exhibit_4-1








  EXHIBIT 4.1











 



TORCHLIGHT ENERGY RESOURCES, INC.


 



Warrant To Purchase Common Stock


 


Warrant
No.: ____________


Number
of Shares of Common Stock: ____________


Date of
Issuance: June __, 2020 (“Issuance Date”)


 


Torchlight Energy
Resources, Inc., a company organized under the laws of Nevada (the
“Company”),
hereby certifies that, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged,
[HOLDER], the registered holder
hereof or its permitted assigns (the “Holder”), is entitled, subject to
the terms set forth below, to purchase from the Company, at the
Exercise Price (as defined below) then in effect, at any time or
times on or after June __, 2020 (the “Initial Exercisability Date”), but
not after 11:59 p.m., New York time, on the Expiration Date, (as
defined below), ______________
(_____________) fully paid non-assessable shares of
Common Stock (as defined below), subject to adjustment as provided
herein (the “Warrant
Shares”). Except as otherwise defined herein,
capitalized terms in this Warrant to Purchase Common Stock
(including any Warrants to Purchase Common Stock issued in
exchange, transfer or replacement hereof, this “Warrant”), shall have the meanings
set forth in Section 17. This Warrant is being issued pursuant to
(i) that certain Securities Purchase Agreement (the “Purchase
Agreement”), dated June __, 2020, between the Company and the
Holder and (ii) a prospectus supplement to the base prospectus that
forms a part of the Company’s registration statement on Form
S-3 (File number 333-220181) (the “Registration
Statement”).


 


1.
EXERCISE OF
WARRANT.


 


 



 


















 


(a)
Mechanics of
Exercise. Subject to the terms and conditions hereof
(including, without limitation, the limitations set forth in
Section 1(f)), this Warrant may be exercised by the Holder at any
time or times on or after the Initial Exercisability Date, in whole
or in part, by delivery (whether via facsimile, electronic mail or
otherwise) of a written notice, in the form attached hereto as
Exhibit A (the
“Exercise
Notice”), of the Holder’s election to exercise
this Warrant. Within one (1) Trading Day following the delivery of
the Exercise Notice, the Holder shall make payment to the Company
of an amount equal to the Exercise Price in effect on the date of
such exercise multiplied by the number of Warrant Shares as to
which this Warrant is being exercised (the “Aggregate Exercise Price”) in cash
by wire transfer of immediately available funds or, if the
provisions of Section 1(d) are applicable, by notifying the Company
that this Warrant is being exercised pursuant to a Cashless
Exercise (as defined in Section 1(d)). The Holder shall not be
required to deliver the original Warrant in order to effect an
exercise hereunder, nor shall any ink-original signature or
medallion guarantee (or other type of guarantee or notarization)
with respect to any Exercise Notice be required. Execution and
delivery of the Exercise Notice with respect to less than all of
the Warrant Shares shall have the same effect as cancellation of
the original Warrant and issuance of a new Warrant evidencing the
right to purchase the remaining number of Warrant Shares and the
Holder shall not be required to physically surrender this Warrant
to the Company until the Holder has purchased all of the Warrant
Shares available hereunder and the Warrant has been exercised in
full, in which case, the Holder shall surrender this Warrant to the
Company for cancellation within three (3) Trading Days of the date
on which the final Exercise Notice is delivered to the Company. On
or before the first (1st) Trading Day
following the date on which the Holder has delivered the applicable
Exercise Notice, the Company shall transmit by facsimile or
electronic mail an acknowledgment of confirmation of receipt of the
Exercise Notice, in the form attached to the Exercise Notice, to
the Holder and the Company’s transfer agent (the
“Transfer
Agent”). So long as the Holder delivers the Aggregate
Exercise Price (or notice of a Cashless Exercise) on or prior to
the first (1st) Trading Day
following the date on which the Exercise Notice has been delivered
to the Company, then on or prior to the earlier of (i) the second
(2nd)
Trading Day and (ii) the number of Trading Days comprising the
Standard Settlement Period, in each case following the date on
which the Exercise Notice has been delivered to the Company, or, if
the Holder does not deliver the Aggregate Exercise Price (or notice
of a Cashless Exercise) on or prior to the first (1st) Trading Day
following the date on which the Exercise Notice has been delivered
to the Company, then on or prior to the first (1st) Trading Day
following the date on which the Aggregate Exercise Price (or notice
of a Cashless Exercise) is delivered (such earlier date, the
“Share Delivery
Date”), the Company shall (X) provided that the
Transfer Agent is participating in The Depository Trust Company
(“DTC”) Fast
Automated Securities Transfer Program, credit such aggregate number
of Warrant Shares to which the Holder is entitled pursuant to such
exercise to the Holder’s or its designee’s balance
account with DTC through its Deposit / Withdrawal At Custodian
system, or (Y) if the Transfer Agent is not participating in the
DTC Fast Automated Securities Transfer Program, issue and dispatch
by overnight courier to the address as specified in the Exercise
Notice, a certificate, registered in the name of the Holder or its
designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise. If the Company fails for any
reason to deliver to such registered holder or Participant, as the
case may be, the Warrant Shares subject to an exercise notice by
the Share Delivery Date, the Company shall pay to the registered
holder, in cash, as liquidated damages and not as a penalty, for
each $1,000 of Warrant Shares subject to such exercise (based on
the Weighted Average Price of the Common Stock on the date of the
applicable exercise notice), $10 per Trading Day (increasing to $20
per Trading Day on the fifth Trading Day after such liquidated
damages begin to accrue) for each Trading Day after such Share
Delivery Date until such Warrant Shares are delivered or the
registered holder rescinds such exercise. The Company shall be
responsible for all fees and expenses of the Transfer Agent and all
fees and expenses with respect to the issuance of Warrant Shares
via DTC, if any, including without limitation for same day
processing. Upon delivery of the Exercise Notice, the Holder shall
be deemed for all corporate purposes to have become the holder of
record and beneficial owner of the Warrant Shares with respect to
which this Warrant has been exercised, irrespective of the date
such Warrant Shares are credited to the Holder’s DTC account
or the date of delivery of the certificates evidencing such Warrant
Shares, as the case may be. If this Warrant is physically delivered
to the Company in connection with any exercise pursuant to this
Section 1(a) and the number of Warrant Shares represented by this
Warrant submitted for exercise is greater than the number of
Warrant Shares being acquired upon an exercise, then the Company
shall as soon as practicable and in no event later than three (3)
Trading Days after any exercise and at its own expense, issue and
deliver to the Holder (or its designee) a new Warrant (in
accordance with Section 7(d)) representing the right to purchase
the number of Warrant Shares issuable immediately prior to such
exercise under this Warrant, less the number of Warrant Shares with
respect to which this Warrant is exercised. No fractional Warrant
Shares are to be issued upon the exercise of this Warrant, but
rather the Company shall, at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to
such fraction multiplied by the Exercise Price or round up to the
next whole share. The Company shall pay any and all transfer,
stamp, issuance and similar taxes, costs and expenses (including,
without limitation, fees and expenses of the Transfer Agent) which
may be payable with respect to the issuance and delivery of Warrant
Shares upon exercise of this Warrant. The Company’s
obligations to issue and deliver Warrant Shares in accordance with
the terms and subject to the conditions hereof are absolute and
unconditional, irrespective of any action or inaction by the Holder
to enforce the same, any waiver or consent with respect to any
provision hereof, the recovery of any judgment against any Person
or any action to enforce the same, or any setoff, counterclaim,
recoupment, limitation or termination; provided, however, that the Company shall
not be required to deliver Warrant Shares with respect to an
exercise prior to the Holder’s delivery of the Aggregate
Exercise Price (or notice of a Cashless Exercise) with respect to
such exercise.


 


(b)
Exercise Price. For
purposes of this Warrant, “Exercise Price” means
$[__] per share, subject to
adjustment as provided herein.


 



 

2







 






 




(c)
Company’s Failure to
Timely Deliver Securities. If either (I) the Company shall
fail for any reason or for no reason on or prior to the applicable
Share Delivery Date, (x) if the Transfer Agent is not participating
in the DTC Fast Automated Securities Transfer Program, to issue to
the Holder a certificate for the number of shares of Common Stock
to which the Holder is entitled and register such Common Stock on
the Company’s share register or (y) if the Transfer Agent is
participating in the DTC Fast Automated Securities Transfer
Program, to credit the Holder’s balance account with DTC, for
such number of shares of Common Stock to which the Holder is
entitled upon the Holder’s exercise of this Warrant or (II) a
registration statement (which may be the Registration Statement)
covering the issuance or resale of the Warrant Shares that are the
subject of the Exercise Notice (the “Exercise Notice Warrant Shares”)
is not available for the issuance or resale, as applicable, of such
Exercise Notice Warrant Shares and (x) the Company fails to
promptly, but in no event later than one (1) Business Day after
such registration statement becomes unavailable, to so notify the
Holder and (y) the Company is unable to deliver the Exercise Notice
Warrant Shares electronically without any restrictive legend by
crediting such aggregate number of Exercise Notice Warrant Shares
to the Holder’s or its designee’s balance account with
DTC through its Deposit / Withdrawal At Custodian system (the event
described in the immediately foregoing clause (II) is hereinafter
referred to as a “Notice
Failure” and, together with the event described in
clause (I) above, an “Exercise Failure”), then, in
addition to all other remedies available to the Holder, if on or
prior to the applicable Share Delivery Date either (I) if the
Transfer Agent is not participating in the DTC Fast Automated
Securities Transfer Program, the Company shall fail to issue and
deliver a certificate to the Holder and register such shares of
Common Stock on the Company’s share register or, if the
Transfer Agent is participating in the DTC Fast Automated
Securities Transfer Program, credit the Holder’s balance
account with DTC for the number of shares of Common Stock to which
the Holder is entitled upon the Holder’s exercise hereunder
or pursuant to the Company’s obligation pursuant to clause
(ii) below or (II) a Notice Failure occurs, and if on or after such
Trading Day the Holder purchases (in an open market transaction or
otherwise) Common Stock to deliver in satisfaction of a sale by the
Holder of shares of Common Stock issuable upon such exercise that
the Holder anticipated receiving from the Company (a
“Buy-In”), then
the Company shall, within three (3) Trading Days after the
Holder’s request and in the Holder’s discretion, either
(i) pay cash to the Holder in an amount equal to the Holder’s
total purchase price (including brokerage commissions and other
out-of-pocket expenses, if any) for the shares of Common Stock so
purchased (the “Buy-In
Price”), at which point the Company’s obligation
to deliver such certificate (and to issue such shares of Common
Stock) or credit such Holder’s balance account with DTC for
such shares of Common Stock shall terminate, or (ii) promptly honor
its obligation to deliver to the Holder a certificate or
certificates representing such shares of Common Stock or credit
such Holder’s balance account with DTC, as applicable, and
pay cash to the Holder in an amount equal to the excess (if any) of
the Buy-In Price over the product of (A) such number of shares of
Common Stock, times (B) any trading price of the Common Stock
selected by the Holder in writing as in effect at any time during
the period beginning on the applicable Exercise Date and ending on
the applicable Share Delivery Date. Nothing shall limit the
Holder’s right to pursue any other remedies available to it
hereunder, at law or in equity, including, without limitation, a
decree of specific performance and/or injunctive relief with
respect to the Company’s failure to timely deliver
certificates representing Warrant Shares (or to electronically
deliver such Warrant Shares) upon the exercise of this Warrant as
required pursuant to the terms hereof. While this Warrant is
outstanding, the Company shall cause its transfer agent to
participate in the DTC Fast Automated Securities Transfer Program.
In addition to the foregoing rights, (i) if the Company fails to
deliver the applicable number of Warrant Shares upon an exercise
pursuant to Section 1 by the applicable Share Delivery Date, then
the Holder shall have the right to rescind such exercise in whole
or in part and retain and/or have the Company return, as the case
may be, any portion of this Warrant that has not been exercised
pursuant to such Exercise Notice; provided that the rescission of
an exercise shall not affect the Company’s obligation to make
any payments that have accrued prior to the date of such notice
pursuant to this Section 1(c) or otherwise, and (ii) if a
registration statement (which may be the Registration Statement)
covering the issuance or resale of the Warrant Shares that are
subject to an Exercise Notice is not available for the issuance or
resale, as applicable, of such Exercise Notice Warrant Shares and
the Holder has submitted an Exercise Notice prior to receiving
notice of the non-availability of such registration statement and
the Company has not already delivered the Warrant Shares underlying
such Exercise Notice electronically without any restrictive legend
by crediting such aggregate number of Warrant Shares to which the
Holder is entitled pursuant to such exercise to the Holder’s
or its designee’s balance account with DTC through its
Deposit / Withdrawal At Custodian system, the Holder shall have the
option, by delivery of notice to the Company, to (x) rescind such
Exercise Notice in whole or in part and retain or have returned, as
the case may be, any portion of this Warrant that has not been
exercised pursuant to such Exercise Notice; provided that the
rescission of an Exercise Notice shall not affect the
Company’s obligation to make any payments that have accrued
prior to the date of such notice pursuant to this Section 1(c) or
otherwise, and/or (y) switch some or all of such Exercise Notice
from a cash exercise to a Cashless Exercise.


 


(d)
Cashless Exercise.
Notwithstanding anything contained herein to the contrary, a
Cashless Exercise (as defined below) may occur (i) in whole or in
part for a number of whole Warrant Shares during the period
commencing on the Issuance Date and ending on the Expiration Date,
during which time,  if the
Weighted Average Price of the Common Stock on the Trading Date
immediately prior to the Exercise Date fails to exceed the Exercise
Price (subject to adjustment for any stock splits, stock dividends,
stock combinations, recapitalizations and similar events) in which
event, in lieu of the formula below, the aggregate number of
Warrant Shares issuable in such cashless exercise pursuant to any
given Exercise Notice electing to effect a Cashless Exercise shall
equal the product of (x) the aggregate number of Warrant
Shares for which the Warrant is exercised as if such exercise were
by means of a cash exercise rather than a Cashless Exercise and (y)
one (1); and (ii) if a registration statement (which may be the
Registration Statement) covering the issuance or resale of the
Exercise Notice Warrant Shares is not available for the issuance or
resale, as applicable, of such Exercise Notice Warrant Shares, the
Holder may, in its sole discretion, exercise this Warrant in whole
or in part and, in lieu of making the cash payment otherwise
contemplated to be made to the Company upon such exercise in
payment of the Aggregate Exercise Price, elect instead to receive
upon such exercise the “Net Number” of shares of Common
Stock determined according to the following formula (a
“Cashless
Exercise”):


 


Net
Number = (A x B) - (A x
C)


B


 


For
purposes of the foregoing formula:


 



 

3







 






 


 


	
 

	

A=

	

the
total number of shares with respect to which this Warrant is then
being exercised.


	
 

	
 

	
 


	
 

	

B=

	

as
applicable: (i) the Closing Sale Price of the Common Stock on the
Trading Day immediately preceding the date of the applicable
Exercise Notice if such Exercise Notice is (1) both executed and
delivered pursuant to Section 1(a) hereof on a day that is not a
Trading Day or (2) both executed and delivered pursuant to Section
1(a) hereof on a Trading Day prior to the opening of “regular
trading hours” (as defined in Rule 600(b)(64) of Regulation
NMS promulgated under the federal securities laws) on such Trading
Day, (ii) at the option of the Holder, either (y) the Weighted
Average Price on the Trading Day immediately preceding the date of
the applicable Notice of Exercise or (z) the Bid Price of the
Common Stock as of the time of the Holder’s execution of the
applicable Exercise Notice if such Exercise Notice is executed
during “regular trading hours” on a Trading Day and is
delivered within two (2) hours thereafter (including until two (2)
hours after the close of “regular trading hours” on a
Trading Day) pursuant to Section 1(a) hereof or (iii) the Closing
Sale Price of the Common Stock on the date of the applicable
Exercise Notice if the date of such Exercise Notice is a Trading
Day and such Exercise Notice is both executed and delivered
pursuant to Section 1(a) hereof after the close of “regular
trading hours” on such Trading Day.


	
 

	
 

	
 


	
 

	

C=

	

the
Exercise Price then in effect for the applicable Warrant Shares at
the time of such exercise.







 


If
Warrant Shares are issued in such a cashless exercise, the Company
acknowledges and agrees that in accordance with Section 3(a)(9) of
the Securities Act of 1933, as amended, the Warrant Shares shall
take on the registered characteristics of the Warrant being
exercised, and the holding period of the Warrant being exercised
may be tacked on to the holding period of the Warrant Shares. The
Company agrees not to take any position contrary to this Section
1(d).


 


(e)
Disputes. In the
case of a dispute as to the determination of the Exercise Price or
the arithmetic calculation of the Warrant Shares, the Company shall
promptly issue to the Holder the number of Warrant Shares that are
not disputed and resolve such dispute in accordance with Section
11.


 


 



 

4







 






 



(f)
Beneficial
Ownership. Notwithstanding anything to the contrary
contained herein, the Company shall not effect the exercise of any
portion of this Warrant, and the Holder shall not have the right to
exercise any portion of this Warrant, pursuant to the terms and
conditions of this Warrant and any such exercise shall be null and
void and treated as if never made, to the extent that after giving
effect to such exercise, the Holder together with the other
Attribution Parties collectively would beneficially own in excess
of 9.99% (the “Maximum
Percentage”) of the number of shares of Common Stock
outstanding immediately after giving effect to such exercise. For
purposes of the foregoing sentence, the aggregate number of shares
of Common Stock beneficially owned by the Holder and the other
Attribution Parties shall include the number of shares of Common
Stock held by the Holder and all other Attribution Parties plus the
number of shares of Common Stock issuable upon exercise of this
Warrant with respect to which the determination of such sentence is
being made, but shall exclude the number of shares of Common Stock
which would be issuable upon (A) exercise of the remaining,
unexercised portion of this Warrant beneficially owned by the
Holder or any of the other Attribution Parties and (B) exercise or
conversion of the unexercised or unconverted portion of any other
securities of the Company (including, without limitation, any
convertible notes or convertible preferred stock or warrants of the
Company) beneficially owned by the Holder or any other Attribution
Party subject to a limitation on conversion or exercise analogous
to the limitation contained in this Section 1(f). For purposes of
this Section 1(f), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Securities Exchange Act of
1934, as amended (the “1934
Act”). For purposes of this Warrant, in determining
the number of outstanding shares of Common Stock the Holder may
acquire upon the exercise of this Warrant without exceeding the
Maximum Percentage, the Holder may rely on the number of
outstanding shares of Common Stock as reflected in (x) the
Company’s most recent Annual Report on Form 10-K, Quarterly
Report on Form 10-Q and Current Reports on Form 8-K or other public
filing with the Securities and Exchange Commission (the
“SEC”), as the
case may be, (y) a more recent public announcement by the Company
or (z) any other written notice by the Company or the Transfer
Agent setting forth the number of shares of Common Stock
outstanding (the “Reported
Outstanding Share Number”). If the Company receives an
Exercise Notice from the Holder at a time when the actual number of
outstanding shares of Common Stock is less than the Reported
Outstanding Share Number, the Company shall (i) notify the Holder
in writing of the number of shares of Common Stock then outstanding
and, to the extent that such Exercise Notice would otherwise cause
the Holder’s beneficial ownership, as determined pursuant to
this Section 1(f), to exceed the Maximum Percentage, the Holder
must notify the Company of a reduced number of Warrant Shares to be
purchased pursuant to such Exercise Notice (the number of shares by
which such purchase is reduced, the “Reduction Shares”) and (ii) as
soon as reasonably practicable, the Company shall return to the
Holder any exercise price paid by the Holder for the Reduction
Shares. For any reason at any time, upon the written or oral
request of the Holder, the Company shall within one (1) Business
Day confirm orally and in writing or by electronic mail to the
Holder the number of shares of Common Stock then outstanding. In
any case, the number of outstanding shares of Common Stock shall be
determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder
and any other Attribution Party since the date as of which the
Reported Outstanding Share Number was reported. In the event that
the issuance of Common Stock to the Holder upon exercise of this
Warrant results in the Holder and the other Attribution Parties
being deemed to beneficially own, in the aggregate, more than the
Maximum Percentage of the number of outstanding shares of Common
Stock (as determined under Section 13(d) of the 1934 Act), the
number of shares so issued by which the Holder’s and the
other Attribution Parties’ aggregate beneficial ownership
exceeds the Maximum Percentage (the “Excess Shares”) shall be deemed
null and void and shall be cancelled ab initio, and the Holder
shall not have the power to vote or to transfer the Excess Shares.
As soon as reasonably practicable after the issuance of the Excess
Shares has been deemed null and void, the Company shall return to
the Holder the exercise price paid by the Holder for the Excess
Shares. Upon delivery of a written notice to the Company, the
Holder may from time to time increase or decrease the Maximum
Percentage to any other percentage not in excess of 9.99% or such
higher percentage as specified in such notice; provided that (i)
any such increase in the Maximum Percentage will not be effective
until the sixty-first (61st) day after such
notice is delivered to the Company and (ii) any such increase or
decrease will apply only to the Holder and the other Attribution
Parties. For purposes of clarity, the shares of Common Stock
issuable pursuant to the terms of this Warrant in excess of the
Maximum Percentage shall not be deemed to be beneficially owned by
the Holder for any purpose including for purposes of Section 13(d)
or Rule 16a-1(a)(1) of the 1934 Act. No prior inability to exercise
this Warrant pursuant to this paragraph shall have any effect on
the applicability of the provisions of this paragraph with respect
to any subsequent determination of exercisability. The provisions
of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section
1(f) to the extent necessary to correct this paragraph or any
portion of this paragraph which may be defective or inconsistent
with the intended beneficial ownership limitation contained in this
Section 1(f) or to make changes or supplements necessary or
desirable to properly give effect to such limitation. The
limitation contained in this paragraph may not be waived and shall
apply to a successor holder of this Warrant.


 


(g)
Required Reserve
Amount. So long as this Warrant remains outstanding, the
Company shall at all times keep reserved for issuance under this
Warrant a number of shares of Common Stock at least equal to 100%
of the maximum number of shares of Common Stock as shall be
necessary to satisfy the Company’s obligation to issue shares
of Common Stock under this Warrant then outstanding (without regard
to any limitations on exercise) (the “Required Reserve Amount”);
provided that at no
time shall the number of shares of Common Stock reserved pursuant
to this Section 1(g) be reduced other than in connection with any
exercise of this Warrant or such other event covered by Section
2(c) below.


 


(h)
Insufficient Authorized
Shares. If at any time while this Warrant remains
outstanding the Company does not have a sufficient number of
authorized and unreserved shares of Common Stock to satisfy its
obligation to reserve for issuance the Required Reserve Amount (an
“Authorized Share
Failure”), then the Company shall promptly take all
action reasonably necessary to increase the Company’s
authorized shares of Common Stock to an amount sufficient to allow
the Company to reserve the Required Reserve Amount for this Warrant
then outstanding. Without limiting the generality of the foregoing
sentence, as soon as practicable after the date of the occurrence
of an Authorized Share Failure, but in no event later than ninety
(90) days after the occurrence of such Authorized Share Failure,
the Company shall hold a meeting of its stockholders for the
approval of an increase in the number of authorized shares of
Common Stock. In connection with such meeting, the Company shall
provide each stockholder with a proxy statement and shall use its
reasonable best efforts to solicit its stockholders’ approval
of such increase in authorized shares of Common Stock and to cause
its board of directors to recommend to the stockholders that they
approve such proposal. Notwithstanding the foregoing, if any such
time of an Authorized Share Failure, the Company is able to obtain
the written consent of a majority of the shares of its issued and
outstanding shares of Common Stock to approve the increase in the
number of authorized shares of Common Stock, the Company may
satisfy this obligation by obtaining such consent and submitting
for filing with the SEC an Information Statement on Schedule
14C.


 



 

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2.
ADJUSTMENT OF EXERCISE
PRICE AND NUMBER OF WARRANT SHARES. The Exercise Price and
the number of Warrant Shares shall be adjusted from time to time as
follows:


 


(a)
Stock Dividends and
Splits. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a
distribution or distributions on shares of its Common Stock or any
other equity or equity equivalent securities payable in shares of
Common Stock (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon exercise of this
Warrant), (ii) subdivides outstanding shares of Common Stock into a
larger number of shares, (iii) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a
smaller number of shares or (iv) issues by reclassification of
shares of Common Stock any shares of capital stock of the Company,
then in each case the Exercise Price shall be multiplied by a
fraction of which the numerator shall be the number of shares of
Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be
the number of shares of Common Stock outstanding immediately after
such event, and the number of shares issuable upon exercise of this
Warrant shall be proportionately adjusted such that the aggregate
Exercise Price of this Warrant shall remain unchanged. Any
adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in
the case of a subdivision, combination or
reclassification.


 


(b)
Voluntary Adjustment By
Company. The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and
for any period of time deemed appropriate by the board of directors
of the Company.


 


(c)
Adjustment Upon
Subdivision or Combination of Common Stock. If the Company
at any time on or after the Issuance Date subdivides (by any stock
split, stock dividend, recapitalization or otherwise) one or more
classes of its outstanding shares of Common Stock into a greater
number of shares, the Exercise Price in effect immediately prior to
such subdivision will be proportionately reduced and the number of
Warrant Shares will be proportionately increased. If the Company at
any time on or after the Issuance Date combines (by combination,
reverse stock split or otherwise) one or more classes of its
outstanding shares of Common Stock into a smaller number of shares,
the Exercise Price in effect immediately prior to such combination
will be proportionately increased and the number of Warrant Shares
will be proportionately decreased. Any adjustment under this
Section 2(c) shall become effective at the close of business on the
date the subdivision or combination becomes effective.


 


(d)
Other Events. If
any event occurs of the type contemplated by the provisions of this
Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation
rights, phantom stock rights or other rights with equity features),
then the Company’s board of directors will make an
appropriate adjustment in the Exercise Price and the number of
Warrant Shares, as mutually determined by the Company’s board
of directors and the Holder, so as to protect the rights of the
Holder; provided
that no such adjustment pursuant to this Section 2(d) will increase
the Exercise Price or decrease the number of Warrant Shares as
otherwise determined pursuant to this Section 2.


 


3.
RIGHTS UPON DISTRIBUTION
OF ASSETS. In addition to any adjustments pursuant to
Section 2 above, if, on or after the Issuance Date and on or prior
to the Expiration Date, the Company shall declare or make any
dividend or other distribution of its assets (or rights to acquire
its assets) to holders of shares of Common Stock, by way of return
of capital or otherwise (including, without limitation, any
distribution of cash, stock or other securities, property, options,
evidence of indebtedness or any other assets by way of a dividend,
spin off, reclassification, corporate rearrangement, scheme of
arrangement or other similar transaction) (a “Distribution”), at any time after
the issuance of this Warrant, then, in each such case, the Holder
shall be entitled to participate in such Distribution to the same
extent that the Holder would have participated therein if the
Holder had held the number of shares of Common Stock acquirable
upon complete exercise of this Warrant (without regard to any
limitations or restrictions on exercise of this Warrant, including
without limitation, the Maximum Percentage) immediately before the
date on which a record is taken for such Distribution, or, if no
such record is taken, the date as of which the record holders of
shares of Common Stock are to be determined for the participation
in such Distribution (provided, however, that to the extent
that the Holder’s right to participate in any such
Distribution would result in the Holder and the other Attribution
Parties exceeding the Maximum Percentage, then the Holder shall not
be entitled to participate in such Distribution to such extent (and
shall not be entitled to beneficial ownership of such shares of
Common Stock as a result of such Distribution (and beneficial
ownership) to such extent) and the portion of such Distribution
shall be held in abeyance for the benefit of the Holder until such
time or times as its right thereto would not result in the Holder
and the other Attribution Parties exceeding the Maximum Percentage,
at which time or times the Holder shall be granted such
Distribution (and any Distributions declared or made on such
initial Distribution or on any subsequent Distribution held
similarly in abeyance) to the same extent as if there had been no
such limitation).


 



 

6







 






 



4.
PURCHASE RIGHTS;
FUNDAMENTAL TRANSACTIONS.


 


(a)
Purchase Rights. In
addition to any adjustments pursuant to Section 2 above, if at any
time on or after the Issuance Date and on or prior to the
Expiration Date the Company grants, issues or sells any Options,
Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any
class of Common Stock (the “Purchase Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of
Common Stock acquirable upon complete exercise of this Warrant
(without regard to any limitations or restrictions on exercise of
this Warrant, including without limitation, the Maximum Percentage)
immediately before the date on which a record is taken for the
grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of Common
Stock are to be determined for the grant, issuance or sale of such
Purchase Rights (provided, however, that to the extent
that the Holder’s right to participate in any such Purchase
Right would result in the Holder and the other Attribution Parties
exceeding the Maximum Percentage, then the Holder shall not be
entitled to participate in such Purchase Right to such extent (and
shall not be entitled to beneficial ownership of such Common Stock
as a result of such Purchase Right (and beneficial ownership) to
such extent) and such Purchase Right to such extent shall be held
in abeyance for the benefit of the Holder until such time or times
as its right thereto would not result in the Holder and the other
Attribution Parties exceeding the Maximum Percentage, at which time
or times the Holder shall be granted such right (and any Purchase
Right granted, issued or sold on such initial Purchase Right or on
any subsequent Purchase Right to be held similarly in abeyance) to
the same extent as if there had been no such
limitation).


 


(b)
Fundamental
Transaction. The Company shall not enter into or be party to
a Fundamental Transaction unless the Successor Entity assumes in
writing all of the obligations of the Company under this Warrant in
accordance with the provisions of this Section 4(b), including
agreements to deliver to the Holder in exchange for this Warrant a
security of the Successor Entity evidenced by a written instrument
substantially similar in form and substance to this Warrant,
including, without limitation, which is exercisable for a
corresponding number of shares of capital stock equivalent to the
shares of Common Stock acquirable and receivable upon exercise of
this Warrant (without regard to any limitations on the exercise of
this Warrant) prior to such Fundamental Transaction, and with an
exercise price which applies the exercise price hereunder to such
shares of capital stock (but taking into account the relative value
of the shares of Common Stock pursuant to such Fundamental
Transaction and the value of such shares of capital stock, such
adjustments to the number of shares of capital stock and such
exercise price being for the purpose of protecting the economic
value of this Warrant immediately prior to the consummation of such
Fundamental Transaction). Upon the consummation of each Fundamental
Transaction, the Successor Entity shall succeed to, and be
substituted for the Company (so that from and after the date of the
applicable Fundamental Transaction, the provisions of this Warrant
and the other Transaction Documents referring to the
“Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall
assume all of the obligations of the Company under this Warrant
with the same effect as if such Successor Entity had been named as
the Company herein. Upon consummation of each Fundamental
Transaction, the Successor Entity shall deliver to the Holder
confirmation that there shall be issued upon exercise of this
Warrant at any time after the consummation of the applicable
Fundamental Transaction, in lieu of the shares of Common Stock (or
other securities, cash, assets or other property (except such items
still issuable under Sections 3 and 4(a) above, which shall
continue to be receivable thereafter)) issuable upon the exercise
of this Warrant prior to the applicable Fundamental Transaction,
such shares of common stock (or its equivalent) of the Successor
Entity (including its Parent Entity) which the Holder would have
been entitled to receive upon the happening of the applicable
Fundamental Transaction had this Warrant been exercised immediately
prior to the applicable Fundamental Transaction (without regard to
any limitations on the exercise of this Warrant), as adjusted in
accordance with the provisions of this Warrant. Notwithstanding the
foregoing, and without limiting Section 1(f) hereof, the Holder may
elect, at its sole option, by delivery of written notice to the
Company to waive this Section 4(b) to permit the Fundamental
Transaction without the assumption of this Warrant. In addition to
and not in substitution for any other rights hereunder, prior to
the consummation of each Fundamental Transaction pursuant to which
holders of shares of Common Stock are entitled to receive
securities or other assets with respect to or in exchange for
shares of Common Stock (a “Corporate Event”), the Company
shall make appropriate provision to insure that the Holder will
thereafter have the right to receive upon an exercise of this
Warrant at any time after the consummation of the applicable
Fundamental Transaction but prior to the Expiration Date, in lieu
of the shares of the Common Stock (or other securities, cash,
assets or other property (except such items still issuable under
Sections 3 and 4(a) above, which shall continue to be receivable
thereafter)) issuable upon the exercise of the Warrant prior to
such Fundamental Transaction, such shares of stock, securities,
cash, assets or any other property whatsoever (including warrants
or other purchase or subscription rights) (collectively, the
“Corporate Event Consideration”) which the Holder would
have been entitled to receive upon the happening of the applicable
Fundamental Transaction had this Warrant been exercised immediately
prior to the applicable Fundamental Transaction (without regard to
any limitations on the exercise of this Warrant). The provision
made pursuant to the preceding sentence shall be in a form and
substance reasonably satisfactory to the Holder.


 



 

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5.
NONCIRCUMVENTION.
The Company hereby covenants and agrees that the Company will not,
by amendment of its articles of incorporation, as amended, or
amended and restated bylaws, or through any reorganization,
transfer of assets, consolidation, merger, scheme of arrangement,
dissolution, issuance or sale of securities, or any other voluntary
action, avoid or seek to avoid the observance or performance of any
of the terms of this Warrant, and will at all times in good faith
carry out all of the provisions of this Warrant and take all action
as may be required to protect the rights of the Holder. Without
limiting the generality of the foregoing, the Company (i) shall not
increase the par value of any shares of Common Stock receivable
upon the exercise of this Warrant above the Exercise Price then in
effect, (ii) shall take all such actions as may be necessary or
appropriate in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock upon the
exercise of this Warrant, and (iii) shall, so long as this Warrant
is outstanding, take all action necessary to reserve and keep
available out of its authorized and unissued shares of Common
Stock, solely for the purpose of effecting the exercise of this
Warrant, the number of shares of Common Stock as shall from time to
time be necessary to effect the exercise of this Warrant (without
regard to any limitations on exercise).


 


6.
WARRANT HOLDER NOT DEEMED
A STOCKHOLDER. Except as otherwise specifically provided
herein, the Holder, solely in such Person’s capacity as a
holder of this Warrant, shall not be entitled to vote or receive
dividends or be deemed the holder of capital stock of the Company
for any purpose, nor shall anything contained in this Warrant be
construed to confer upon the Holder, solely in such Person’s
capacity as the Holder of this Warrant, any of the rights of a
stockholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue
of stock, reclassification of stock, consolidation, merger,
conveyance or otherwise), receive notice of meetings, receive
dividends or subscription rights, or otherwise, prior to the
issuance to the Holder of the Warrant Shares which such Person is
then entitled to receive upon the due exercise of this Warrant. In
addition, nothing contained in this Warrant shall be construed as
imposing any liabilities on the Holder to purchase any securities
(upon exercise of this Warrant or otherwise) or as a stockholder of
the Company, whether such liabilities are asserted by the Company
or by creditors of the Company. Notwithstanding this Section 6, the
Company shall provide the Holder with copies of the same notices
and other information given to the stockholders of the Company
generally, contemporaneously with the giving thereof to the
stockholders.


 


7.
REISSUANCE OF
WARRANTS.


 


(a)
Transfer of
Warrant. If this Warrant is to be transferred, the Holder
shall surrender this Warrant to the Company, whereupon the Company
will forthwith issue and deliver upon the order of the Holder a new
Warrant (in accordance with Section 7(d)), registered as the Holder
may request, representing the right to purchase the number of
Warrant Shares being transferred by the Holder and, if less than
the total number of Warrant Shares then underlying this Warrant is
being transferred, a new Warrant (in accordance with Section 7(d))
to the Holder representing the right to purchase the number of
Warrant Shares not being transferred.


 


(b)
Lost, Stolen or Mutilated
Warrant. Upon receipt by the Company of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or
mutilation of this Warrant, and, in the case of loss, theft or
destruction, of any indemnification undertaking by the Holder to
the Company in customary form (but without the obligation to post a
bond) and, in the case of mutilation, upon surrender and
cancellation of this Warrant, the Company shall execute and deliver
to the Holder a new Warrant (in accordance with Section 7(d))
representing the right to purchase the Warrant Shares then
underlying this Warrant.


 



 

8







 






 



(c)
Exchangeable for Multiple
Warrants. This Warrant is exchangeable, upon the surrender
hereof by the Holder at the principal office of the Company, for a
new Warrant or Warrants (in accordance with Section 7(d))
representing in the aggregate the right to purchase the number of
Warrant Shares then underlying this Warrant, and each such new
Warrant will represent the right to purchase such portion of such
Warrant Shares as is designated by the Holder at the time of such
surrender.


 


(d)
Issuance of New
Warrants. If this Warrant is not held in global form through
DTC (or any successor depository), whenever the Company is required
to issue a new Warrant pursuant to the terms of this Warrant, such
new Warrant (i) shall be of like tenor with this Warrant, (ii)
shall represent, as indicated on the face of such new Warrant, the
right to purchase the Warrant Shares then underlying this Warrant
(or in the case of a new Warrant being issued pursuant to Section
7(a) or Section 7(c), the Warrant Shares designated by the Holder
which, when added to the number of shares of Common Stock
underlying the other new Warrants issued in connection with such
issuance, does not exceed the number of Warrant Shares then
underlying this Warrant), (iii) shall have an issuance date, as
indicated on the face of such new Warrant which is the same as the
Issuance Date, and (iv) shall have the same rights and conditions
as this Warrant.


 


8.
NOTICES. Whenever
notice is required to be given under this Warrant, including,
without limitation, an Exercise Notice, unless otherwise provided
herein, such notice shall be given in writing, (i) if delivered (a)
from within the domestic United States, by first-class registered
or certified airmail, or nationally recognized overnight express
courier, postage prepaid, electronic mail or (b) from outside the
United States, by International Federal Express, electronic mail,
and (ii) will be deemed given (A) if delivered by first-class
registered or certified mail domestic, three (3) Business Days
after so mailed, (B) if delivered by nationally recognized
overnight carrier, one (1) Business Day after so mailed, (C) if
delivered by International Federal Express, two (2) Business Days
after so mailed and (D) at the time of transmission, if delivered
by electronic mail to each of the email addresses specified in this
Section 8 prior to 5:00 p.m. (New York time) on a Trading Day and
(E) the next Trading Day after the date of transmission, if
delivered by electronic mail to each of the email addresses
specified in this Section 8 on a day that is not a Trading Day or
later than 5:00 p.m. (New York time) on any Trading Day, and will
be delivered and addressed as follows:


 


(i) if
to the Company, to:


 


Torchlight
Energy Resources, Inc.


5700
West Plano Parkway, Suite 3600


Plano,
Texas 75093


Attn: John Brda, Chief Executive
Officer


Email:
john@torchlightenergy.com


 


With a
copy (for informational purposes only) to:


 


Axelrod
& Smith


5300
Memorial Drive, Suite 1000


Houston, Texas
77007


Attention: Robert
D. Axelrod, Esq.


Email:
rdaxel@asklawhou.com


 


(ii) if
to the Holder, at such address or other contact information
delivered by the Holder to Company or as is on the books and
records of the Company.


 


The
Company shall provide the Holder with prompt written notice of all
actions taken pursuant to this Warrant, including in reasonable
detail a description of such action and the reason therefor.
Without limiting the generality of the foregoing, the Company will
give written notice to the Holder (i) immediately upon any
adjustment of the Exercise Price, setting forth in reasonable
detail, and certifying, the calculation of such adjustment and (ii)
at least fifteen (15) days prior to the date on which the Company
closes its books or takes a record (A) with respect to any dividend
or distribution upon the shares of Common Stock, (B) with respect
to any grants, issuances or sales of any Options, Convertible
Securities or rights to purchase stock, warrants, securities or
other property to holders of shares of Common Stock or (C) for
determining rights to vote with respect to any Fundamental
Transaction, dissolution or liquidation; provided in each case that such
information shall be made known to the public prior to or in
conjunction with such notice being provided to the Holder. It is
expressly understood and agreed that the time of exercise specified
by the Holder in each Exercise Notice shall be definitive and may
not be disputed or challenged by the Company.


 



 

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9.
AMENDMENT AND
WAIVER. Except as otherwise provided herein, the provisions
of this Warrant may be amended or waived and the Company may take
any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained
the written consent of the Holder.


 


10.
GOVERNING LAW;
JURISDICTION; JURY TRIAL. This Warrant shall be governed by
and construed and enforced in accordance with, and all questions
concerning the construction, validity, interpretation and
performance of this Warrant shall be governed by, the internal laws
of the State of New York, without giving effect to any choice of
law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the
application of the laws of any jurisdictions other than the State
of New York. The Company hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in
The City of New York, Borough of Manhattan, for the adjudication of
any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein, and hereby
irrevocably waives, and agrees not to assert in any suit, action or
proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or
proceeding is brought in an inconvenient forum or that the venue of
such suit, action or proceeding is improper. The Company hereby
irrevocably waives personal service of process and consents to
process being served in any such suit, action or proceeding by
mailing a copy thereof to the Company at the address set forth in
Section 8(i) above or such other address as the Company
subsequently delivers to the Holder and agrees that such service
shall constitute good and sufficient service of process and notice
thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any manner permitted by law.
Nothing contained herein shall be deemed or operate to preclude the
Holder from bringing suit or taking other legal action against the
Company in any other jurisdiction to collect on the Company’s
obligations to the Holder, to realize on any collateral or any
other security for such obligations, or to enforce a judgment or
other court ruling in favor of the Holder. If either party shall
commence an action, suit or proceeding to enforce any provisions of
this Warrant, the prevailing party in such action, suit or
proceeding shall be reimbursed by the other party for their
reasonable attorneys’ fees and other costs and expenses
incurred with the investigation, preparation and prosecution of
such action or proceeding. THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES
NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS WARRANT OR
ANY TRANSACTION CONTEMPLATED HEREBY.


 


11.
DISPUTE RESOLUTION.
In the case of a dispute as to the determination of the Exercise
Price or the arithmetic calculation of the Warrant Shares, the
Company shall submit the disputed determinations or arithmetic
calculations via facsimile or electronic mail within two (2)
Business Days of receipt of the Exercise Notice or other event
giving rise to such dispute, as the case may be, to the Holder. If
the Holder and the Company are unable to agree upon such
determination or calculation of the Exercise Price or the Warrant
Shares within three (3) Business Days of such disputed
determination or arithmetic calculation being submitted to the
Holder, then the Company shall, within two (2) Business Days submit
via facsimile or electronic mail (a) the disputed determination of
the Exercise Price to an independent, reputable investment bank
selected by the Company and approved by the Holder or (b) the
disputed arithmetic calculation of the Warrant Shares to the
Company’s independent, outside accountant. The Company shall
cause at its expense the investment bank or the accountant, as the
case may be, to perform the determinations or calculations and
notify the Company and the Holder of the results no later than ten
(10) Business Days from the time it receives the disputed
determinations or calculations. Such investment bank’s or
accountant’s determination or calculation, as the case may
be, shall be binding upon all parties absent demonstrable
error.


 


12.
REMEDIES, OTHER
OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF. The remedies
provided in this Warrant shall be cumulative and in addition to all
other remedies available under this Warrant and any other
Transaction Documents, at law or in equity (including a decree of
specific performance and/or other injunctive relief), and nothing
herein shall limit the right of the Holder to pursue actual damages
for any failure by the Company to comply with the terms of this
Warrant. The Company acknowledges that a breach by it of its
obligations hereunder will cause irreparable harm to the Holder and
that the remedy at law for any such breach may be inadequate. The
Company therefore agrees that, in the event of any such breach or
threatened breach, the holder of this Warrant shall be entitled, in
addition to all other available remedies, to an injunction
restraining any breach, without the necessity of showing economic
loss and without any bond or other security being required.
Notwithstanding the foregoing or anything else herein to the
contrary, other than as expressly provided in Section 1(a), Section
1(c) or Section 2(d) hereof, if the Company is for any reason
unable to issue and deliver Warrant Shares upon exercise of this
Warrant as required pursuant to the terms hereof, the Company shall
have no obligation to pay to the holder any cash or other
consideration or otherwise “net cash settle” this
Warrant; provided that the foregoing shall not limit or supersede
the applicability of Section 4(b) hereof.


 



 

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13.
TRANSFER. This
Warrant and the Warrant Shares may be offered for sale, sold,
transferred, pledged or assigned without the consent of the
Company.


 


14.
SEVERABILITY;
CONSTRUCTION; HEADINGS. If any provision of this Warrant is
prohibited by law or otherwise determined to be invalid or
unenforceable by a court of competent jurisdiction, the provision
that would otherwise be prohibited, invalid or unenforceable shall
be deemed amended to apply to the broadest extent that it would be
valid and enforceable, and the invalidity or unenforceability of
such provision shall not affect the validity of the remaining
provisions of this Warrant so long as this Warrant as so modified
continues to express, without material change, the original
intentions of the parties as to the subject matter hereof and the
prohibited nature, invalidity or unenforceability of the
provision(s) in question does not substantially impair the
respective expectations or reciprocal obligations of the parties or
the practical realization of the benefits that would otherwise be
conferred upon the parties. The parties will endeavor in good faith
negotiations to replace the prohibited, invalid or unenforceable
provision(s) with a valid provision(s), the effect of which comes
as close as possible to that of the prohibited, invalid or
unenforceable provision(s). This Warrant shall be deemed to be
jointly drafted by the Company and the Holder and shall not be
construed against any Person as the drafter hereof. The headings of
this Warrant are for convenience of reference and shall not form
part of, or affect the interpretation of, this
Warrant.


 


15.
DISCLOSURE. Upon
receipt or delivery by the Company of any notice in accordance with
the terms of this Warrant, unless the Company has in good faith
determined that the matters relating to such notice do not
constitute material, nonpublic information relating to the Company
or its subsidiaries, the Company shall contemporaneously with any
such receipt or delivery publicly disclose such material, nonpublic
information on a Current Report on Form 8-K or otherwise. In the
event that the Company believes that a notice contains material,
nonpublic information relating to the Company or its subsidiaries,
the Company so shall indicate to such Holder contemporaneously with
delivery of such notice, and in the absence of any such indication,
the Holder shall be allowed to presume that all matters relating to
such notice do not constitute material, nonpublic information
relating to the Company or its subsidiaries.


 


16.
[RESERVED].


 


17.
CERTAIN
DEFINITIONS. For purposes of this Warrant, the following
terms shall have the following meanings:


 


(a)
“Affiliate”
means, with respect to any Person, any other Person that directly
or indirectly controls, is controlled by, or is under common
control with, such Person, it being understood for purposes of this
definition that “control” of a Person means the power
directly or indirectly either to vote 10% or more of the stock
having ordinary voting power for the election of directors of such
Person or direct or cause the direction of the management and
policies of such Person whether by contract or
otherwise.


 


(b)
“Attribution
Parties” means, collectively, the following Persons
and entities: (i) any investment vehicle, including, any funds,
feeder funds or managed accounts, currently, or from time to time
after the Issuance Date, directly or indirectly managed or advised
by the Holder’s investment manager or any of its Affiliates
or principals, (ii) any direct or indirect Affiliates of the Holder
or any of the foregoing, (iii) any Person acting or who could be
deemed to be acting as a Group together with the Holder or any of
the foregoing and (iv) any other Persons whose beneficial ownership
of the Company’s Common Stock would or could be aggregated
with the Holder’s and the other Attribution Parties for
purposes of Section 13(d) of the 1934 Act. For clarity, the purpose
of the foregoing is to subject collectively the Holder and all
other Attribution Parties to the Maximum Percentage.


 



 

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(c)
“Bid Price”
means, for any security as of the particular time of determination,
the bid price for such security on the Principal Market as reported
by Bloomberg as of such time of determination, or, if the Principal
Market is not the principal securities exchange or trading market
for such security, the bid price of such security on the principal
securities exchange or trading market where such security is listed
or traded as reported by Bloomberg as of such time of
determination, or if the foregoing does not apply, the bid price of
such security in the over-the-counter market on the electronic
bulletin board for such security as reported by Bloomberg as of
such time of determination, or, if no bid price is reported for
such security by Bloomberg as of such time of determination, the
average of the bid prices of any market makers for such security as
reported in the “pink sheets” by OTC Markets Group Inc.
(formerly Pink Sheets LLC) as of such time of determination. If the
Bid Price cannot be calculated for a security as of the particular
time of determination on any of the foregoing bases, the Bid Price
of such security as of such time of determination shall be the fair
market value as mutually determined by the Company and the Holder.
If the Company and the Holder are unable to agree upon the fair
market value of such security, then such dispute shall be resolved
in accordance with the procedures in Section 11. All such
determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination or other similar
transaction during such period.


 


(d)
“Bloomberg”
means Bloomberg Financial Markets.


 


(e)
“Business Day”
means any day other than Saturday, Sunday or other day on which
commercial banks in The City of New York are authorized or required
by law to remain closed.


 


(f)
“Closing Bid
Price” and “Closing Sale Price” means, for any
security as of any date, the last closing bid price and last
closing trade price, respectively, for such security on the
Principal Market, as reported by Bloomberg, or, if the Principal
Market begins to operate on an extended hours basis and does not
designate the closing bid price or the closing trade price, as the
case may be, then the last bid price or the last trade price,
respectively, of such security prior to 4:00:00 p.m., New York
time, as reported by Bloomberg, or, if the Principal Market is not
the principal securities exchange or trading market for such
security, the last closing bid price or last trade price,
respectively, of such security on the principal securities exchange
or trading market where such security is listed or traded as
reported by Bloomberg, or if the foregoing do not apply, the last
closing bid price or last trade price, respectively, of such
security in the over-the-counter market on the electronic bulletin
board for such security as reported by Bloomberg, or, if no closing
bid price or last trade price, respectively, is reported for such
security by Bloomberg, the average of the bid prices, or the ask
prices, respectively, of any market makers for such security as
reported in the OTC Link or “pink sheets” by OTC
Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Closing
Bid Price or the Closing Sale Price cannot be calculated for a
security on a particular date on any of the foregoing bases, the
Closing Bid Price or the Closing Sale Price, as the case may be, of
such security on such date shall be the fair market value as
mutually determined by the Company and the Holder. If the Company
and the Holder are unable to agree upon the fair market value of
such security, then such dispute shall be resolved pursuant to
Section 11. All such determinations to be appropriately adjusted
for any stock dividend, stock split, stock combination,
reclassification or other similar transaction during the applicable
calculation period.


 


(g)
“Common Stock”
means (i) the Company’s Common Stock, par value $0.001 per
share, and (ii) any capital stock into which such Common Stock
shall have been changed or any capital stock resulting from a
reclassification of such Common Stock.


 


(h)
“Convertible
Securities” means any stock or securities (other than
Options) directly or indirectly convertible into or exercisable or
exchangeable for shares of Common Stock.


 


(i)
“Eligible
Market” means The Nasdaq Capital Market, the NYSE
American LLC, The Nasdaq Global Select Market, The Nasdaq Global
Market or The New York Stock Exchange, Inc.


 


(j)
“Expiration
Date” means the date twelve (12) months after the
Initial Exercisability Date or, if such date falls on a day other
than a Business Day or on which trading does not take place on the
Principal Market (a “Holiday”), the next day that is
not a Holiday.


 



 

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(k)
“Fundamental
Transaction” means (A) that the Company shall,
directly or indirectly, including through subsidiaries, Affiliates
or otherwise, in one or more related transactions, (i) consolidate
or merge with or into (whether or not the Company is the surviving
corporation) another Subject Entity, or (ii) sell, assign,
transfer, convey or otherwise dispose of all or substantially all
of the properties or assets of the Company or any of its
“significant subsidiaries” (as defined in Rule 1-02 of
Regulation S-X) to one or more Subject Entities, or (iii) make, or
allow one or more Subject Entities to make, or allow the Company to
be subject to or have its shares of Common Stock be subject to or
party to one or more Subject Entities making, a purchase, tender or
exchange offer that is accepted by the holders of at least either
(x) 50% of the outstanding shares of Common Stock, (y) 50% of the
outstanding shares of Common Stock calculated as if any shares of
Common Stock held by all Subject Entities making or party to, or
Affiliated with any Subject Entities making or party to, such
purchase, tender or exchange offer were not outstanding; or (z)
such number of shares of Common Stock such that all Subject
Entities making or party to, or Affiliated with any Subject Entity
making or party to, such purchase, tender or exchange offer, become
collectively the beneficial owners (as defined in Rule 13d-3 under
the 1934 Act) of at least 50% of the outstanding shares of Common
Stock, or (iv) consummate a stock purchase agreement or other
business combination (including, without limitation, a
reorganization, recapitalization, spin-off or scheme of
arrangement) with one or more Subject Entities whereby all such
Subject Entities, individually or in the aggregate, acquire, either
(x) at least 50% of the outstanding shares of Common Stock, (y) at
least 50% of the outstanding shares of Common Stock calculated as
if any shares of Common Stock held by all the Subject Entities
making or party to, or Affiliated with any Subject Entity making or
party to, such stock purchase agreement or other business
combination were not outstanding; or (z) such number of shares of
Common Stock such that the Subject Entities become collectively the
beneficial owners (as defined in Rule 13d-3 under the 1934 Act) of
at least 50% of the outstanding shares of Common Stock, or (v)
reorganize, recapitalize or reclassify its shares of Common Stock,
(B) that the Company shall, directly or indirectly, including
through subsidiaries, Affiliates or otherwise, in one or more
related transactions, allow any Subject Entity individually or the
Subject Entities in the aggregate to be or become the
“beneficial owner” (as defined in Rule 13d-3 under the
1934 Act), directly or indirectly, whether through acquisition,
purchase, assignment, conveyance, tender, tender offer, exchange,
reduction in outstanding shares of Common Stock, merger,
consolidation, business combination, reorganization,
recapitalization, spin-off, scheme of arrangement, reorganization,
recapitalization or reclassification or otherwise in any manner
whatsoever, of either (x) at least 50% of the aggregate ordinary
voting power represented by issued and outstanding shares of Common
Stock, (y) at least 50% of the aggregate ordinary voting power
represented by issued and outstanding shares of Common Stock not
held by all such Subject Entities as of the Issuance Date
calculated as if any shares of Common Stock held by all such
Subject Entities were not outstanding, or (z) a percentage of the
aggregate ordinary voting power represented by issued and
outstanding shares of Common Stock or other equity securities of
the Company sufficient to allow such Subject Entities to effect a
statutory short form merger or other transaction requiring other
stockholders of the Company to surrender their Common Stock without
approval of the stockholders of the Company or (C) directly or
indirectly, including through subsidiaries, Affiliates or
otherwise, in one or more related transactions, the issuance of or
the entering into any other instrument or transaction structured in
a manner to circumvent, or that circumvents, the intent of this
definition in which case this definition shall be construed and
implemented in a manner otherwise than in strict conformity with
the terms of this definition to the extent necessary to correct
this definition or any portion of this definition which may be
defective or inconsistent with the intended treatment of such
instrument or transaction.


 


(l)
“Group” means a
“group” as that term is used in Section 13(d) of the
1934 Act and as defined in Rule 13d-5 thereunder.


 


(m)
“Options” means
any rights, warrants or options to subscribe for or purchase shares
of Common Stock or Convertible Securities.


 


(n)
“Parent Entity”
of a Person means an entity that, directly or indirectly, controls
the applicable Person, including such entity whose common stock or
equivalent equity security is quoted or listed on an Eligible
Market (or, if so elected by the Holder, any other market, exchange
or quotation system), or, if there is more than one such Person or
such entity, the Person or such entity designated by the Holder or
in the absence of such designation, such Person or entity with the
largest public market capitalization as of the date of consummation
of the Fundamental Transaction.


 


(o)
“Person” means
an individual, a limited liability company, a partnership, a joint
venture, a corporation, a trust, an unincorporated organization,
any other entity and a government or any department or agency
thereof.


 


(p)
“Principal
Market” means the principal securities exchange or
securities market on which the shares of Common Stock are then
traded.


  



 

13







 






 



(q)
“Standard Settlement
Period” means the standard settlement period,
expressed in a number of Trading Days, for the Company’s
primary trading market or quotation system with respect to the
Common Stock that is in effect on the date of receipt of an
applicable Exercise Notice.


 


(r)
“Subject Entity”
means any Person, Persons or Group or any Affiliate or associate of
any such Person, Persons or Group.


 


(s)
“Successor
Entity” means one or more Person or Persons (or, if so
elected by the Holder, the Company or Parent Entity) formed by,
resulting from or surviving any Fundamental Transaction or one or
more Person or Persons (or, if so elected by the Holder, the
Company or the Parent Entity) with which such Fundamental
Transaction shall have been entered into.


 


(t)
“Trading Day”
means any day on which the Common Stock is traded on the Principal
Market, or, if the Principal Market is not the principal trading
market for the Common Stock, then on the principal securities
exchange or securities market on which the Common Stock is then
traded.


 


(u)
“Transaction
Documents” means any agreement entered into by and
between the Company and the Holder, as applicable.


  


(v)
“Weighted Average
Price” means, for any security as of any date, the
dollar volume-weighted average price for such security on the
Principal Market during the period beginning at 9:30:01 a.m., New
York time (or such other time as the Principal Market publicly
announces is the official open of trading), and ending at 4:00:00
p.m., New York time (or such other time as the Principal Market
publicly announces is the official close of trading), as reported
by Bloomberg through its “Volume at Price” function or,
if the foregoing does not apply, the dollar volume-weighted average
price of such security in the over-the-counter market on the
electronic bulletin board for such security during the period
beginning at 9:30:01 a.m., New York time (or such other time as
such market publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York time (or such other time as
such market publicly announces is the official close of trading),
as reported by Bloomberg, or, if no dollar volume-weighted average
price is reported for such security by Bloomberg for such hours,
the average of the highest Closing Bid Price and the lowest closing
ask price of any of the market makers for such security as reported
in the OTC Link or “pink sheets” by OTC Markets Group
Inc. (formerly Pink OTC Markets Inc.). If the Weighted Average
Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Weighted Average Price of such
security on such date shall be the fair market value as mutually
determined by the Company and the Holder. If the Company and the
Holder are unable to agree upon the fair market value of such
security, then such dispute shall be resolved pursuant to Section
11 with the term “Weighted Average Price” being
substituted for the term “Exercise Price.” All such
determinations shall be appropriately adjusted for any stock
dividend, stock split, stock combination, reclassification or other
similar transaction during the applicable calculation
period.


 


 


 


 


 



[Signature Page Follows]


 


 


 


 


 


 


 








 

14








 






 


IN WITNESS WHEREOF, the Company has
caused this Warrant to Purchase Common Stock to be duly executed as
of the Issuance Date set out above.


 


	
 

	


TORCHLIGHT ENERGY RESOURCES, INC.


	
 

	

   


	
 

	

By:

	

                   


	
 

	

Name:

	
 


	
 

	

Title:

	
 







 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 













 

15








 






 



EXHIBIT A


 



EXERCISE NOTICE


 



TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE
THIS



WARRANT TO PURCHASE COMMON STOCK


 



TORCHLIGHT ENERGY RESOURCES, INC.


 


The
undersigned holder hereby exercises the right to purchase
_________________ shares of Common Stock (“Warrant Shares”) of Torchlight
Energy Resources, Inc., a company organized under the laws of
Nevada (the “Company”), evidenced by the
attached Warrant to Purchase Common Stock (the “Warrant”). Capitalized terms used
herein and not otherwise defined shall have the respective meanings
set forth in the Warrant.


 


1. Form
of Exercise Price. The Holder intends that payment of the Exercise
Price shall be made as:


 


____________ a
“Cash
Exercise” with respect to _________________ Warrant
Shares; and/or


 


____________ a
“Cashless
Exercise” with respect to _______________ Warrant
Shares.


 


2.
Payment of Exercise Price. In the event that the holder has elected
a Cash Exercise with respect to some or all of the Warrant Shares
to be issued pursuant hereto, the holder shall pay the Aggregate
Exercise Price in the sum of $___________________ to the Company in
accordance with the terms of the Warrant.


 


3.
Delivery of Warrant Shares. The Company shall deliver to the holder
__________ Warrant Shares in accordance with the terms of the
Warrant.


 


Date:
_______________ __, ______


 


 


_________________________________________________________________________


    Name
of Registered Holder


 


 


By:
________________________________________


Name:


Title: 


 


 


 


 


 








 











 






 


 



ACKNOWLEDGMENT


 


The
Company hereby acknowledges this Exercise Notice and hereby directs
the Transfer Agent to issue the above indicated number of shares of
Common Stock on or prior to the applicable Share Delivery
Date.


 


	
 

	


TORCHLIGHT ENERGY RESOURCES, INC.


	
 

	

   


	
 

	

By:

	

                    


	
 

	

Name:

	
 


	
 

	

Title:

	
 







 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 


 













 

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