless in writing, executed by all the
parties hereto. Except as otherwise expressly provided herein, no
waiver with respect to this Agreement shall be enforceable unless
in writing and signed by the party against whom enforcement is
sought. Except as otherwise expressly provided herein, no failure
to exercise, delay in exercising, or single or partial exercise of
any right, power or remedy by any party, and no course of dealing
between or among any of the parties, shall constitute a waiver of,
or shall preclude any other or further exercise of, any right,
power or remedy.

 

Section
10.2              
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 nationally recognized overnight delivery service, postage
pre-paid, addressed as follows, or to such other address has such
party may notify to the other parties in writing:

 

	

(a)

	

If to the Seller

	

Greg McCabe

	
 

	

or the Company:

	

500 W. Texas, Suite 890

	
 

	
 

	

Midland, Texas 79701

	
 

	
 

	
 

	
 

	

with a copy to:

	

Michael J. Dawson

	
 

	
 

	

Dawson Parrish, PC

	
 

	
 

	

309 W. 7th
St, Ste. 915

	
 

	
 

	

Fort Worth, Texas 76102

	
 

	
 

	
 

	

(b)

	

If to the Purchaser

	

Torchlight Energy Resources, Inc.

	
 

	

or Merger Sub:

	

Attn: John Brda, President

	
 

	
 

	

5700 W. Plano Parkway, Suite 3600

	
 

	
 

	

Plano, Texas 75093

	
 

	
 

	
 

	
 

	

with a copy to:

	

Robert D. Axelrod

	
 

	
 

	

Axelrod, Smith & Kirshbaum

	
 

	
 

	

5300 Memorial Drive, Suite 1000

	
 

	
 

	

Houston, Texas 77007

 

 

13

 

 

A
notice or communication will be effective (i) if delivered in
Person or by overnight courier, on the business day it is delivered
and (ii) if sent by registered or certified mail, three (3)
business days after dispatch.

 

Section
10.3                
Severability.
Whenever possible, each provision of this Agreement shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to
be prohibited by or invalid under applicable law, such provision
will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this
Agreement.

 

Section
10.4                  
Assignment;
Successors and
Assigns. Except as otherwise provided herein, the provisions
hereof shall inure to the benefit of, and be binding upon, the
successors and permitted assigns of the parties hereto. No party
hereto may assign its rights or delegate its obligations under this
Agreement without the prior written consent of the other parties
hereto, which consent will not be unreasonably
withheld.

 

Section
10.5                  
Public
Announcements. The parties hereto agree that prior to making
any public announcement or statement with respect to the
transactions contemplated by this Agreement, the party desiring to
make such public announcement or statement shall consult with the
other parties hereto and exercise their best efforts to agree upon
the text of a public announcement or statement to be made by the
party desiring to make such public announcement; provided, however,
that if any party hereto is required by law to make such public
announcement or statement, then such announcement or statement may
be made without the approval of the other parties. Provided,
however, that this section shall not apply post-Closing to
Purchaser or Company.

 

Section
10.6                 
Entire Agreement.
This Agreement, the Plan of Merger and the other documents
delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the
subject matter hereof and thereof and supersede and cancel all
prior representations, alleged warranties, statements,
negotiations, undertakings, letters, acceptances, understandings,
contracts and communications, whether verbal or written among the
parties hereto and thereto or their respective agents with respect
to or in connection with the subject matter hereof.

 

Section
10.7                
Choice of Law. This
Agreement shall be governed by, and construed in accordance with,
the laws of the State of Texas without regard to principles of
conflict of laws. In any action between or among any of the
parties, whether arising out of this Agreement or otherwise, each
of the parties irrevocably consents to the exclusive jurisdiction
and venue of the federal and state courts located in Collin County,
Texas.

 

 

14

 

 

Section
10.8           
    Execution. This Agreement may
be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party
and delivered to the other party, it being understood that both
parties need not sign the same counterpart. In the event that any
signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature
shall create a valid and binding obligation of the party executing
(or on whose behalf such signature is executed) with the same force
and effect as if such facsimile or “.pdf” signature
page were an original thereof.

 

Section
10.9            
     Costs
and Expenses. Each party shall pay their own respective
fees, costs and disbursements incurred in connection with this
Agreement.

 

Section
10.10              
Section Headings.
The section and subsection headings in this Agreement are used
solely for convenience of reference, do not constitute a part of
this Agreement, and shall not affect its
interpretation.

 

Section
10.11            
   No
Third-Party Beneficiaries. Nothing in this Agreement will
confer any third party beneficiary or other rights upon any person
(specifically including any employees of The Company) or any entity
that is not a party to this Agreement.

 

Section
10.12              
Further Assurances.
Each party covenants that at any time, and from time to time, after
the Closing Date, it will execute such additional instruments and
take such actions as may be reasonably be requested by the other
parties to confirm or perfect or otherwise to carry out the intent
and purposes of this Agreement.

 

Section
10.13                
Exhibits Not
Attached. Any exhibits not attached hereto on the date of
execution of this Agreement shall be deemed to be and shall become
a part of this Agreement as if executed on the date hereof upon
each of the parties initialing and dating each such exhibit, upon
their respective acceptance of its terms, conditions and/or
form.

 

Section
10.14            
  Attorney Review -
Construction. In connection with the negotiation and
drafting of this Agreement, the parties represent and warrant to
each other that they have had the opportunity to be advised by
attorneys of their own choice and, therefore, the normal rule of
construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the
interpretation of this Agreement or any amendments
hereto.

 

Section
10.15              
Gender. All
personal pronouns used in this Agreement shall include the other
genders, whether used in the masculine, feminine or neuter gender
and the singular shall include the plural and vice versa, wherever
appropriate.

 

 

[SIGNATURES
APPEAR ON THE FOLLOWING PAGE.]

 

 

15

 

 

IN
WITNESS WHEREOF, the undersigned have executed this Agreement and
Plan of Reorganization to become effective as of the Effective
Date.

 

 

	

 

	

COMPANY

	

 

	

 

	
 

LINE
DRIVE ENERGY, LLC, a Texas limited liability company

	

 

	

 

	
 

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ 
Greg
McCabe, Sr.

	

 

	

 

	

 

	
Greg McCabe, Sr.,
Manager

	

 

	

 

	

 

	
 

	

 

	

 

	

 

	
 

	

 

	

 

	

SELLER

	

 

	

 

	

 

	

 

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	

/s/ 
Greg
McCabe, Sr.

	

 

	

 

	

 

	

GREG
MCCABE, SR.

	

 

 

	

 

	

PARENT

	

 

	

 

	

	

 

	

 

	

TORCHLIGHT ENERGY
RESOURCES, INC., a Nevada corporation

	

 

	

 

	

 

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ 
John
Brda

	

 

	

 

	

 

	
John Brda,
CEO

	

 

 

	

 

	

MERGER
SUB

	

 

	

 

	

 

	

 

	

 

	TORCHLIGHT
ACQUISITION CORPORATION, a Texas corporation	

 

	

 

	 	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ 
John
Brda

	

 

	

 

	

 

	
John Brda,
President

	

 

 

 

 

Agreement and Plan of Reorganization

16

 

 

EXHIBIT A

PLAN OF MERGER

 

 

This
PLAN OF MERGER (the "Plan of
Merger") is made as of the 30th day of January,
2017 by and among TORCHLIGHT ENERGY
RESOURCES, INC., a Nevada corporation
(“Purchaser”), TORCHLIGHT ACQUISITION CORPORATION, a
Texas corporation (“Merger Sub”), and LINE DRIVE ENERGY, LLC, a Texas limited
liability company (“Target”) (Merger Sub and Target
being hereinafter collectively referred to as the “Parties to
the Merger”).

 

RECITALS

 

A.         
Prior to the execution of this Plan of Merger, Purchaser, Merger
Sub, and Target have entered into an Agreement and Plan of
Reorganization dated as of January 30, 2017 (the “Plan of
Reorganization”) providing for certain representations,
warranties, and agreements in connection with the transaction
contemplated.

 

B.           The
Boards of Directors of Purchaser and Merger Sub and the Manager and
Member of Target have approved the acquisition of Target by
Parent.

 

C.           The
Boards of Directors of Purchaser and Merger Sub and the Manager and
Member of Target have approved the merger of Merger Sub into Target
(the “Merger”) upon the terms and subject to the
conditions set forth herein and in the Plan of
Reorganization.

 

D.           For
federal income tax purposes, it is intended that the Merger shall
qualify as a reorganization within the meaning of Section 368(a) of
the Internal Revenue Code of 1986, as amended (the
“Code”).

 

WITNESSETH

 

Now,
therefore, in consideration of the premises and the mutual promises
and covenants contained herein, and subject to the conditions
hereinafter set forth, the parties agree as follows:

 

ARTICLE I

THE MERGER

 

1.1           The
Merger.  At the Effective Time (as defined in
Section 1.2) and subject to the terms and conditions of this Plan
of Merger and the Plan of Reorganization, Merger Sub shall be
merged with and into Target and the separate existence of Merger
Sub shall thereupon cease, in accordance with the applicable
provisions of the Texas Business Organizations Code (the
“Act”). Target shall be the surviving organization in
the Merger (sometimes referred to herein as the “Surviving
Entity”) and will continue to be governed by the laws of the
State of Texas, and the existence of Target will continue. The
Merger will have the effects specified by the Act.

 

 

17

 

 

1.2           Effective
Time.  As soon as practicable following
fulfillment or waiver of the conditions specified in Article VII of
the Plan of Reorganization and provided that this Plan of Merger
has not been terminated or abandoned pursuant to Article IV hereof,
the Parties to the Merger will cause a Certificate of Merger (the
“Certificate of Merger”) to be filed with the office of
the Secretary of State of the State of Texas as provided in Section
10.151 of the Act, and will cause this Plan of Merger to be on file
at the principal place of business of the Target. Subject to and in
accordance with the laws of the State of Texas, the Merger will
become effective upon the filing of the Certificate of Merger with
the office of the Secretary of State of the State of Texas , or
such later time or date as may be specified in the Certificate of
Merger (the “Effective Time”).

 

ARTICLE II

THE SURVIVING ORGANIZATION

 

2.1           Certificate
of Formation. The Certificate of Formation of
Target, as in effect immediately prior to the Effective Time shall
be the Certificate of Formation of the Surviving Organization until
the same shall be altered or amended.

 

2.2.           Company
Agreement. The
Company Agreement of Target, as in effect immediately prior to the
Effective Time shall be the Company Agreement of the Surviving
Organization until the same shall be altered or
amended.

 

2.3.           Manager. The
Manager of Target, as the Surviving Organization, immediately after
the Effective Time shall be John Brda.

 

ARTICLE III

CONVERSION OF SECURITIES

 

3.1           Conversion
of Capital Stock of Merger Sub. As of the Effective Time, by
virtue of the Merger and without any action on the part of
Purchaser, Merger Sub, Target or the respective shareholders or
members thereof, each share of the capital stock of Merger Sub
issued and outstanding immediately prior to the Effective Time
shall be automatically converted into and become one (1) validly
issued membership interest in the Surviving Organization, and such
membership interest in the Surviving Organization shall constitute
all of the issued and outstanding membership interests in the
Surviving Organization immediately following the Effective
Time.

 

3.2           Conversion
of Membership Interest in Target.

 

(a)           Aggregate
Merger Consideration. The aggregate merger consideration
payable for the issued and outstanding membership interest in
Target (the “Merger Consideration”) shall be 3,301,739
restricted shares of common stock, par value $0.0001 per share, of
Purchaser (“Purchaser Common Stock”). The issuance of
the Purchaser Common Stock will be made without registration under
the Securities Act of 1933, as amended, or any securities
“blue sky” or other similar laws of any
state.

 

 

18

 

 

(b)           Cancellation
of Target Membership Interest. As of the Effective Time, by
virtue of the Merger and without any action on the part of
Purchaser, Merger Sub, Target or the respective shareholders of
members thereof, the membership interest in Target issued and
outstanding immediately prior to the Effective Time (the
“Target Membership Interest”) shall cease to exist;
provided, however, that the holder of the Target Membership
Interest shall be entitled to the Merger Consideration in the form
of Purchaser Common Stock.

 

(c)           
Payment of Merger
Consideration. At the Closing (as defined in the Plan of
Reorganization), Purchaser will deliver stock certificates
evidencing the Purchaser Common Stock.

 

ARTICLE IV

TERMINATION AND AMENDMENT

 

4.1           Termination. This
Plan of Merger shall terminate in the event of and upon termination
of the Plan of Reorganization.

 

4.2           Amendment.
This Plan of Merger may not be amended except by an instrument in
writing signed on behalf of each of the parties
hereto.

 

4.3           Severability.
Whenever possible, each provision of this Plan of Merger shall be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Plan of Merger is held
to be prohibited by or invalid under applicable law, such provision
will be ineffective only to the extent of such prohibition or
invalidity, without invalidating the remainder of this Plan of
Merger.

 

4.4           Assignment,
Successors and Assigns. The provisions hereof shall inure to
the benefit of, and be binding upon, the successors and permitted
assigns of the parties hereto. No party hereto may assign its
rights or delegate its obligations under this Plan of Merger
without the prior written consent of the other parties hereto,
which consent will not be unreasonably withheld.

 

4.5           Entire
Agreement. This Agreement and the Plan of Reorganization
constitute the full and entire understanding and agreement between
the parties with regard to the subject matter hereof and thereof
and supersede and cancel all prior representations, alleged
warranties, statements, negotiations, undertakings, letters,
acceptances, understandings, contracts and communications, whether
verbal or written among the parties hereto and thereto or their
respective agents with respect to or in connection with the subject
matter hereof.

 

4.6           Choice
of Law. This Plan of Merger shall be governed by, and
construed in accordance with, the laws of the State of Texas
without regard to principles of conflict of laws. In any action
between or among any of the parties, whether arising out of this
Plan of Merger or otherwise, each of the parties irrevocably
consents to the exclusive jurisdiction and venue of the federal and
state courts located in Collin County, Texas.

 

4.7           Execution.
This Plan of Merger may be executed in two or more counterparts,
all of which when taken together shall be considered one and the
same agreement and shall become effective when counterparts have
been signed by each party and delivered to the other party, it
being understood that both parties need not sign the same
counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a
“.pdf” format data file, such signature shall create a
valid and binding obligation of the party executing (or on whose
behalf such signature is executed) with the same force and effect
as if such facsimile or “.pdf” signature page were an
original thereof.

 

 

19

 

 

4.8           Section
Headings. The section and subsection headings in this Plan
of Merger are used solely for convenience of reference, do not
constitute a part of this Plan of Merger, and may not affect its
interpretation.

 

 [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20

 

 

IN WITNESS WHEREOF, the parties, by and
through their respective authorized representatives, have executed
this Plan of Merger effective as of the day first written
above.

 

	

 

	

TORCHLIGHT ENERGY
RESOURCES, INC., a Nevada corporation

	

 

	

 

	
 

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ 
John
Brda

	

 

	

 

	

Name: 

	
John
Brda

	

 

	

 

	

Title:

	
President

	

 

	

 

	

 

	
 

	

 

 

	

 

	

TORCHLIGHT
ACQUISITION CORPORATION, a Texas corporation

	

 

	

 

	
 

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ 
John
Brda

	

 

	

 

	

 

	

John Brda,
President 

	

 

	

 

	

 

	
 

	

 

 

	

 

	

LINE
DRIVE ENERGY, LLC, a Texas limited liability company

	

 

	

 

	
 

	

 

	

 

	

 

	

 

	

 

	
 

	
By:  

	
/s/ 
Greg
McCabe, Sr.

	

 

	

 

	

Name: 

	
Greg McCabe, Sr.,
Manager

	

 

	

 

	

 

	
 

	

 

 

 

 

 

 

 

 

 

 

 

21

 

 

Schedules

 

 

Schedule
4.3 -- Assets

 

Warrant
to Purchase 521,739 shares of common stock of Torchlight Energy
Resources, Inc., warrant certificate number W-SAP-004

 

Lessor:
Cotten Resources, LTD

Lessee:
Torchlight Energy, Inc.

Date:
June 8, 2016

V/P:
Unknown

Legal
Description:

 

All of
Section 73 Block 6, Abstract 1005, Tom Green County, 640
acres.

All of
Section 41, Block 7, Abstract 950(TG) & 237(S), Tom Green and
Sterling County, 640 acres

All of
Section 86, Block 6, Abstract 8472(TG) & 1119(S), Tom Green and
Sterling County, 640 acres

All of
Section 87, Block 6, Abstract 1012(TG) & 191(S), Tom Green and
Sterling County, 640 acres

All of
Section 88, Block 6, Abstract 8345(TG) & 1076(S), Tom Green and
Sterling County, 640 acres**

All of
Section 90, Block 6, Abstract 1075, Sterling County, 640
acres

All of
Section 91, Block 6, Abstract 193, Sterling County, 640
acres

Total
acres: 4,480 gross acres

** Save
and Except 40 acres in the form of a square around the wellbore of
the EXCO PNR-Harris Heirs “88” #1 Well (API No.
42-431-33263) located 850 feet FNL and 1320 feet FWL of Section 88,
as to depths from the surface down to 5,482 feet.

 

Lessor: Cotten Resources, LTD

Lessee: Oxy USA, Inc.

Date: 4/12/13

V/P: 71/345

Legal Description:

All of
Section 73 Block 6, Abstract 1005, Tom Green County, 640
acres.

All of
Section 41, Block 7, Abstract 950(TG) & 237(S), Tom Green and
Sterling County, 640 acres

All of
Section 86, Block 6, Abstract 8472(TG) & 1119(S), Tom Green and
Sterling County, 640 acres

All of
Section 87, Block 6, Abstract 1012(TG) & 191(S), Tom Green and
Sterling County, 640 acres

All of
Section 88, Block 6, Abstract 8345(TG) & 1076(S), Tom Green and
Sterling County, 640 acres**

All of
Section 90, Block 6, Abstract 1075, Sterling County, 640
acres

All of
Section 91, Block 6, Abstract 193, Sterling County, 640
acres

 

 

22

 

 

Total
acres: 4,480 gross acres

** Save
and Except 40 acres in the form of a square around the wellbore of
the EXCO PNR-Harris Heirs “88” #1 Well (API No.
42-431-33263) located 850 feet FNL and 1320 feet FWL of Section 88,
as to depths from the surface down to 5,482 feet.

 

Lessor: Judson Properties, LTD, & Judson Investment
Corporation

Lessee: Oxy USA, Inc.

Date: 4/12/13

V/P: 71/360

Legal Description:

All of
Section 70, Block 6, Abstract 8592(TG) & 1187(I), Irion and Tom
Green County, 644.20 acres

All of
Section 71, Block 6, Abstract 1004(TG) & 347(I), Irion and Tom
Green County, 640 acres

All of
Section 72, Block 6, Abstract 8662(TG) & 1214(I), Irion and Tom
Green County, 644.20 acres

All of
Section 73 Block 6, Abstract 1005, Tom Green County, 640
acres

All of
Section 74, Block 6, Abstract 8344, Tom Green County, 645.9
acres

All of
Section 75, Block6, Abstract 1006, Tom Green County, 640
acres

All of
Section 41, Block 7, Abstract 950(TG) & 237(S), Tom Green and
Sterling County, 640 acres

All of
Section 86, Block 6, Abstract 8472(TG) & 1119(S), Tom Green and
Sterling County, 640 acres

All of
Section 87, Block 6, Abstract 1012(TG) & 191(S), Tom Green and
Sterling County, 640 acres

All of
Section 88, Block 6, Abstract 8345(TG) & 1076(S), Tom Green and
Sterling County, 640 acres**

Total
acres: 6,414.3

 

All of
Section 89, Block 6, Abstract 192, Sterling County, 640
acres

All of
Section 90, Block 6, Abstract 1075, Sterling County, 640
acres

All of
Section 91, Block 6, Abstract 193, Sterling County, 640
acres

All of
Section 102, Block 6, Abstract 1170, Sterling County, 649
acres

All of
Section 103, Block 6, Abstract 199, Sterling County, 640
acres

All of
Section 104, Block 6, Abstract 1169, Sterling County, 649.3
acres

All of
Section 105, Block 6, Abstract 201, Sterling County, 640
acres

All of
Section 106, Block 6, Abstract 1072, Sterling County, 650
acres

All of
Section 107, Block 6, Abstract 202, Sterling County, 640
acres

Total
acres: 5,788.30 gross acres

** Save
and Except 40 acres in the form of a square around the wellbore of
the EXCO PNR-Harris Heirs “88” #1 Well (API No.
42-431-33263) located 850 feet FNL and 1320 feet FWL of Section 88,
as to depths from the surface down to 5,482 feet.

 

Lessor: LAJ Corporation

Lessee: Oxy USA, Inc.

Date: 4/11/13

V/P: 71/366

 

 

23

 

 

Legal Description:

All of
Section 70, Block 6, Abstract 8592(TG) & 1187(I), Irion and Tom
Green County, 644.20 acres

All of
Section 71, Block 6, Abstract 1004(TG) & 347(I), Irion and Tom
Green County, 640 acres

All of
Section 72, Block 6, Abstract 8662(TG) & 1214(I), Irion and Tom
Green County, 644.20 acres

All of
Section 73 Block 6, Abstract 1005, Tom Green County, 640
acres

All of
Section 74, Block 6, Abstract 8344, Tom Green County, 645.9
acres

All of
Section 75, Block6, Abstract 1006, Tom Green County, 640
acres

All of
Section 41, Block 7, Abstract 950(TG) & 237(S), Tom Green and
Sterling County, 640 acres

All of
Section 86, Block 6, Abstract 8472(TG) & 1119(S), Tom Green and
Sterling County, 640 acres

All of
Section 87, Block 6, Abstract 1012(TG) & 191(S), Tom Green and
Sterling County, 640 acres

All of
Section 88, Block 6, Abstract 8345(TG) & 1076(S), Tom Green and
Sterling County, 640 acres**

Total
acres: 6,414.3

 

All of
Section 89, Block 6, Abstract 192, Sterling County, 640
acres

All of
Section 90, Block 6, Abstract 1075, Sterling County, 640
acres

All of
Section 91, Block 6, Abstract 193, Sterling County, 640
acres

All of
Section 102, Block 6, Abstract 1170, Sterling County, 649
acres

All of
Section 103, Block 6, Abstract 199, Sterling County, 640
acres

All of
Section 104, Block 6, Abstract 1169, Sterling County, 649.3
acres

All of
Section 105, Block 6, Abstract 201, Sterling County, 640
acres

All of
Section 106, Block 6, Abstract 1072, Sterling County, 650
acres

All of
Section 107, Block 6, Abstract 202, Sterling County, 640
acres

Total
acres: 5,788.30 gross acres

** Save
and Except 40 acres in the form of a square around the wellbore of
the EXCO PNR-Harris Heirs “88” #1 Well (API No.
42-431-33263) located 850 feet FNL and 1320 feet FWL of Section 88,
as to depths from the surface down to 5,482 feet.

 

Lessor: Sigmar, Inc.

Lessee: Oxy USA, Inc.

Date: 4/11/13

V/P: 71/354

Legal Description:

All of
Section 70, Block 6, Abstract 8592(TG) & 1187(I), Irion and Tom
Green County, 644.20 acres

All of
Section 71, Block 6, Abstract 1004(TG) & 347(I), Irion and Tom
Green County, 640 acres

All of
Section 72, Block 6, Abstract 8662(TG) & 1214(I), Irion and Tom
Green County, 644.20 acres

All of
Section 73 Block 6, Abstract 1005, Tom Green County, 640
acres

All of
Section 74, Block 6, Abstract 8344, Tom Green County, 645.9
acres

All of
Section 75, Block6, Abstract 1006, Tom Green County, 640
acres

 

 

24

 

 

All of
Section 41, Block 7, Abstract 950(TG) & 237(S), Tom Green and
Sterling County, 640 acres

All of
Section 86, Block 6, Abstract 8472(TG) & 1119(S), Tom Green and
Sterling County, 640 acres

All of
Section 87, Block 6, Abstract 1012(TG) & 191(S), Tom Green and
Sterling County, 640 acres

All of
Section 88, Block 6, Abstract 8345(TG) & 1076(S), Tom Green and
Sterling County, 640 acres**

Total
acres: 6,414.3

 

All of
Section 89, Block 6, Abstract 192, Sterling County, 640
acres

All of
Section 90, Block 6, Abstract 1075, Sterling County, 640
acres

All of
Section 91, Block 6, Abstract 193, Sterling County, 640
acres

All of
Section 102, Block 6, Abstract 1170, Sterling County, 649
acres

All of
Section 103, Block 6, Abstract 199, Sterling County, 640
acres

All of
Section 104, Block 6, Abstract 1169, Sterling County, 649.3
acres

All of
Section 105, Block 6, Abstract 201, Sterling County, 640
acres

All of
Section 106, Block 6, Abstract 1072, Sterling County, 650
acres

All of
Section 107, Block 6, Abstract 202, Sterling County, 640
acres

Total
acres: 5,788.30 gross acres

** Save
and Except 40 acres in the form of a square around the wellbore of
the EXCO PNR-Harris Heirs “88” #1 Well (API No.
42-431-33263) located 850 feet FNL and 1320 feet FWL of Section 88,
as to depths from the surface down to 5,482 feet.

 

Lessor: Wayne H. Bellows; Marilyn L. Bellows; Andrew Paul
Smith and wife, Bonnie Smith; Andrew P. Smith, Trustee; Andrew P.
Smith, JR., Trustee of the Andrew P. Smith, Jr., Mineral Trust
dated September 19, 2008; Clayton H. Smith, Trustee of the Clayton
H. Smith Mineral Trust dated September 19, 2008; Shannon Fraser
Smith Stephens, Successor Trustee of the David M. Smith Family
Trust U/W/O of David Malcolm Smith, Deceased; Frank Harris Smith
and wife, Gloria Grubb Smith, Wells Fargo Bank N.A., Successor
Trustee of the Keith French Ellwanger Trust; Stephen Martin Samuel;
Daniel H. Barrow, Kenneth H. Wanamaker, Trustee of the Townes
Trust; Robin Mourning and Deborah Jeanne Crownover, Trustee of the
Crownover Revocable Trust dated October 7, 1993, as Amended and
Restated in Restated Declaration of Trust dated May 22,
2012

 

Lessee: Oxy USA, Inc.

Date: 7/12/12

V/P: 63/350

Legal Description:

All of
Section 70, Block 6, Abstract 8592(TG) & 1187(I), Irion and Tom
Green County, 644.20 acres

All of
Section 71, Block 6, Abstract 1004(TG) & 347(I), Irion and Tom
Green County, 640 acres

All of
Section 72, Block 6, Abstract 8662(TG) & 1214(I), Irion and Tom
Green County, 644.20 acres

All of
Section 73 Block 6, Abstract 1005, Tom Green County, 640
acres

All of
Section 74, Block 6, Abstract 8344, Tom Green County, 645.9
acres

 

 

25

 

 

All of
Section 75, Block6, Abstract 1006, Tom Green County, 640
acres

All of
Section 41, Block 7, Abstract 950(TG) & 237(S), Tom Green and
Sterling County, 640 acres

All of
Section 86, Block 6, Abstract 8472(TG) & 1119(S), Tom Green and
Sterling County, 640 acres

All of
Section 87, Block 6, Abstract 1012(TG) & 191(S), Tom Green and
Sterling County, 640 acres

All of
Section 88, Block 6, Abstract 8345(TG) & 1076(S), Tom Green and
Sterling County, 640 acres**

Total
acres: 6,414.3

 

All of
Section 89, Block 6, Abstract 192, Sterling County, 640
acres

All of
Section 90, Block 6, Abstract 1075, Sterling County, 640
acres

All of
Section 91, Block 6, Abstract 193, Sterling County, 640
acres

All of
Section 102, Block 6, Abstract 1170, Sterling County, 649
acres

All of
Section 103, Block 6, Abstract 199, Sterling County, 640
acres

All of
Section 104, Block 6, Abstract 1169, Sterling County, 649.3
acres

All of
Section 105, Block 6, Abstract 201, Sterling County, 640
acres

All of
Section 106, Block 6, Abstract 1072, Sterling County, 650
acres

All of
Section 107, Block 6, Abstract 202, Sterling County, 640
acres

Total
acres: 5,788.30 gross acres

** Save
and Except 40 acres in the form of a square around the wellbore of
the EXCO PNR-Harris Heirs “88” #1 Well (API No.
42-431-33263) located 850 feet FNL and 1320 feet FWL of Section 88,
as to depths from the surface down to 5,482 feet.

 

Lessor: Wesley Z. Hodges and wife, Karen G.
Hodges

Lessee: Oxy USA, Inc.

Date: 7/18/13

V/P: 73/355

Legal Description:

33.96
acres, more or less, situated in Sterling County, TX out of what is
known and designated as Survey No 1H out of the J.E. Beavers Survey
No 1, described in Warranty Deed dated January 28, 1942 from W.B.
Atkinson to L.F. Hodges, recorded in Volume 35, Page 101, Deed
Records of Sterling County, TX and more particularly described as
follows:

Beginning
at a rock mound made for the S. Common corner of Sections 37 and
38, G.C.&S.F.Ry. Co. for N.E. Corner of this survey and N.W.
Corner of Sur. 1-A in name of W.B. Atkinson.

Thence
South 87°41’W. with the S. line of said Section38, 1903
vrs. to an old rock mound at a fence corner for the S. common
corner of Sections 38 and 39 for N.W. Corner of this
survey:

Thence
South 4°45’E, with a division fence 89 vrs. to a stake
for S.W. corner of this survey and N.W. corner of Survey N. 2A in
the name of W.B Atkinson;

Thence
East with the N. line of Section 136, Block 6, H. & T.C. Ry.
Co. 1896 vrs. to a point in the N. line of said Section 136, for
the SE corner of this survey and S.W. corner of Survey No. 1-A,
W.B. Atkinson;

Thence
North 130 vrs. to the place of the beginning.

 

Lessor: James Clinton Hodges and wife, Joyce G.
Hodges

 

 

26

 

 

Lessee: Oxy USA, Inc.

Date: 7/25/13

V/P: 73/667

Legal Description:

52.52
acres more or less, situated in Sterling County, TX out of what is
known and designated as Survey No. 2H out of the J.E. Beavers
Survey No. 1, described in Warranty Deed dated January 28, 1942
from W.B. Atkinson to L.F. Hodges, recorded in Volume 35, Page 101,
deed records of Sterling County, Tx and more particularly described
as follows:

Beginning
at an old rock mound made for the S. Common corner of Sections 38
and 39, G.C.&S.F. Ry. Co. for the Northerly corner of this
survey.

Thence
South 4°41’E, with the division fence 1947 vrs. a rock
mound for the SW corner of Section136, Blk 6, H.&T.C. Ry. Co.,
a mesquite stump brs. S, 27-1/2° E 79 vrs. DO. Brs. S.
41-1/2° E, ff-1/2° vrs.

Thence
West at 1915 vrs. a rock mound for the N common corner of Section 7
and 8, Blk 7, .&T.C. Ry. Co., at 3828 vrs. a rock mound for N
common corner of Section 6 and 7 in said Blk 7. A mesquite 8”
brs. S 33° E, 55 vrs. at 4048 vrs. a stake in the N line of
Section6 in said Blk 7, At a point 220 vrs, West of its NE corner
for SW corner of this survey;

Thence
North 33vrs. to the S common corner of Sections 41 and 44,
G.C.&S.F. Ry Co. for NW corner of this survey;

Thence
North 89° 40’E 1937 vrs. to SE corner of Section 40,
G.C.&S.F. Ry Co., which is 159 vrs. W and 40 vrs. N of the SW
corner of said Section 136.

Thence
North 1900 vrs. to the place of beginning.

 

Lessor: Hudson Management, Ltd.

Lessee: Oxy USA, Inc.

Date: 1/25/13

V/P: 203/624

Legal Description:

510
acre portion of Section 70, Block 6, Abstract 8592(TG) &
1187(I), Irion and Tom Green County

400
acre portion of Section 71, Block 6, Abstract 1004(TG) &
347(I), Irion and Tom Green County

All of
Section 74, Block 6, Abstract 8344, Tom Green County, 645.9
acres

All of
Section 75, Block 6, Abstract 1006, Tom Green County, 640
acres

 

 

Schedule
4.16 – Encumbrances

 

The
Assets are specifically subject to that certain Participation
Agreement, dated effective May 1, 2016, by and between McCabe
Petroleum Corporation, Imperial Exploration, LLC, and Torchlight
Energy, Inc., and all amendments and modifications thereto. The
Participation Agreement also includes a joint operating agreement
that is binding on the assets.

 

 

Schedule
4.17 -- Liabilities

 

 

27

 

 

1.

The Assets are
specifically subject to that certain Participation Agreement, dated
effective May 1, 2016, by and between McCabe Petroleum Corporation,
Imperial Exploration, LLC, and Torchlight Energy, Inc., and all
amendments and modifications thereto. The Participation Agreement
also includes a joint operating agreement that is binding on the
assets.

 

2.

Its proportionate
share of the costs incurred in drilling the Flying B Ranch #2 Well
(API Number 42-451-32852).

 

Schedule
4.18 – Contracts and Leases

 

The
Assets are specifically subject to that certain Participation
Agreement, dated effective May 1, 2016, by and between McCabe
Petroleum Corporation, Imperial Exploration, LLC, and Torchlight
Energy, Inc., and all amendments and modifications thereto. The
Participation Agreement also includes a joint operating agreement
that is binding on the assets.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

28Blueprint

EXHIBIT
10.13

 

PURCHASE
AND SALE AGREEMENT

 

This
PURCHASE AND SALE AGREEMENT (this “Agreement”), dated
effective January
30, 2017, (the “Effective Date”), is
entered into by Wolfbone
Investments, LLC (“Seller”), and
Torchlight Energy, Inc., a
Nevada corporation, 5700 W. Plano Pkwy., Ste. 3600, Plano, Texas
75093, (“Purchaser” or
“Buyer”). Seller and
Purchaser are sometimes collectively referred to as the
“Parties” and each is
referred to individually as a “Party.”

 

RECITALS

 

WHEREAS, Seller
owns an undivided 40.66% of 8/8ths working interest in an oil/gas
well, the Flying B Ranch #1 (API 451-32847) located in Tom Green
County, Texas, and the personal property associated with the well,
along with an undivided 40.66% of 8/8ths working interest in an oil
and gas leases covering forty acres around such well.

 

WHEREAS, Seller
desires to sell, and Purchaser desires to purchase, all of
Seller’s right, title and interest in the above referenced
well, oil and gas leases, and related assets, which constitute the
Assets, as more fully described and defined below, on the terms and
conditions set forth in this Agreement.

 

WHEREAS, Seller and
Buyer are bound by that certain Participation Agreement (the
“Participation Agreement”), dated effective May 1,
2016, among McCabe Petroleum Corporation, Imperial Exploration,
LLC, and Torchlight Energy, Inc., and all amendments and
modifications thereto, which is applicable to the Assets;
and

 

WHEREAS, Seller and
Purchaser intend that the purchase price for the Assets shall be
based on fair market value under current prices for oil and
gas.

 

DEFINITIONS

 

“Assets”
means

 

(a)

All of
Seller’s working interest in the oil and gas leases,
described in the Assignment of Oil & Gas Interests
(“Assignment”) attached as Exhibit A
(the “Leases”) and the lands
covered by such Leases or otherwise pooled or unitized therewith
(the “Lands”).

 

(b)

The working
interests assigned in Exhibit A
include a proportionate undivided interest in the following (to the
extent that such exists or is accessible to Seller):

 

1.

The oil and gas
wells now located on the Lands or lands pooled or unitized
therewith, whether producing or non-producing (the
“Wells”), and all
Hydrocarbons that may be produced from the Wells after the
Closing.

 

 

1

 

 

2.

Subject to all
rights of offset or withholding under the Participation Agreement,
all Hydrocarbon sales, purchase, gathering, compression, treating,
transportation, storage and processing agreements and all other
contracts, operating agreements, balancing agreements, joint
venture agreements, partnership agreements, farmout agreements and
other contracts, agreements and instruments insofar and only
insofar as they cover or relate to the Leases and Lands, excluding
any insurance contracts.

 

3.

The geological and
geophysical data, studies, surveys, evaluations, maps, plats and
information of every form and nature and in every form and manner
record, stored or transmitted, pertaining to the Leases and
Lands.

 

4.

The permits,
licenses, approvals, servitudes, rights-of-way, easements, surface
use agreements, and other surface rights that are used or held
primarily for use in connection with the operation of the Leases
and Lands (or lands pooled, communitized or unitized therewith)
(collectively, the “Easements”).

 

5.

The personal
property, equipment, machinery, fixtures and improvements,
operational or nonoperational, known or unknown, located on the
Lands (or lands pooled, communitized or unitized therewith) or the
Easements, including pipelines, gathering systems, manifolds, well
equipment, casing, tubing, pumps, motors, compression equipment,
flow lines, processing and separation facilities, pads, and
structures that, as of the date of this Agreement, are located on
the Lands (or lands pooled, communitized or unitized therewith),
and to the degree such are used or held for use primarily in
connection with the operation of the Assigned Interest in the Wells
or Lands (or lands pooled, communitized or unitized therewith)
(collectively, the “Equipment”).

 

6.

The rights to any
fee surface property, and the surface leases used for Seller yards
for operation of the Leases and Lands.

 

7.

The pipes,
tubulars, fittings, and other materials used or specifically held
for use as operating inventory in connection with the operation of
the Leases and Lands in the Wells or the Equipment.

 

“Closing” means the
execution of all documents necessary to effectuate the sale and
transfers of the Assets contemplated under this Agreement, which
shall occur contemporaneously with the execution of this Agreement,
at Buyer’s offices.

 

“Hydrocarbons” means all
oil, gas, natural gas liquids and other hydrocarbons and products
produced in association therewith.

 

“Net Revenue Interest”
means the share of production after all burdens, royalties, and
overriding royalties, have been deducted from the working
interest.

 

In this
Agreement, unless expressly stated otherwise, the singular includes
the plural, and vice versa; likewise, the disjunctive includes the
conjunctive, and vice versa.

 

 

2

 

 

AGREEMENT

 

For and
in consideration of the mutual promises contained herein and for
other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the Parties agree as
follows:

 

A.

Sale and
Purchase. At the Closing, upon the terms and conditions
hereinafter set forth, Seller agrees to sell, assign and convey to
Purchaser all of its right, title and interest in the Assets,
respectively, effective as of the Effective Time, and Purchaser
agrees to buy and accept such right, title and interest in such
Assets from Seller at such Closing, effective as of the Effective
Time.

 

B.

Cancelation of Warrants. As part of the
transaction contemplated by this Agreement, Seller will cause the
following warrants to be canceled:

 

a.

a Purchase Warrant giving Green
Hill Minerals, LLC the right to purchase 100,000 Warrant Shares,
which has a warrant number of “SEPT-100-2015”, a date
of issuance of September 30, 2015 and an expiration date of
September 30, 2018 (the “100,000 Warrant”), and (ii) a
Purchase Warrant giving it the right to purchase 1,700,000 Warrant
Shares, which has a warrant number of “FEB-100-2016-A”,
a date of issuance of February 15, 2016 and an expiration date of
February 15, 2020. Such cancellation will be effected
through the Warrant Cancellation Agreement attached hereto as
Exhibit B-1, which
will be executed by Green Hill Minerals and Torchlight Energy
Resources, Inc. at Closing; and

 

b.

Seller shall
additionally cause McCabe Petroleum Corporation to deliver to
Purchaser for cancellation a total of 1,500,000 warrants to
purchase common stock of Torchlight Energy Resources, Inc., which
warrants are held in the name of McCabe Petroleum Corporation, a
warrant number of “APRIL-04-2016,” a date of issuance
of April 4, 2016 and an
expiration date of April 4,
2021. Such cancellation will be effected through the Warrant
Cancellation Agreement attached hereto as Exhibit B-2, which will be
executed by McCabe Petroleum Corporation and Torchlight Energy
Resources, Inc. at Closing.

 

C.

Purchase Price for
Assets. Subject to the terms and conditions in this
Agreement:

 

1.

Purchaser will
purchase the Assets by a cash payment of FOUR HUNDRED FIFTEEN
THOUSAND AND 92/100THS US DOLLARS ($415,000.00) (the
“Purchase
Price”) at the Closing.

 

D.

Acquisition of Assets and Conditions of Closing.

 

As
conditions to the Closing:

 

1.

On or before the
Closing, Seller will deliver the Assets to Purchaser as is, where
is, with all faults.

 

 

3

 

 

2.

The Parties will
execute and deliver the Assignment attached and incorporated herein
as Exhibit A to
effectuate transfer the Assets.

 

3.

Seller and
Purchaser shall execute and deliver all necessary letters in lieu
of transfer orders directing all purchasers of production to pay
operator the proceeds attributable to production, which will
distribute the net proceeds from production from the Assets from
and after the Effective Time to Purchaser.

 

4.

Torchlight Energy
Resources, Inc. shall have acquired all the right, title and
interest in all membership interest Line Drive Energy, LLC, as
outlined in the Purchase Agreement among Torchlight Energy
Resources, Inc., Greg McCabe, and Line Drive Energy, LLC, dated
effective November 1, 2016.

 

5.

Green Hill Minerals
and Torchlight Energy Resources, Inc. will execute and deliver the
Warrant Cancellation Agreement attached hereto as Exhibit B-1.

 

6.

McCabe Petroleum
Corporation and Torchlight Energy Resources, Inc. will execute and
deliver the Warrant Cancellation Agreement attached hereto as
Exhibit
B-2.

 

E.

Taxes.
Seller shall pay all taxes on the Assets that are accrued as of the
Effective Time.

 

F.

Responsibility for
Recordation. Purchaser’s counsel shall record the
Assignment Agreement in the appropriate real property records, and
provide copies of the file-stamped originals of those documents to
the Parties as soon as practicable after each Closing.

 

G.

Representations, Warranties and Covenants.

 

1. 

Seller’s Representations,
Warranties and Covenants. Each of the Sellers hereby,
jointly and severally, make the following representations and
warranties to the Purchaser as of the date of the
Agreement:

 

(a)

Seller has all
requisite power and authority to carry on his business as presently
conducted, to enter into this Agreement and to perform his
obligations hereunder. The consummation of the transactions
contemplated by this Agreement will not violate or be in conflict
with any provision of any material agreement or instrument to which
Seller is a party or by which Seller is bound, or any judgment,
decree, order, statute, rule or regulation applicable to
Seller.

 

(b)

Seller warrants and
represents to Purchaser that Seller is authorized to enter into
this Agreement, all third-party consents required have been
obtained, and that the person executing this Agreement on its
behalf has the authority to do so.

 

(c)

This Agreement
constitutes, and all documents and instruments required hereunder
to be executed and delivered by Seller at each Closing will, when
duly executed and delivered for value constitute, valid, legal and
binding obligations of Seller, enforceable against Seller, in
accordance with their respective terms, subject to applicable
bankruptcy and other similar laws of general application with
respect to creditors as well as the general principles of equity
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).

 

 

4

 

 

(d)

Seller further
warrants and represents to Purchaser that it is the owner of all
the Assets covered by this Agreement, that there are no other
parties with an interest in the Assets.

 

(e)

Seller shall convey
title to the Assets to Purchaser with a special warranty of title,
by through and under Seller, but not otherwise.

 

(f)

Seller warrants and
represents to Purchaser that it has not transferred, sold, assigned
conveyed, encumbered, pledged or hypothecated any rights, title or
interest in or to the Assets, nor is such transfer, sale,
assignment, conveyance, encumbrance, pledging or hypothecation
pending.

 

2. 

Purchaser’s Representations and Warranties.

 

(a)

Purchaser warrants
and represents to Seller that Purchaser is authorized to enter into
this Agreement, and that the person executing this Agreement on its
behalf has the authority to do so.

 

(b)

Purchaser has all
requisite company powers and authority to carry on its business as
presently conducted, to enter into this Agreement, to purchase the
Assets on the terms and conditions described in this Agreement, and
to perform its other obligations under this Agreement. The
consummation of the transactions contemplated by this Agreement
will not violate nor be in conflict with any provision of
Purchaser’s governing documents or any material agreement or
instrument to which Purchaser is a party or by which Purchaser is
bound, or any judgment, decree, order, statute, rule or regulation
applicable to Purchaser.

 

(c)

This Agreement and
all documents and instruments required or contemplated hereunder to
be executed and delivered by Purchaser on each Closing Date will,
when duly executed and delivered for value, constitute valid, legal
and binding obligations of Purchaser, enforceable against
Purchaser, in accordance with their respective terms, subject only
to applicable bankruptcy and other similar laws of general
application with respect to creditors.

 

(d)

Purchaser has had
sufficient time to examine the Seller’s records regarding the
Assets and believes that the Purchase Price is a fair price to pay
for the Assets.

 

H.

Assumption.
From and after a Closing, Purchaser shall be deemed to have assumed
and shall have proportionate responsibility and liability for the
following, but only insofar as attributable to the Assets acquired
under this Agreement, and prior to such Closing shall have assumed
none such responsibility or liability:

 

1.

Assumed Environmental
Liabilities. The normal and customary pro rata environmental
liabilities of a working interest owner. (“Assumed Environmental
Liabilities”).

 

 

5

 

 

2.

General Assumption. Except to
the extent covered by Seller’s limited indemnification of
Purchaser, upon such Closing, Purchaser shall assume and pay all
normal and customary costs, expenses and liabilities assumed by a
working interest owner that arise after the Effective Date (the
“Assumed
Liabilities”).

 

I.

Non-Reliance.
The Parties hereby declare and represent that in making this
Agreement, they rely wholly upon their respective judgment, belief,
and knowledge of their respective liabilities, the subject Leases,
and that this Agreement is executed and made without any reliance
upon any statement or representation of any other party or of any
other party’s representative and Seller acknowledges that it
had access to all information and data it deems necessary to
evaluate this transaction, including the Purchase Price to be paid
by Purchaser and the other terms and conditions
herein.

 

J.

Notices.
All notices contemplated under this Agreement shall be made to the
following, unless modified by written notice via U.S. mail, fax, or
email to the other party(ies):

 

1.

Seller:

 

Greg
McCabe

Wolfbone
Investments, LLC

500 W.
Texas, Suite 890

Midland, Texas
79701

 

2.

Purchaser:

 

John
Brda

Torchlight Energy,
Inc.

5700 W.
Plano Pkwy., Ste. 3600

Plano,
Texas 75093

 

K.

Relationship of
Parties. It
is not the purpose or intention of this Agreement to create any
joint venture, partnership, mining partnership, or association, and
neither this Agreement (including any exhibit attached to this
Agreement) nor the operations hereunder shall be construed or
considered as creating any such legal relationship. The liabilities
of the Parties shall be several and not joint or collective.
Furthermore, nothing in this Agreement shall be construed as
providing directly or indirectly for any joint or cooperative
refining or marketing or sale of any Party’s interest in oil
and gas or the products therefrom.

 

L.

Controlling
Law. The Parties agree that this Agreement shall be
governed, construed, and applied in accordance with the laws of the
State of Texas applicable to contracts between Texas residents that
are to be wholly performed in Texas, without regard to choice of
law or conflicts of law principles of Texas or any other
jurisdiction.

 

 

6

 

 

M.

Forum Selection
Clause. The Parties agree that all disputes arising under
this Agreement shall be brought exclusively in the Judicial
District Courts of Collin County, Texas.

 

N.

Entire
Agreement. This Agreement constitutes the entire, final
agreement of the Parties on all matters that are the subject of
this Agreement, and this Agreement fully supersedes and replaces
any and all prior agreements or understandings, written or oral,
between the Parties relating to the Assets.

 

O.

Multiple
Counterparts. This Agreement may be
executed in counterparts by the undersigned and all such
counterparts so executed shall together be deemed to constitute one
final agreement, as if one document had been signed by all parties
hereto; and each such counterpart shall be deemed to be an
original, binding the party subscribed thereto, and multiple
signature pages (including faxes or other electronic delivery of
signature pages) affixed to a single copy of this Agreement shall
be deemed to be a fully executed original Agreement. It shall be
sufficient in making proof of this Agreement to produce or account
for a facsimile or pdf copy of an executed counterpart of this
Agreement.

 

P.

Fees &
Costs. Each Party will pay its own legal fees and costs
associated with this transaction.

 

Q.

Joint
Drafting. The Parties agree that this Agreement was drafted
jointly and that this Agreement shall not be construed against the
other because of their involvement in drafting this
Agreement.

 

R.

Non-Waiver.
No exercise or failure to exercise or delay by any Party in
exercising any right or remedy under this Agreement shall
constitute a waiver by such Party of such right or remedy in any
other instance or any other right or remedy.

 

S.

Amendment &
Modification. Any amendment or modification to this
Agreement must be in writing and executed by the
Parties.

 

T.

No
Assignments. No obligation or right arising under this
Agreement may be assigned or delegated by any Party without the
express written consent of the other Parties, which consent shall
not be unreasonably withheld. Any assignment made without prior
written consent is void ab
initio. Provided, however, that Purchaser may assign all of
its rights and obligations under this Agreement without the consent
of the other parties, as long as that assignment is made in
furtherance of the acquisition of the Assets.

 

U.

Future
Documents. The Parties shall perform any and all acts and
execute and deliver any and all documents that may be or become
necessary and proper to give effect to and carry out the terms
hereof.

 

V.

No Third-Party
Beneficiary. Any agreement to perform any obligations herein
contained, express or implied, shall be only for the benefit of the
Parties and their respective heirs, successors, assigns and legal
representatives, and such agreements and obligations shall not
inure to the benefit of any indebtedness or any other party,
whatsoever, it being the intention of the Parties that no one shall
be deemed to be a third-party beneficiary of this
Agreement.

 

 

7

 

 

W.

Binding
Effect. The Parties may plead this Agreement as a full and
complete defense to, and may use this Agreement as the basis for,
an injunction against any action, suit or other proceeding which
may be instituted, prosecuted or attempted by the other Party, or
by the other Party’s respective representatives, agents,
executors, decedents, trustees, beneficiaries, successors, heirs,
attorneys and assigns, in contravention or breach of this
Agreement.

 

X.

Severability.
Each part of this Agreement is intended to be several. If any term,
covenant, condition or provision violates any applicable law or is
declared illegal, invalid or unenforceable, in whole or in part, by
a court of last resort, such provision shall be enforced to the
greatest extent permitted by law, and such a declaration shall not
affect the legality, validity or enforceability of the remaining
parts of this Agreement, all of which shall remain in full force
and effect.

 

Y.

Review by
Counsel. The Parties have had sufficient opportunity to read
this Agreement and to consult with legal counsel of their choosing
regarding the meaning and effect of this Agreement and its rights
and liabilities under it. Accordingly, each Party and signatory to
this Agreement has entered into it freely, voluntarily and without
duress.

 

Z.

Disclaimers.
THE PARTIES AGREE THAT, TO THE EXTENT REQUIRED BY APPLICABLE LAW TO
BE OPERATIVE, THE DISCLAIMERS OF WARRANTIES CONTAINED IN THIS
SECTION ARE “CONSPICUOUS” DISCLAIMERS FOR THE PURPOSES
OF ANY APPLICABLE LAW, RULE OR ORDER. THE EXPRESS REPRESENTATIONS
AND WARRANTIES OF SELLER CONTAINED IN THIS AGREEMENT, AND THE TITLE
WARRANTIES IN THE CONVEYANCES OF THE CONVEYED INTERESTS TO BE
DELIVERED AT EACH CLOSING, (COLLECTIVELY
“SELLER’S’ WARRANTIES”) ARE EXCLUSIVE AND
ARE IN LIEU OF ALL OTHER REPRESENTATIONS AND WARRANTIES, EXPRESS,
IMPLIED, STATUTORY OR OTHERWISE. SELLER EXPRESSLY DISCLAIMS ANY AND
ALL SUCH OTHER REPRESENTATIONS AND WARRANTIES. WITHOUT LIMITATION
OF THE FOREGOING AND EXCEPT FOR SELLER’S WARRANTIES, THE
CONVEYED INTERESTS SHALL BE CONVEYED PURSUANT HERETO WITHOUT (A)
ANY WARRANTY OR REPRESENTATION, WHETHER EXPRESS, IMPLIED, STATUTORY
OR OTHERWISE, RELATING TO (I) TITLE TO THE CONVEYED INTERESTS, THE
CONDITION, QUANTITY, QUALITY, FITNESS FOR A PARTICULAR PURPOSE,
CONFORMITY TO THE MODELS OR SAMPLES OF MATERIALS OR MERCHANTABILITY
OF ANY EQUIPMENT OR ITS FITNESS FOR ANY PURPOSE, (II) THE ACCURACY
OR COMPLETENESS OF ANY DATA, REPORTS, RECORDS, PROJECTIONS,
INFORMATION OR MATERIALS NOW, HERETOFORE OR HEREAFTER FURNISHED OR
MADE AVAILABLE TO PURCHASER IN CONNECTION WITH THIS AGREEMENT,
(III) PRICING ASSUMPTIONS, OR QUALITY OR QUANTITY OF HYDROCARBON
RESERVES (IF ANY) ATTRIBUTABLE TO THE CONVEYED INTERESTS OR THE
ABILITY OR POTENTIAL OF THE CONVEYED INTERESTS TO PRODUCE
HYDROCARBONS, (IV) THE ENVIRONMENTAL CONDITION OF THE CONVEYED
INTERESTS, BOTH SURFACE AND SUBSURFACE, (V) ANY IMPLIED OR EXPRESS
WARRANTY OF NON-INFRINGEMENT, OR (VI) ANY OTHER MATTERS CONTAINED
IN ANY MATERIALS FURNISHED OR MADE AVAILABLE TO PURCHASER BY SELLER
OR BY SELLER’S AGENTS OR REPRESENTATIVES, OR (B) ANY OTHER
EXPRESS, IMPLIED, STATUTORY OR OTHER WARRANTY OR REPRESENTATION
WHATSOEVER. PURCHASER SHALL HAVE INSPECTED, OR WAIVED (AND UPON
EACH CLOSING SHALL BE DEEMED TO HAVE WAIVED) ITS RIGHT TO INSPECT,
THE CONVEYED INTERESTS FOR ALL PURPOSES AND SATISFIED ITSELF AS TO
THEIR PHYSICAL AND ENVIRONMENTAL CONDITION, BOTH SURFACE AND
SUBSURFACE, INCLUDING BUT NOT LIMITED TO CONDITIONS SPECIFICALLY
RELATED TO THE PRESENCE, RELEASE OR DISPOSAL OF HAZARDOUS
SUBSTANCES, SOLID WASTES, ASBESTOS AND OTHER MAN MADE FIBERS.
PURCHASER IS RELYING SOLELY UPON THE TERMS OF THIS AGREEMENT AND
ITS OWN INSPECTION OF THE CONVEYED INTERESTS, AND PURCHASER SHALL
ACCEPT ALL OF THE SAME IN THEIR “AS IS, WHERE IS”
CONDITION.

 

 

8

 

 

AA.

Subject to and Conflicting
Terms. This Agreement and the Assets assigned herein shall
be specifically subject to the Participation Agreement. In the case
of any conflict between this Agreement and the Purchase Agreement,
the Purchase Agreement shall control in all cases.

 

INTENTIONALLY
BLANK—SIGNATURE PAGES FOLLOW

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

AGREED
AND EXECUTED as of the Effective Date:

 

 

 

Torchlight Energy, Inc.

 

 

	
By:

	
/s/ John A.
Brda

	
 

John A.
Brda, CEO

 

AND:

 

Wolfbone Investments, LLC

 

 

	
By:

	
/s/ Greg
McCabe

	
 

Greg
McCabe, Managing Member

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10

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