exhibit_10-1








 





EXHIBIT
10.1


 



Torchlight Energy Resources, Inc.

 



$7,000,000

 


Common
Stock


($0.001
par value per share)

 



Sales Agreement

 


July
20, 2020

 


Roth
Capital Partners, LLC


888 San
Clemente Drive, Suite 400


Newport
Beach, CA 92660

 


Ladies
and Gentlemen:

 


Torchlight Energy
Resources, Inc., a Nevada corporation (the “Company”), confirms its
agreement (this “Agreement”) with Roth
Capital Partners, LLC (the “Agent”), as
follows:

 


1. 
Issuance
and Sale of Shares. The Company agrees that, from time to
time during the term of this Agreement, on the terms and subject to
the conditions set forth herein, it may issue and sell through or
to the Agent, shares (the “Placement Shares”) of
common stock of the Company, $0.001 par value per share (the
“Common
Stock”) having an aggregate offering price of up to
$7,000,000; provided,
however, that in no event
shall the Company issue or sell through Agent such number of
Placement Shares that: (a) exceeds the number or dollar amount
of shares of Common Stock that may be sold pursuant to the
Registration Statement (as defined below), or (b) exceeds the
number of authorized but unissued shares of Common Stock of the
Company (the “Maximum Amount”).
Notwithstanding anything to the contrary contained herein, the
parties hereto agree that compliance with the limitations set forth
in this Section 1 on the amount of Placement Shares issued and
sold under this Agreement shall be the sole responsibility of the
Company and that Agent shall have no obligation in connection with
such compliance. The issuance and sale of Placement Shares through
or to Agent will be effected pursuant to the Registration Statement
(as defined below) filed by the Company and declared effective by
the Securities and Exchange Commission (the “Commission”), although
nothing in this Agreement shall be construed as requiring the
Company to use the Registration Statement to issue any Placement
Shares.

 



 

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The
Company has filed, in accordance with the provisions of the
Securities Act of 1933, as amended, and the rules and regulations
thereunder (the “Securities Act”), with
the Commission a registration statement on Form S-3 (File No.
333-220181), including a base prospectus, relating to certain
securities, including the Placement Shares to be issued from time
to time by the Company, and which incorporates by reference
documents that the Company has filed or will file in accordance
with the provisions of the Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder (the
“Exchange
Act”). The Company has prepared a prospectus
supplement specifically relating to the Placement Shares (the
“Prospectus
Supplement”) to the base prospectus included as part
of such registration statement. The Company will furnish to the
Agent, for use by the Agent, copies of the prospectus included as
part of such registration statement, as supplemented by the
Prospectus Supplement relating to the Placement Shares. Except
where the context otherwise requires, such registration statement,
and any post-effective amendment thereto, including all documents
filed as part thereof or incorporated by reference therein, and
including any information contained in a Prospectus (as defined
below) subsequently filed with the Commission pursuant to
Rule 424(b) under the Securities Act or deemed to be a part of
such registration statement pursuant to Rule 430B of the
Securities Act, or any subsequent registration statement on Form
S-3 filed pursuant to Rule 415(a)(6) under the Securities Act by
the Company to cover any Placement Shares, is herein called the
“Registration
Statement.” The base prospectus, including all
documents incorporated therein by reference, included in the
Registration Statement, as it may be supplemented by the Prospectus
Supplement, in the form in which such prospectus and/or Prospectus
Supplement have most recently been filed by the Company with the
Commission pursuant to Rule 424(b) under the Securities Act,
together with any then issued Issuer Free Writing Prospectus
(defined below), is herein called the “Prospectus.” Any
reference herein to the Registration Statement, the Prospectus or
any amendment or supplement thereto, shall be deemed to refer to
and include the documents incorporated or deemed to be incorporated
by reference therein, and any reference herein to the terms
“amend,” “amendment” or
“supplement” with respect to the Registration Statement
or the Prospectus shall be deemed to refer to and include the
filing after the execution hereof of any document with the
Commission deemed to be incorporated by reference therein (the
“Incorporated
Documents”). For purposes of this Agreement, all
references to the Registration Statement, the Prospectus or to any
amendment or supplement thereto shall be deemed to include any copy
filed with the Commission pursuant to its Electronic Data Gathering
Analysis and Retrieval System, or if applicable, the Interactive
Data Electronic Application system when used by the Commission
(collectively, “EDGAR”).

 


2. 
Placements. Each time that the
Company wishes to issue and sell Placement Shares hereunder (each,
a “Placement”), it will
notify the Agent by email notice (or other method mutually agreed
to in writing by the parties) of the number or dollar value of
Placement Shares, the time period during which sales are requested
to be made, any limitation on the number of Placement Shares that
may be sold in any one day and any minimum price below which sales
may not be made (a “Placement Notice”), the
form of which is attached hereto as Schedule 1. The Placement
Notice shall originate from any of the individuals from the Company
set forth on Schedule 3 (with a copy to each of the other
individuals from the Company listed on such schedule), and shall be
addressed to each of the individuals from the Agent set forth on
Schedule 3, as such Schedule 3 may be amended from time to time.
The Placement Notice shall be effective unless and until
(i) the Agent declines to accept the terms contained therein
for any reason, in its sole discretion, (ii) the entire amount
of the Placement Shares thereunder have been sold, (iii) the
Company suspends or terminates the Placement Notice or
(iv) the Agreement has been terminated under the provisions of
Section 12. The amount of any discount, commission or other
compensation to be paid by the Company to Agent in connection with
the sale of the Placement Shares shall be calculated in accordance
with the terms set forth in Schedule 2. It is expressly
acknowledged and agreed that neither the Company nor the Agent will
have any obligation whatsoever with respect to a Placement or any
Placement Shares unless and until the Company delivers a Placement
Notice to the Agent and the Agent does not decline such Placement
Notice pursuant to the terms set forth above, and then only upon
the terms specified therein and herein. In the event of a conflict
between the terms of this Agreement and the terms of a Placement
Notice, the terms of the Placement Notice will
control.

 



 

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3. Sale of Placement Shares by
Agent. Subject to the provisions of Section 5(a), the Agent, for the period
specified in the Placement Notice, will use its commercially
reasonable efforts consistent with its normal trading and sales
practices and applicable state and federal laws, rules and
regulations and the rules of The NASDAQ Stock Market LLC (the
“Exchange”), to sell the
Placement Shares up to the amount specified, and otherwise in
accordance with the terms of such Placement Notice. The Agent will
provide written confirmation to the Company no later than the
opening of the Trading Day (as defined below) immediately following
the Trading Day on which it has made sales of Placement Shares
hereunder setting forth the number of Placement Shares sold on such
day, the compensation payable by the Company to the Agent pursuant
to Section 2 with respect to such sales,
and the Net Proceeds (as defined below) payable to the Company,
with an itemization of the deductions made by the Agent (as set
forth in Section 5(b)) from the gross proceeds
that it receives from such sales. Subject to the terms of the
Placement Notice, the Agent may sell Placement Shares by any method
permitted by law deemed to be an “at the market
offering” as defined in Rule 415 of the Securities
Act.

 



4. Suspension of
Sales.

 


(a) The Company or the
Agent may, upon notice to the other party in writing (including by
email correspondence to each of the individuals of the other party
set forth on Schedule 3, if receipt of such correspondence is
actually acknowledged by any of the individuals to whom the notice
is sent, other than via auto-reply) or by telephone (confirmed
immediately by verifiable facsimile transmission or email
correspondence to each of the individuals of the other party set
forth on Schedule 3), suspend any sale of Placement Shares;
provided, however, that such suspension shall not affect or impair
any party’s obligations with respect to any Placement Shares
sold hereunder prior to the receipt of such notice. Each party
agrees that no such notice under this Section 4 shall be
effective against any other party unless it is made to one of the
individuals named on Schedule 3 hereto, as such Schedule may be
amended from time to time.

 


(b) Notwithstanding any
other provision of this Agreement, during any period in which the
Company is in possession of material non-public information, the
Company and the Agent agree that (i) no sale of Placement Shares
will take place, (ii) the Company shall not request the sale of any
Placement Shares, and (iii) the Agent shall not be obligated to
sell or offer to sell any Placement Shares.

 



5. Sale and Delivery to the Agent;
Settlement.

 


(a) 
Sale of
Placement Shares. On
the basis of the representations and warranties herein contained
and subject to the terms and conditions herein set forth, upon the
Agent’s acceptance of the terms of a Placement Notice, and
unless the sale of the Placement Shares described therein has been
declined, suspended, or otherwise terminated in accordance with the
terms of this Agreement, the Agent, for the period specified in the
Placement Notice, will use its commercially reasonable efforts
consistent with its normal trading and sales practices to sell such
Placement Shares up to the amount specified in such Placement
Notice, and otherwise in accordance with the terms of such
Placement Notice. The Company acknowledges and agrees that
(i) there can be no assurance that the Agent will be
successful in selling Placement Shares, (ii) the Agent will
incur no liability or obligation to the Company or any other person
or entity if it does not sell Placement Shares for any reason other
than a failure by the Agent to use its commercially reasonable
efforts consistent with its normal trading and sales practices and
applicable law and regulations to sell such Placement Shares as
required under this Agreement and (iii) the Agent shall be
under no obligation to purchase Placement Shares on a principal
basis pursuant to this Agreement, except as otherwise agreed by the
Agent and the Company.

 



 

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(b) 
Settlement of Placement
Shares. Unless
otherwise specified in the applicable Placement Notice, settlement
for sales of Placement Shares will occur on the second
(2nd) Trading Day
(or such earlier day as is industry practice for regular-way
trading) following the date on which such sales are made (each, a
“Settlement
Date”). The amount of proceeds to be delivered to the
Company on a Settlement Date against receipt of the Placement
Shares sold (the “Net Proceeds”) will be
equal to the aggregate sales price received by the Agent, after
deduction for (i) the Agent’s commission, discount or
other compensation for such sales payable by the Company pursuant
to Section 2 hereof, and (ii) any transaction fees
imposed by any governmental or self-regulatory organization in
respect of such sales.

 


(c) Delivery of Placement Shares.
On each Settlement Date, against payment of the Net Proceeds, the
Company will, or will cause its transfer agent to, electronically
transfer the Placement Shares being sold by crediting the
Agent’s or its designee’s account (provided the Agent
shall have given the Company written notice of such designee prior
to the Settlement Date) at The Depository Trust Company through its
Deposit and Withdrawal at Custodian System or by such other means
of delivery as may be mutually agreed upon by the parties hereto
which in all cases shall be freely tradable, transferable,
registered shares in good deliverable form. On each Settlement
Date, the Agent will deliver the related Net Proceeds in same day
funds to an account designated by the Company on, or prior to, the
Settlement Date. The Company agrees that if the Company, or its
transfer agent (if applicable), defaults in its obligation to
deliver Placement Shares on a Settlement Date, the Company agrees
that in addition to and in no way limiting the rights and
obligations set forth in Section 10(a) hereto, it will
(i) hold the Agent harmless against any loss, claim, damage,
or expense (including reasonable legal fees and expenses), as
incurred, arising out of or in connection with such default by the
Company or its transfer agent (if applicable) and (ii) pay to
the Agent any commission, discount, or other compensation to which
it would otherwise have been entitled absent such
default.

 


(d) Limitations on Offering
Size. Under no
circumstances shall the Company cause or request the offer or sale
of any Placement Shares if, after giving effect to the sale of such
Placement Shares, the aggregate gross sales proceeds of Placement
Shares sold pursuant to this Agreement would exceed the lesser of
(A) together with all sales of Placement Shares under this
Agreement, the Maximum Amount, (B) the amount available for
offer and sale under the Registration Statement and (C) the
amount authorized from time to time to be issued and sold under
this Agreement by the Company’s board of directors, a duly
authorized committee thereof or a duly authorized executive
committee, and notified to the Agent in writing. Under no
circumstances shall the Company cause or request the offer or sale
of any Placement Shares pursuant to this Agreement at a price lower
than the minimum price authorized from time to time by the
Company’s board of directors, duly authorized committee
thereof or a duly authorized executive committee, and notified to
the Agent in writing. Further, under no circumstances shall the
Company cause or permit the aggregate offering amount of Placement
Shares sold pursuant to this Agreement to exceed the Maximum
Amount.

 



 

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6. Representations and Warranties of the
Company. Except as disclosed in the Registration Statement
or Prospectus (including the Incorporated Documents), the Company
represents and warrants to, and agrees with the Agent that as of
the date of this Agreement and as of each Applicable Time (as
defined below), unless such representation, warranty or agreement
specifies a different date or time:

 


(a) Registration Statement and
Prospectus. The Company and the transactions contemplated by
this Agreement meet the requirements for and comply with the
conditions for the use of Form S-3 under the Securities Act. The
Registration Statement has been filed with the Commission and
declared effective under the Securities Act. The Prospectus
Supplement will name the Agent as the agent in the section entitled
“Plan of Distribution.” The Company has not received,
and has no notice of, any order of the Commission preventing or
suspending the use of the Registration Statement, or threatening or
instituting proceedings for that purpose. The Registration
Statement and the offer and sale of Placement Shares as
contemplated hereby meet the requirements of Rule 415 under
the Securities Act and comply in all material respects with said
Rule. Any statutes, regulations, contracts or other documents that
are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
have been so described or filed. Copies of the Registration
Statement, the Prospectus, and any such amendments or supplements
and all documents incorporated by reference therein that were filed
with the Commission on or prior to the date of this Agreement have
been delivered, or are available through EDGAR, to Agent and its
counsel. The Company has not distributed and, prior to the later to
occur of each Settlement Date and completion of the distribution of
the Placement Shares, will not distribute any offering material in
connection with the offering or sale of the Placement Shares other
than the Registration Statement and the Prospectus and any Issuer
Free Writing Prospectus to which Agent has consented. The Company
has not, in the 12 months preceding the date hereof, received
notice from the Exchange to the effect that the Company is not in
compliance with the listing or maintenance
requirements.

 


(b) No Misstatement or
Omission. The Registration Statement, when it became or
becomes effective, and the Prospectus, and any amendment or
supplement thereto, on the date of such Prospectus or amendment or
supplement, conformed and will conform in all material respects
with the requirements of the Securities Act. At each Settlement
Date, the Registration Statement and the Prospectus, as of such
date, will conform in all material respects with the requirements
of the Securities Act. The Registration Statement, when it became
or becomes effective, did not, and will not, contain an untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading. The Prospectus and any amendment or
supplement thereto, on the date thereof and at each Applicable Time
(defined below), did not and will not include an untrue statement
of a material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading. The Incorporated Documents
did not, and any further documents filed and incorporated by
reference therein will not, when filed with the Commission, contain
an untrue statement of a material fact or omit to state a material
fact required to be stated in such document or necessary to make
the statements in such document, in light of the circumstances
under which they were made, not misleading. The foregoing shall not
apply to statements in, or omissions from, any such document made
in reliance upon, and in conformity with, information furnished to
the Company by Agent specifically for use in the preparation
thereof.

 



 

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(c) Conformity with Securities Act and
Exchange Act. The Registration Statement, the Prospectus,
any Issuer Free Writing Prospectus or any amendment or supplement
thereto, and the Incorporated Documents, when such documents were
or are filed with the Commission under the Securities Act or the
Exchange Act or became or become effective under the Securities
Act, as the case may be, conformed and will conform in all material
respects with the requirements of the Securities Act and the
Exchange Act, as applicable.

 


(d) Financial Information. The
financial statements of the Company included or incorporated by
reference in the Registration Statement, the Prospectus and the
Issuer Free Writing Prospectuses, if any, together with the related
notes and schedules, present fairly, in all material respects, the
financial position of the Company as of the dates indicated and the
results of operations, cash flows and changes in
stockholders’ equity of the Company for the periods specified
and have been prepared in compliance with the requirements of the
Securities Act and Exchange Act and in conformity with generally
accepted accounting principles in the United States
(“GAAP”) applied on a
consistent basis (except for (i) such adjustments to
accounting standards and practices as are noted therein,
(ii) in the case of unaudited interim financial statements, to
the extent such financial statements may not include footnotes
required by GAAP or may be condensed or summary statements and
(iii) such adjustments which will not be material, either
individually or in the aggregate) during the periods involved; the
other financial and statistical data with respect to the Company
contained or incorporated by reference in the Registration
Statement, the Prospectus and the Issuer Free Writing Prospectuses,
if any, are accurately and fairly presented and prepared on a basis
consistent with the financial statements and books and records of
the Company; there are no financial statements (historical or pro
forma) that are required to be included or incorporated by
reference in the Registration Statement, or the Prospectus that are
not included or incorporated by reference as required; the Company
does not have any material liabilities or obligations, direct or
contingent (including any off-balance sheet obligations), not
described in the Registration Statement(excluding the exhibits
thereto), and the Prospectus; and all disclosures contained or
incorporated by reference in the Registration Statement, the
Prospectus and the Issuer Free Writing Prospectuses, if any,
regarding “non-GAAP financial measures” (as such term
is defined by the rules and regulations of the Commission) comply
in all material respects with Regulation G of the Exchange Act and
Item 10 of Regulation S-K under the Securities Act, to the
extent applicable.

 


(e) Conformity with EDGAR Filing.
The Prospectus delivered to the Agent for use in connection with
the sale of the Placement Shares pursuant to this Agreement will be
identical to the versions of the Prospectus created to be
transmitted to the Commission for filing via EDGAR, except to the
extent permitted by Regulation S-T.

 


(f) Organization. The Company is
duly organized, validly existing as a corporation and in good
standing under the laws of its jurisdiction of organization. The
Company is, and will be, duly licensed or qualified as a foreign
corporation for transaction of business and in good standing under
the laws of each other jurisdiction in which its ownership or lease
of property or the conduct of its business requires such license or
qualification, and has all corporate power and authority necessary
to own or hold its properties and to conduct its business as
described in the Registration Statement and the Prospectus, except
where the failure to be so qualified or in good standing or have
such power or authority would not, individually or in the
aggregate, have a material adverse effect on or affecting the
assets, business, operations, earnings, properties, condition
(financial or otherwise), prospects, stockholders’ equity or
results of operations of the Company or prevent or materially
interfere with consummation of the transactions contemplated hereby
(a “Material Adverse
Effect”).

 



 

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(g) Subsidiaries. The Company does
not own or control, directly or indirectly, any corporation,
association or other entity other than the subsidiaries listed in
Exhibit 21.1 to the Company’s Annual Report on Form 10-K for
the most recently ended fiscal year The Company owns directly or
indirectly, all of the equity interests of its subsidiaries free
and clear of any lien, charge, security interest, encumbrance,
right of first refusal or other restriction, and all the equity
interests of its subsidiaries are validly issued and are fully
paid, non-assessable and free of preemptive and similar
rights.

 


(h) No Violation or Default.
The Company is not (i) in violation of its charter or by-laws
or similar organizational documents; (ii) in default, and no
event has occurred that, with notice or lapse of time or both,
would constitute such a default, in the due performance or
observance of any term, covenant or condition contained in any
indenture, mortgage, deed of trust, loan agreement or other
agreement or instrument to which the Company is a party or by which
the Company is bound or to which any of the property or assets of
the Company is subject; or (iii) in violation of any law or
statute or any judgment, order, rule or regulation of any court or
arbitrator or governmental or regulatory authority, except, in the
case of each of clauses (ii) and (iii) above, for any
such violation or default that would not, individually or in the
aggregate, have a Material Adverse Effect. To the Company’s
knowledge, no other party under any material contract or other
agreement to which it is a party is in default in any respect
thereunder where such default would have a Material Adverse
Effect.

 


(i) No Material Adverse
Effect. Subsequent to the respective dates as of which
information is given in the Registration Statement, the Prospectus
and the Issuer Free Writing Prospectuses, if any, (including any
document deemed incorporated by reference therein), there has not
been (i) any Material Adverse Effect, (ii) any
transaction which is material to the Company, (iii) any
obligation or liability, direct or contingent (including any
off-balance sheet obligations), incurred by the Company which is
material to the Company, (iv) any material change in the
capital stock or outstanding long-term indebtedness (other than
(A) the grant of additional awards under equity incentive
plans, (B) changes in the number of outstanding Common Stock
due to the issuance of shares upon exercise or conversion of
securities exercisable for or convertible into Common Stock
outstanding on the date hereof, (C) any repurchase of capital
stock of the Company, (D) as a result of the sale of Placement
Shares, or (E) other than as publicly reported or announced),
or (v) any dividend or distribution of any kind declared, paid
or made on the capital stock of the Company other than in each case
above in the ordinary course of business or as otherwise disclosed
in the Registration Statement or Prospectus (including any document
deemed incorporated by reference therein).

 


(j) Capitalization. The issued and
outstanding shares of capital stock of the Company have been
validly issued, are fully paid and non-assessable and, other than
as disclosed in the Registration Statement or the Prospectus, are
not subject to any preemptive rights, rights of first refusal or
similar rights. The Company has an authorized, issued and
outstanding capitalization as set forth in the Registration
Statement and the Prospectus as of the dates referred to therein
(other than the grant of additional options and restricted stock
units under the Company’s existing stock option plans, or
changes in the number of outstanding shares of Common Stock of the
Company due to the issuance of shares upon the exercise or
conversion of securities exercisable for, or convertible into,
Common Stock outstanding on the date hereof) and such authorized
capital stock conforms to the description thereof set forth in the
Registration Statement and the Prospectus. The description of the
securities of the Company in the Registration Statement and the
Prospectus is complete and accurate in all material respects. As of
the date referred to therein, the Company does not have outstanding
any options to purchase, or any rights or warrants to subscribe
for, or any securities or obligations convertible into, or
exchangeable for, or any contracts or commitments to issue or sell,
any shares of capital stock or other securities.

 



 

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(k) Authorization; Enforceability.
The Company has full legal right, power and authority to enter into
this Agreement and perform the transactions contemplated hereby.
This Agreement has been duly authorized, executed and delivered by
the Company and is a legal, valid and binding agreement of the
Company enforceable in accordance with its terms, except
(i) to the extent that enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally and by general
equitable principles and (ii) the indemnification and
contribution provisions of Section 10 hereof may be limited by
federal or state securities laws and public policy considered in
respect thereof.

 


(l) Authorization of Placement
Shares. The Placement Shares, when issued and delivered
pursuant to the terms approved by the board of directors of the
Company or a duly authorized committee thereof, against payment
therefor as provided herein, will be duly and validly authorized
and issued and fully paid and non-assessable, free and clear of any
pledge, lien, encumbrance, security interest or other claim,
including any statutory or contractual preemptive rights, resale
rights, rights of first refusal or other similar rights, and will
be registered pursuant to Section 12 of the Exchange Act. The
Placement Shares, when issued, will conform in all material
respects to the description thereof set forth in or incorporated
into the Prospectus.

 


(m) No Consents Required.
No consent, approval, authorization, order, registration or
qualification of or with any court or arbitrator or governmental or
regulatory authority having jurisdiction over the Company is
required for the execution, delivery and performance by the Company
this Agreement, the issuance and sale by the Company of the
Placement Shares, except for such consents, approvals,
authorizations, orders and registrations or qualifications as may
be required under applicable state securities laws or by the
by-laws and rules of the Financial Industry Regulatory Authority
(“FINRA”) or the Exchange
in connection with the sale of the Placement Shares by the
Agent.

 


(n) No Preferential Rights.
(i) No person, as such term is defined in Rule 1-02 of
Regulation S-X promulgated under the Securities Act (each, a
“Person”), has the right,
contractual or otherwise, to cause the Company to issue or sell to
such Person any Common Stock or shares of any other capital stock
or other securities of the Company, (ii) no Person has any
preemptive rights, resale rights, rights of first refusal, or any
other rights (whether pursuant to a “poison pill”
provision or otherwise) to purchase any Common Stock or shares of
any other capital stock or other securities of the Company,
(iii) no Person has the right to act as an underwriter or as a
financial advisor to the Company in connection with the offer and
sale of Common Stock, and (iv) no Person has the right,
contractual or otherwise, to require the Company to register under
the Securities Act any Common Stock or shares of any other capital
stock or other securities of the Company, or to include any such
shares or other securities in the Registration Statement or the
offering contemplated thereby, whether as a result of the filing or
effectiveness of the Registration Statement or the sale of the
Placement Shares as contemplated thereby or otherwise.

 



 

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(o) Independent Public Accountant.
Briggs & Veselka Co. (the “Accountant”), whose
report on the financial statements of the Company is filed with the
Commission as part of the Company’s most recent Annual Report
on Form 10-K filed with the Commission and incorporated into the
Registration Statement and the Prospectus, are and, during the
periods covered by their report, were an independent registered
public accounting firm with respect to the Company within the
meaning of the Securities Act and the Public Company Accounting
Oversight Board (United States). To the Company’s knowledge,
the Accountant is not in violation of the auditor independence
requirements of the Sarbanes-Oxley Act of 2002 (the
“Sarbanes-Oxley
Act”) with respect to the Company.

 


(p) Enforceability of Agreements.
All agreements between the Company and third parties expressly
referenced in the Prospectus are legal, valid and binding
obligations of the Company enforceable in accordance with their
respective terms, except to the extent that (i) enforceability
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting creditors’ rights
generally and by general equitable principles and (ii) the
indemnification provisions of certain agreements may be limited be
federal or state securities laws or public policy considerations in
respect thereof, and except for any unenforceability that,
individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.

 


(q) No Litigation. There are
no legal, governmental or regulatory actions, suits or proceedings
pending, nor, to the Company’s knowledge, any legal,
governmental or regulatory investigations, to which the Company is
a party or to which any property of the Company is the subject
that, individually or in the aggregate, if determined adversely to
the Company would have a Material Adverse Effect or materially and
adversely affect the ability of the Company to perform its
obligations under this Agreement; to the Company’s knowledge,
no such actions, suits or proceedings are threatened or
contemplated by any governmental or regulatory authority or
threatened by others that individually or in the aggregate, if
determined adversely to the Company would have a Material Adverse
Effect; and (i) there are no current or pending legal,
governmental or regulatory investigations, actions, suits or
proceedings that are required under the Securities Act to be
described in the Prospectus that are not so described; and
(ii) there are no contracts or other documents that are
required under the Securities Act to be filed as exhibits to the
Registration Statement that are not so filed.

 


(r) Licenses and Permits. The
Company possesses or has obtained, all licenses, certificates,
consents, orders, approvals, permits and other authorizations
issued by, and have made all declarations and filings with, the
appropriate federal, state, local or foreign governmental or
regulatory authorities that are necessary for the ownership or
lease of their respective properties or the conduct of their
respective businesses as described in the Registration Statement
and the Prospectus (the “Permits”), except where
the failure to possess, obtain or make the same would not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. The Company has not received written
notice of any proceeding relating to revocation or modification of
any such Permit or has any reason to believe that such Permit will
not be renewed in the ordinary course, except where the failure to
obtain any such renewal would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.

 



 

9







 





 



(s) No Material Defaults. The
Company is not in default on any installment on indebtedness for
borrowed money or on any rental on one or more long-term leases,
which defaults, individually or in the aggregate, have a Material
Adverse Effect. The Company has not filed a report pursuant to
Section 13(a) or 15(d) of the Exchange Act since the filing of its
last Annual Report on Form 10-K, indicating that it (i) has failed
to pay any dividend or sinking fund installment on preferred stock
or (ii) has defaulted on any installment on indebtedness for
borrowed money or on any rental on one or more long-term leases,
which is continuing, which defaults, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect. All royalties, rentals, deposits and other amounts owed
under the oil and gas leases constituting the oil and gas
properties of the Company and its subsidiaries have been properly
and timely paid (other than amounts held in suspense accounts
pending routine payments or related to disputes about the proper
identification of royalty owners), and no amount of proceeds from
the sale or production attributable to the oil and gas properties
of the Company and its subsidiaries are currently being held in
suspense by any purchaser thereof, except where such amounts due
could not, individually or in the aggregate, have a Material
Adverse Effect. There are no claims under take-or-pay contracts
pursuant to which natural gas purchasers have any make-up rights
affecting the interests of the Company, and its subsidiaries in
their oil and gas properties, except where such claims could not,
individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.

 


(t) S-3 Eligibility. At the time
the Registration Statement was declared effective, and at the time
the Company’s most recent Annual Report on Form 10-K was
filed with the Commission, the Company met or will meet the then
applicable requirements for the use of Form S-3 under the
Securities Act, including, but not limited to, General Instruction
I.B.6 of Form S-3, if applicable. As of the close of trading on the
Exchange on July 15, 2020, the aggregate market value of the
outstanding voting and non-voting common equity (as defined in Rule
405) of the Company held by persons other than affiliates of the
Company (pursuant to Rule 144 of the Securities Act, those that
directly, or indirectly through one or more intermediaries,
control, or are controlled by, or are under common control with,
the Company) (the “Non-Affiliate Shares”),
was approximately $41.1 million (calculated by multiplying (x) the
price at which the common equity of the Company was last sold on
the Exchange on June 8, 2020 times (y) the number of Non-Affiliate
Shares). The Company is not a shell company (as defined in Rule 405
under the Securities Act) and has not been a shell company for at
least 12 calendar months previously and if it has been a shell
company at any time previously, has filed current Form 10
information (as defined in General Instruction I.B.6 of Form S-3)
with the Commission at least 12 calendar months previously
reflecting its status as an entity that is not a shell
company.

 


(u) Certain Market Activities.
Neither the Company nor, to the Company’s knowledge, any of
its directors, officers or controlling persons has taken, directly
or indirectly, any action designed, or that has constituted or
would reasonably be expected to cause or result in, under the
Exchange Act or otherwise, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of the Placement Shares.

 



 

10







 





 



(v) Broker/Dealer Relationships.
Neither the Company nor any related entities (i) is required
to register as a “broker” or “dealer” in
accordance with the provisions of the Exchange Act or
(ii) directly or indirectly through one or more
intermediaries, controls or is a “person associated with a
member” or “associated person of a member”
(within the meaning set forth in the FINRA Manual).

 


(w) No Reliance. The Company
has not relied upon the Agent or legal counsel for the Agent for
any legal, tax or accounting advice in connection with the offering
and sale of the Placement Shares.

 


(x) Taxes. The Company has filed or
has a valid extension of time to file all federal, state, local and
foreign tax returns which have been required to be filed and paid
all taxes shown thereon through the date hereof, to the extent that
such taxes have become due and are not being contested in good
faith. Except as otherwise disclosed in or contemplated by the
Registration Statement or the Prospectus, no tax deficiency has
been determined adversely to the Company which has had, or would
reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect. The Company has no knowledge of any
federal, state or other governmental tax deficiency, penalty or
assessment which has been or might be asserted or threatened
against it which reasonably would be expected to have a Material
Adverse Effect.

 


(y) Title to Real and Personal
Property. The Company has good and valid title in fee simple
to all items of real property and good and valid title to all
personal property described in the Registration Statement or
Prospectus as being owned by it that are material to the business
of the Company, in each case free and clear of all liens,
encumbrances and claims, except those that (i) do not
materially interfere with the use made and proposed to be made of
such property by the Company or (ii) would not reasonably
expected, individually or in the aggregate, to have a Material
Adverse Effect. Any real property described in the Registration
Statement or Prospectus as being leased by the Company is held by
it under valid, existing and enforceable leases, except those that
(A) do not materially interfere with the use made or proposed
to be made of such property by the Company or (B) would not be
reasonably expected to have a Material Adverse Effect.

 


(z) Intellectual Property. The
Company owns or possesses adequate enforceable rights to use all
patents, patent applications, trademarks (both registered and
unregistered), service marks, trade names, trademark registrations,
service mark registrations, copyrights, licenses and know-how
(including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures)
(collectively, the “Intellectual Property”),
necessary for the conduct of its business as conducted as of the
date hereof, except to the extent that the failure to own or
possess adequate rights to use such Intellectual Property would
not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect; the Company has not received any
written notice of any claim of infringement or conflict which
asserted Intellectual Property rights of others, which infringement
or conflict, if the subject of an unfavorable decision, would
result in a Material Adverse Effect; there are no pending, or to
the Company’s knowledge, threatened judicial proceedings or
interference proceedings against the Company challenging the
Company’s rights in or to or the validity of the scope of any
of the Company’s patents, patent applications or proprietary
information.

 



 

11







 





 



(aa) Environmental
Laws. The Company (i) is in compliance with any and all
applicable federal, state, local and foreign laws, rules,
regulations, decisions and orders relating to the protection of
human health and safety, the environment or hazardous or toxic
substances or wastes, pollutants or contaminants (collectively,
“Environmental
Laws”); (ii) has received and is in compliance
with all permits, licenses or other approvals required of it under
applicable Environmental Laws to conduct its businesses as
described in the Registration Statement and the Prospectus; and
(iii) has not received notice of any actual or potential
liability for the investigation or remediation of any disposal or
release of hazardous or toxic substances or wastes, pollutants or
contaminants, except, in the case of any of clauses (i),
(ii) or (iii) above, for any such failure to comply or
failure to receive required permits, licenses, other approvals or
liability as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse
Effect.

 


(bb) Disclosure
Controls. The Company maintains systems of internal controls
designed to provide reasonable assurance that (i) transactions
are executed in accordance with management’s general or
specific authorizations; (ii) transactions are recorded as
necessary to permit preparation of financial statements in
conformity with GAAP and to maintain asset accountability;
(iii) access to assets is permitted only in accordance with
management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences. The Company is not aware
of any material weaknesses in its internal control over financial
reporting (other than as set forth in the Prospectus). Since the
date of the latest audited financial statements of the Company
included in the Prospectus, there has been no change in the
Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect,
the Company’s internal control over financial reporting
(other than as set forth in the Prospectus). The Company has
established disclosure controls and procedures (as defined in
Exchange Act Rules 13a-15 and 15d-15) for the Company and designed
such disclosure controls and procedures to ensure that material
information relating to the Company is made known to the certifying
officers by others within those entities, particularly during the
period in which the Company’s Annual Report on Form 10-K or
Quarterly Report on Form 10-Q, as the case may be, is being
prepared. The Company’s certifying officers have evaluated
the effectiveness of the Company’s controls and procedures as
of a date within 90 days prior to the filing date of the Form 10-K
for the fiscal year most recently ended (such date, the
“Evaluation
Date”). The Company presented in its Form 10-K for the
fiscal year most recently ended the conclusions of the certifying
officers about the effectiveness of the disclosure controls and
procedures based on their evaluations as of the Evaluation Date.
Since the Evaluation Date, there have been no significant changes
in the Company’s internal controls (as such term is defined
in Item 307(b) of Regulation S-K under the Securities Act) or,
to the Company’s knowledge, in other factors that could
significantly affect the Company’s internal controls. To the
knowledge of the Company, the Company’s “internal
controls over financial reporting” and “disclosure
controls and procedures” are effective.

 


(cc) Sarbanes-Oxley.
The Company is not aware of any failure on the part of the Company
or any of the Company’s directors or officers, in their
capacities as such, to comply with any applicable provisions of the
Sarbanes-Oxley Act and the applicable rules and regulations
promulgated thereunder in all material respects. Each of the
principal executive officer and the principal financial officer of
the Company (or each former principal executive officer of the
Company and each former principal financial officer of the Company
as applicable) has made all certifications required by Sections 302
and 906 of the Sarbanes-Oxley Act with respect to all reports,
schedules, forms, statements and other documents required to be
filed by it or furnished by it to the Commission during the past 12
months. For purposes of the preceding sentence, “principal
executive officer” and “principal financial
officer” shall have the meanings given to such terms in the
Sarbanes-Oxley Act.

 



 

12







 





 



(dd) Finder’s
Fees. The Company has not incurred any liability for any
finder’s fees, brokerage commissions or similar payments in
connection with the transactions herein contemplated, except as may
otherwise exist with respect to Agent pursuant to this
Agreement.

 


(ee) Labor
Disputes. No labor disturbance by or dispute with
employees of the Company exists or, to the knowledge of the
Company, is threatened which would be reasonably likely to have a
Material Adverse Effect.

 


(ff) Investment
Company Act. The Company is not or after giving effect to
the offering and sale of the Placement Shares, will not be an
“investment company” or an entity
“controlled” by an “investment company,” as
such terms are defined in the Investment Company Act of 1940, as
amended (the “Investment Company
Act”).

 


(gg) Operations.
The operations of the Company are and have been conducted at all
times in compliance with applicable financial record keeping and
reporting requirements of the Currency and Foreign Transactions
Reporting Act of 1970, as amended, the money laundering statutes of
all jurisdictions to which the Company is subject, the rules and
regulations thereunder and any related or similar rules,
regulations or guidelines, issued, administered or enforced by any
governmental agency (collectively, the “Money Laundering Laws”),
except as would not have a Material Adverse Effect; and no action,
suit or proceeding by or before any court or governmental agency,
authority or body or any arbitrator involving the Company with
respect to the Money Laundering Laws is pending or, to the
knowledge of the Company, threatened.

 


(hh) Off-Balance
Sheet Arrangements. There are no transactions, arrangements
and other relationships between and/or among the Company, and/or,
to the knowledge of the Company, any of its affiliates and any
unconsolidated entity, including, but not limited to, any
structural finance, special purpose or limited purpose entity
(each, an “Off
Balance Sheet Transaction”) that could reasonably be
expected to affect materially the Company’s liquidity or the
availability of or requirements for its capital resources,
including those Off Balance Sheet Transactions described in the
Commission’s Statement about Management’s Discussion
and Analysis of Financial Conditions and Results of Operations
(Release Nos. 33-8056; 34-45321; FR-61), required to be described
in the Prospectus which have not been described as
required.

 


(ii) Underwriter
Agreements. Other than with respect to this Agreement, the
Company is not a party to any agreement with an agent or
underwriter for any other “at the market” or continuous
equity transaction.

 



 

13







 





 



(jj) ERISA.
To the knowledge of the Company, each material employee benefit
plan, within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
(“ERISA”), that is
maintained, administered or contributed to by the Company or any of
its affiliates for employees or former employees of the Company has
been maintained in material compliance with its terms and the
requirements of any applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Internal
Revenue Code of 1986, as amended (the “Code”); no prohibited
transaction, within the meaning of Section 406 of ERISA or
Section 4975 of the Code, has occurred which would result in a
material liability to the Company with respect to any such plan
excluding transactions effected pursuant to a statutory or
administrative exemption; and for each such plan that is subject to
the funding rules of Section 412 of the Code or
Section 302 of ERISA, no “accumulated funding
deficiency” as defined in Section 412 of the Code has
been incurred, whether or not waived, and the fair market value of
the assets of each such plan (excluding for these purposes accrued
but unpaid contributions) exceeds the present value of all benefits
accrued under such plan determined using reasonable actuarial
assumptions.

 


(kk) Forward
Looking Statements. No forward-looking statement
(within the meaning of Section 27A of the Securities Act and
Section 21E of the Exchange Act) (a “Forward Looking
Statement”) contained in the Registration Statement
and the Prospectus has been made or reaffirmed without a reasonable
basis or has been disclosed other than in good faith. The Forward
Looking Statements incorporated by reference in the Registration
Statement and the Prospectus from the Company’s Annual Report
on Form 10-K for the fiscal year most recently ended (i) are
within the coverage of the safe harbor for forward looking
statements set forth in Section 27A of the Securities Act,
Rule 175(b) under the Securities Act or Rule 3b-6 under the
Exchange Act, as applicable, (ii) were made by the Company
with a reasonable basis and in good faith and reflect the
Company’s good faith commercially reasonable best estimate of
the matters described therein, and (iii) have been prepared in
accordance with Item 10 of Regulation S-K under the Securities
Act.

 


(ll) Agent
Purchases. The Company acknowledges and agrees that Agent
has informed the Company that the Agent may, to the extent
permitted under the Securities Act and the Exchange Act, purchase
and sell Common Stock for its own account while this Agreement is
in effect, provided, that (i) no such purchase or sales shall
take place while a Placement Notice is in effect (except to the
extent each Agent may engage in sales of Placement Shares purchased
or deemed purchased from the Company as a “riskless
principal” or in a similar capacity) and (ii) the
Company shall not be deemed to have authorized or consented to any
such purchases or sales by the Agent.

 


(mm) Margin
Rules. Neither the issuance, sale and delivery of the
Placement Shares nor the application of the proceeds thereof by the
Company as described in the Registration Statement and the
Prospectus will violate Regulation T, U or X of the Board of
Governors of the Federal Reserve System or any other regulation of
such Board of Governors.

 


(nn) Insurance.
The Company carries, or is covered by, insurance in such amounts
and covering such risks as the Company reasonably believes is
adequate for the conduct of its business and as is customary for
companies engaged in similar businesses in similar
industries.

 



 

14







 





 



(oo) No Improper
Practices. (i) Neither the Company, nor to the
Company’s knowledge, any of its executive officers has, in
the past five years, made any unlawful contributions to any
candidate for any political office (or failed fully to disclose any
contribution in violation of law) or made any contribution or other
payment to any official of, or candidate for, any federal, state,
municipal, or foreign office or other person charged with similar
public or quasi-public duty in violation of any law or of the
character required to be disclosed in the Prospectus; (ii) no
relationship, direct or indirect, exists between or among the
Company or, to the Company’s knowledge, any affiliate of the
Company, on the one hand, and the directors, officers and
stockholders of the Company, that is required by the Securities Act
to be described in the Registration Statement and the Prospectus
that is not so described; (iii) no relationship, direct or
indirect, exists between or among the Company, or any affiliate of
the Company, on the one hand, and the directors, officers,
stockholders or directors of the Company that is required by the
rules of FINRA to be described in the Registration Statement and
the Prospectus that is not so described; (iv) there are no
material outstanding loans or advances or material guarantees of
indebtedness by the Company to or for the benefit of any of its
officers or directors or any of the members of the families of any
of them; (v) the Company has not offered, or caused any placement
agent to offer, Common Stock to any person with the intent to
influence unlawfully (A) a customer or supplier of the Company
to alter the customer’s or supplier’s level or type of
business with the Company or (B) a trade journalist or
publication to write or publish favorable information about the
Company or any of its products or services, and, (vi) neither
the Company nor, to the Company’s knowledge, any employee or
agent of the Company has made any payment of funds of the Company
or received or retained any funds in violation of any law, rule or
regulation (including, without limitation, the Foreign Corrupt
Practices Act of 1977, which payment, receipt or retention of funds
is of a character required to be disclosed in the Registration
Statement or the Prospectus).

 


(pp) Compliance
with Applicable Laws. The Company has not been advised, and
has no reason to believe, that it and each of its subsidiaries are
not conducting business in compliance with all applicable laws,
rules and regulations of the jurisdictions in which it is
conducting business, except where failure to be so in compliance
would not result in a Material Adverse Effect.

 


(qq) Status
Under the Securities Act. The Company was not and is not an
ineligible issuer as defined in Rule 405 under the Securities Act
at the times specified in Rules 164 and 433 under the Securities
Act in connection with the offering of the Placement
Shares.

 


(rr) No Misstatement
or Omission in an Issuer Free Writing Prospectus. Each
Issuer Free Writing Prospectus, as of its issue date and as of each
Applicable Time (as defined in Section 24 below), did not, does not
and will not include any information that conflicted, conflicts or
will conflict with the information contained in the Registration
Statement or the Prospectus, including any incorporated document
deemed to be a part thereof that has not been superseded or
modified. The foregoing sentence does not apply to statements in or
omissions from any Issuer Free Writing Prospectus based upon and in
conformity with written information furnished to the Company by the
Agent specifically for use therein.

 


(ss) No Conflicts.
Neither the execution of this Agreement, nor the issuance, offering
or sale of the Placement Shares, nor the consummation of any of the
transactions contemplated herein and therein, nor the compliance by
the Company with the terms and provisions hereof and thereof will
conflict with, or will result in a breach of, any of the terms and
provisions of, or has constituted or will constitute a default
under, or has resulted in or will result in the creation or
imposition of any lien, charge or encumbrance upon any property or
assets of the Company pursuant to the terms of any contract or
other agreement to which the Company may be bound or to which any
of the property or assets of the Company is subject, except
(i) such conflicts, breaches or defaults as may have been
waived and (ii) such conflicts, breaches and defaults that
would not have a Material Adverse Effect; nor will such action
result (x) in any violation of the provisions of the
organizational or governing documents of the Company, or
(y) in any material violation of the provisions of any statute
or any order, rule or regulation applicable to the Company or of
any court or of any federal, state or other regulatory authority or
other government body having jurisdiction over the
Company.

 



 

15







 





 



(tt) OFAC. Neither the Company or
any director, officer, agent, employee, affiliate or representative
of the Company is a Person that is, or is owned or controlled by a
Person that is, currently subject to any U.S. sanctions
administered by the Office of Foreign Assets Control of the U.S.
Department of the Treasury (“OFAC”), the United
Nations Security Council, the European Union, Her Majesty’s
Treasury, or other relevant sanctions authority (collectively,
“Sanctions”), nor located,
organized or resident in a country or territory that is the subject
of Sanctions; provided, however, that for the purposes of this
paragraph (tt), no Person shall be an affiliate of the Company
solely by reason of owning less than a majority of any class of
voting securities of the Company. The Company will not directly or
indirectly use the proceeds of the offering of the Securities
hereunder, or lend, contribute or otherwise make available such
proceeds to any subsidiary, joint venture partner or other Person,
for the purpose of financing the activities of any Person currently
subject to any U.S. sanctions administered by OFAC. The Company
represents and covenants that, except as detailed in the
Prospectus, for the past 5 years, the Company has not knowingly
engaged in, is not now knowingly engaged in, and will not engage
in, any dealings or transactions with any Person, or in any country
or territory, that at the time of the dealing or transaction is or
was the subject of Sanctions.

 


(uu) Stock
Transfer Taxes. On each Settlement Date, all stock transfer
or other taxes (other than income taxes) which are required to be
paid in connection with the sale and transfer of the Placement
Shares to be sold hereunder will be, or will have been, fully paid
or provided for by the Company and all laws imposing such taxes
will be or will have been fully complied with.

 


(vv) Reserve
Reports. The information underlying the estimates of the
reserves of the Company and its subsidiaries, which was supplied to
the Company by PeTech Enterprises, Inc. (the “Reserve Engineer”), for
purposes of preparing the reserve reports incorporated by reference
into the Registration Statement and the Prospectus (the
“Reserve
Reports”), including production and costs of operation
and estimates of future capital expenditures and other future
exploration and development costs, was true and correct in all
material respects on the dates such estimates were made, and such
information was supplied and prepared in good faith, with a
reasonable basis and in accordance with customary industry
practices; other than normal production of the reserves, the impact
of changes in prices and costs, and fluctuations in demand for oil
and natural gas, and except as disclosed in or contemplated by each
of the Registration Statement and the Prospectus, the Company is
not aware of any facts or circumstances that would in the aggregate
result in a material adverse change in the aggregate net proved
reserves, or the aggregate present value or the standardized
measure of the future net cash flows therefrom, as of the date of
the Reserve Reports, as described in each of the Registration
Statement and the Prospectus and as reflected in the Reserve
Reports; and the estimates of such reserves and the standardized
measure of such reserves as described in each of the Registration
Statement and the Prospectus and reflected in the Reserve Reports
referenced therein have been prepared in good faith and in a manner
that complies with the applicable requirements of the rules under
the Securities Act with respect to such estimates. The Reserve
Engineer was, as of the respective dates of the Reserve Reports
prepared by it, and is, as of the date hereof, an independent
petroleum engineer with respect to the Company and its
subsidiaries.

 



 

16







 





 



Any
certificate signed by an officer of the Company and delivered to
the Agent or to counsel for the Agent pursuant to or in connection
with this Agreement shall be deemed to be a representation and
warranty by the Company, as applicable, to the Agent as to the
matters set forth therein.

 



7. Covenants of the Company. The
Company covenants and agrees with Agent that:

 


(a) 
Registration Statement
Amendments. After the date of this Agreement and during any
period in which a Prospectus relating to any Placement Shares is
required to be delivered by Agent under the Securities Act
(including in circumstances where such requirement may be satisfied
pursuant to Rule 172 under the Securities Act) (the
“Prospectus Delivery
Period”) (i) the Company will notify the Agent
promptly of the time when any subsequent amendment to the
Registration Statement, other than documents incorporated by
reference, has been filed with the Commission and/or has become
effective or any subsequent supplement to the Prospectus has been
filed and of any request by the Commission for any amendment or
supplement to the Registration Statement or Prospectus or for
additional information, (ii) the Company will prepare and file with
the Commission, promptly upon the Agent’s request, any
amendments or supplements to the Registration Statement or
Prospectus that, in such Agent’s reasonable opinion, may be
necessary or advisable in connection with the distribution of the
Placement Shares by the Agent (provided, however, that the failure
of the Agent to make such request shall not relieve the Company of
any obligation or liability hereunder, or affect the Agent’s
right to rely on the representations and warranties made by the
Company in this Agreement and provided, further, that the only
remedy the Agent shall have with respect to the failure to make
such filing shall be to cease making sales under this Agreement
until such amendment or supplement is filed); (iii) the Company
will not file any amendment or supplement to the Registration
Statement or Prospectus relating to the Placement Shares or a
security convertible into the Placement Shares unless a copy
thereof has been submitted to Agent within a reasonable period of
time before the filing and the Agent has not objected thereto
(provided, however, that (A) the failure of the Agent to make such
objection shall not relieve the Company of any obligation or
liability hereunder, or affect the Agent’s right to rely on
the representations and warranties made by the Company in this
Agreement and (B) the Company has no obligation to provide the
Agent any advance copy of such filing or to provide the Agent an
opportunity to object to such filing if the filing does not name
the Agent or does not relate to the transaction herein provided;
and provided, further, that the only remedy Agent shall have with
respect to the failure to by the Company to obtain such consent
shall be to cease making sales under this Agreement) and the
Company will furnish to the Agent at the time of filing thereof a
copy of any document that upon filing is deemed to be incorporated
by reference into the Registration Statement or Prospectus, except
for those documents available via EDGAR; and (iv) the Company will
cause each amendment or supplement to the Prospectus to be filed
with the Commission as required pursuant to the applicable
paragraph of Rule 424(b) of the Securities Act or, in the case of
any document to be incorporated therein by reference, to be filed
with the Commission as required pursuant to the Exchange Act,
within the time period prescribed (the determination to file or not
file any amendment or supplement with the Commission under this
Section 7(a), based on the Company’s reasonable opinion or
reasonable objections, shall be made exclusively by the
Company).

 



 

17







 





 





(b) Notice of Commission Stop
Orders. The Company will advise the Agent, promptly after it
receives notice or obtains knowledge thereof, of the issuance or
threatened issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement, of the suspension
of the qualification of the Placement Shares for offering or sale
in any jurisdiction, or of the initiation or threatening of any
proceeding for any such purpose; and it will promptly use its
commercially reasonable efforts to prevent the issuance of any stop
order or to obtain its withdrawal if such a stop order should be
issued. The Company will advise the Agent promptly after it
receives any request by the Commission for any amendments to the
Registration Statement or any amendment or supplements to the
Prospectus or any Issuer Free Writing Prospectus or for additional
information related to the offering of the Placement Shares or for
additional information related to the Registration Statement, the
Prospectus or any Issuer Free Writing Prospectus.

 


(c) Delivery of Prospectus; Subsequent
Changes. During the Prospectus Delivery Period, the Company
will comply with all requirements imposed upon it by the Securities
Act, as from time to time in force, and to file on or before their
respective due dates all reports and any definitive proxy or
information statements required to be filed by the Company with the
Commission pursuant to Sections 13(a), 13(c), 14, 15(d) or any
other provision of or under the Exchange Act. If the Company has
omitted any information from the Registration Statement pursuant to
Rule 430A under the Securities Act, it will use its best efforts to
comply with the provisions of and make all requisite filings with
the Commission pursuant to said Rule 430A and to notify the Agent
promptly of all such filings. If during the Prospectus Delivery
Period any event occurs as a result of which the Prospectus as then
amended or supplemented would include an untrue statement of a
material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances then
existing, not misleading, or if during the Prospectus Delivery
Period it is necessary to amend or supplement the Registration
Statement or Prospectus to comply with the Securities Act, the
Company will promptly notify Agent to suspend the offering of
Placement Shares during such period and the Company will promptly
amend or supplement the Registration Statement or Prospectus (at
the expense of the Company) so as to correct such statement or
omission or effect such compliance; provided, however, that the
Company may delay the filing of any amendment or supplement, if in
the judgment of the Company, it is in the best interests of the
Company.

 


(d) Listing of Placement Shares.
During the Prospectus Delivery Period, the Company will use its
commercially reasonable efforts to cause the Placement Shares to be
listed on the Exchange and to qualify the Placement Shares for sale
under the securities laws of such jurisdictions as Agent reasonably
designates and to continue such qualifications in effect so long as
required for the distribution of the Placement Shares; provided,
however, that the Company shall not be required in connection
therewith to qualify as a foreign corporation or dealer in
securities or file a general consent to service of process in any
jurisdiction.

 



 

18







 





 



(e) Delivery of Registration Statement and
Prospectus. The Company will furnish to the Agent and its
counsel (at the expense of the Company) copies of the Registration
Statement, the Prospectus (including all documents incorporated by
reference therein) and all amendments and supplements to the
Registration Statement or Prospectus that are filed with the
Commission during the Prospectus Delivery Period (including all
documents filed with the Commission during such period that are
deemed to be incorporated by reference therein), in each case as
soon as reasonably practicable and in such quantities as the Agent
may from time to time reasonably request and, at Agent’s
request, will also furnish copies of the Prospectus to each
exchange or market on which sales of the Placement Shares may be
made; provided, however, that the Company shall not be required to
furnish any document (other than the Prospectus) to the Agent to
the extent such document is available on EDGAR.

 


(f) Earnings Statement. The Company
will make generally available to its security holders as soon as
practicable, but in any event not later than 15 months after the
end of the Company’s current fiscal quarter, an earnings
statement covering a 12-month period that satisfies the provisions
of Section 11(a) and Rule 158 of the Securities
Act.

 


(g) Use of Proceeds. The Company
will use the Net Proceeds as described in the Prospectus in the
section entitled “Use of Proceeds.”

 


(h) Notice of Other Sales. Without
prior written notice to Agent, the Company will not, directly or
indirectly, offer to sell, sell, contract to sell, grant any option
to sell or otherwise dispose of any Common Stock (other than the
Placement Shares offered pursuant to this Agreement) or securities
convertible into or exchangeable for Common Stock, warrants or any
rights to purchase or acquire, Common Stock during the period
beginning on the date on which any Placement Notice is delivered to
Agent hereunder and ending on the second (2nd) Trading Day
immediately following the final Settlement Date with respect to
Placement Shares sold pursuant to such Placement Notice (or, if the
Placement Notice has been terminated or suspended prior to the sale
of all Placement Shares covered by a Placement Notice, the date of
such suspension or termination); and will not directly or
indirectly in any other “at the market” or continuous
equity transaction offer to sell, sell, contract to sell, grant any
option to sell or otherwise dispose of any Common Stock (other than
the Placement Shares offered pursuant to this Agreement) or
securities convertible into or exchangeable for Common Stock,
warrants or any rights to purchase or acquire, Common Stock prior
to the termination of this Agreement; provided, however, that such
restrictions will not be required in connection with the
Company’s issuance or sale of (i) Common Stock, restricted
stock units, options to purchase Common Stock or Common Stock
issuable upon the exercise of options, pursuant to any employee or
director stock option or benefits plan, stock ownership plan or
dividend reinvestment plan (but not Common Stock subject to a
waiver to exceed plan limits in its dividend reinvestment plan) of
the Company whether now in effect or hereafter implemented, (ii)
Common Stock issuable upon conversion of securities or the exercise
of warrants, options or other rights in effect or outstanding, and
disclosed in filings by the Company available on EDGAR or otherwise
in writing to the Agent, and (iii) Common Stock, or securities
convertible into or exercisable for Common Stock, offered and sold
in a negotiated transaction to vendors, customers, strategic
partners or potential strategic partners, acquisition candidates or
other investors conducted in a manner so as not to be integrated
with the offering of Common Stock hereby.

 



 

19







 





 



(i) Change of Circumstances. The
Company will, at any time during the pendency of a Placement Notice
advise the Agent promptly after it shall have received notice or
obtained knowledge thereof, of any information or fact that would
alter or affect in any material respect any opinion, certificate,
letter or other document required to be provided to the Agent
pursuant to this Agreement.

 


(j) Due Diligence Cooperation. The
Company will cooperate with any reasonable due diligence review
conducted by the Agent or its representatives in connection with
the transactions contemplated hereby, including, without
limitation, providing information and making available documents
and senior corporate officers, during regular business hours and at
the Company’s principal offices, as the Agent may reasonably
request.

 


(k) Required Filings Relating to Placement
of Placement Shares. The Company agrees that on such dates
as the Securities Act shall require, the Company will (i) file
a prospectus supplement with the Commission under the applicable
paragraph of Rule 424(b) under the Securities Act, which prospectus
supplement will set forth, within the relevant period, the amount
of Placement Shares sold through the Agent, the Net Proceeds to the
Company and the compensation payable by the Company to the Agent
with respect to such Placement Shares, and (ii) deliver such
number of copies of each such prospectus supplement to each
exchange or market on which such sales were effected as may be
required by the rules or regulations of such exchange or
market.

 



(l) 
Representation Dates;
Certificate. On the date of this Agreement and within five
(5) trading days of each time the Company (each date of filing
of one or more of the documents referred to in clauses
(i) through (iv) shall be a “Representation
Date”):

 


(i) files the
Prospectus relating to the Placement Shares or amends or
supplements (other than a prospectus supplement relating solely to
an offering of securities other than the Placement Shares), the
Registration Statement or the Prospectus relating to the Placement
Shares by means of a post-effective amendment, sticker, or
supplement but not by means of incorporation of documents by
reference into the Registration Statement or the Prospectus
relating to the Placement Shares;

 


(ii) files an annual report on Form
10-K under the Exchange Act (including any Form 10-K/A containing
amended financial information or a material amendment to the
previously filed Form 10-K);

 


(iii) files
a quarterly report on Form 10-Q under the Exchange Act;
or

 


(iv) files
a current report on Form 8-K containing amended financial
information (other than information “furnished”
pursuant to Items 2.02 or 7.01 of Form 8-K or to provide
disclosure pursuant to Item 8.01 of Form 8-K relating to the
reclassification of certain properties as discontinued operations
in accordance with Statement of Financial Accounting Standards
No. 144) under the Exchange Act;

 



 

20







 





 



the
Company shall furnish the Agent (but in the case of clause
(iv) above only if the Agent reasonably determines that the
information contained in such Form 8-K is material) with a
certificate, in the form attached hereto as Exhibit 7(l) (the “Representation Date
Certificate”); provided however, if no Placement
Notice is pending at such Representation Date, then before the
Company delivers a Placement Notice or the Agent sells any
Placement Shares, the Company shall provide the Agent with a
Representation Date Certificate. The requirement to provide a
Representation Date Certificate shall be waived for any
Representation Date occurring at a time at which no Placement
Notice is pending, which waiver shall continue until the earlier to
occur of the date the Company delivers a Placement Notice hereunder
(which for such calendar quarter shall be considered a
Representation Date) and the next occurring Representation Date;
provided, however, that such waiver shall not apply for any
Representation Date on which the Company files its annual report on
Form 10-K. Notwithstanding the foregoing, if the Company
subsequently decides to sell Placement Shares following a
Representation Date when the Company relied on such waiver and did
not provide the Agent with a Representation Date Certificate, then
before the Company delivers the Placement Notice or the Agent sells
any Placement Shares, the Company shall provide the Agent with a
Representation Date Certificate, dated the date of the Placement
Notice.

 


(m) 
Legal
Opinion. On the date of this Agreement, the Company shall
cause to be furnished to the Agent a written opinion and negative
assurance letter of Axelrod & Smith P.C. (“Company Counsel”), or
other counsel satisfactory to the Agent, in form and substance
satisfactory to Agent and its counsel. Thereafter, within five
(5) Trading Days of each Representation Date with respect to
which the Company is obligated to deliver a Representation Date
Certificate for which no waiver is applicable, the Company shall
cause to be furnished to the Agent a negative assurance letter of
Company Counsel in form and substance satisfactory to Agent and its
counsel; provided however, if no placement notice is pending at
such Representation Date, then before the Company delivers a
Placement Notice or the Agent sells any Placement Shares, the
Company shall provide the Agent with such negative assurance
letter; provided, further, that in lieu of such negative assurance
letter for subsequent periodic filings under the Exchange Act,
counsel may furnish the Agent with a letter (a “Reliance Letter”) to the
effect that the Agent may rely on a prior negative assurance letter
delivered under this Section 7(m) to the same extent as if it
were dated the date of such letter (except that statements in such
prior negative assurance letter shall be deemed to relate to the
Registration Statement and the Prospectus as amended or
supplemented as of the date of the Reliance Letter).

 


(n) 
Comfort
Letter. (1) On the date of this Agreement and
(2) within five (5) Trading Days of each Representation
Date on which the Company files its annual report on Form 10-K, as
contemplated by Section 7(l)(ii), with respect to which the
Company is obligated to deliver a certificate in the form attached
hereto as Exhibit
7(l) for which no
waiver is applicable, the Company shall cause its independent
accountants to furnish the Agent letters (the “Comfort Letters”), dated
the date the Comfort Letter is delivered, which shall meet the
requirements set forth in this Section 7(n); provided however,
if no placement notice is pending at such Representation Date, then
before the Company delivers a Placement Notice or the Agent sells
any Placement Shares, the Company shall provide the Agent with the
Comfort Letter; provided, further, that if requested by the Agent,
the Company shall cause a Comfort Letter to be furnished to the
Agent within ten (10) Trading Days of the date of occurrence
of any material transaction or event, including the restatement of
the Company’s financial statements. The Comfort Letter from
the Company’s independent accountants shall be in a form and
substance satisfactory to the Agent, (i) confirming that they
are an independent public accounting firm within the meaning of the
Securities Act and the Public Company Accounting Oversight Board,
(ii) stating, as of such date, the conclusions and findings of
such firm with respect to the financial information and other
matters ordinarily covered by accountants’ “comfort
letters” to underwriters in connection with registered public
offerings (the first such letter, the “Initial Comfort Letter”)
and (iii) updating the Initial Comfort Letter with any
information that would have been included in the Initial Comfort
Letter had it been given on such date and modified as necessary to
relate to the Registration Statement and the Prospectus, as amended
and supplemented to the date of such letter.

 



 

21







 





 



(o) Market Activities. The Company
will not, directly or indirectly, (i) take any action designed
to cause or result in, or that constitutes or might reasonably be
expected to constitute, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or
resale of Common Stock or (ii) sell, bid for, or purchase
Common Stock, or pay anyone any compensation for soliciting
purchases of the Placement Shares other than the
Agent.

 


(p) Investment Company Act. The
Company will conduct its affairs in such a manner so as to
reasonably ensure that it will not become, at any time prior to the
termination of this Agreement, an “investment company,”
as such term is defined in the Investment Company Act.

 


(q) No Offer to Sell. Other
than an Issuer Free Writing Prospectus approved in advance by the
Company and the Agent in its capacity as agent hereunder, neither
the Agent nor the Company (including its agents and
representatives, other than Agent in their capacity as such) will
make, use, prepare, authorize, approve or refer to any written
communication (as defined in Rule 405 under the Securities Act),
required to be filed with the Commission, that constitutes an offer
to sell or solicitation of an offer to buy Placement Shares
hereunder.

 


(r) Sarbanes-Oxley Act. The Company
will maintain and keep accurate books and records reflecting its
assets and maintain internal accounting controls in a manner
designed to provide reasonable assurance regarding the reliability
of financial reporting and the preparation of financial statements
for external purposes in accordance with GAAP and including those
policies and procedures that (i) pertain to the maintenance of
records that in reasonable detail accurately and fairly reflect the
transactions and dispositions of the assets of the Company,
(ii) provide reasonable assurance that transactions are
recorded as necessary to permit the preparation of the
Company’s consolidated financial statements in accordance
with GAAP, (iii) that receipts and expenditures of the Company
are being made only in accordance with management’s and the
Company’s directors’ authorization, and
(iv) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use or disposition of
the Company’s assets that could have a material effect on its
financial statements. The Company will use commercially reasonable
efforts to maintain such controls and other procedures, including,
without limitation, those required by Sections 302 and 906 of the
Sarbanes-Oxley Act, and the applicable regulations thereunder that
are designed to ensure that information required to be disclosed by
the Company in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the Commission’s rules
and forms, including, without limitation, controls and procedures
designed to ensure that information required to be disclosed by the
Company in the reports that it files or submits under the Exchange
Act is accumulated and communicated to the Company’s
management, including its principal executive officer and principal
financial officer, or persons performing similar functions, as
appropriate to allow timely decisions regarding required disclosure
and to ensure that material information relating to the Company is
made known to it by others within the Company, particularly during
the period in which such periodic reports are being
prepared.

 



 

22







 





 



8. 
Payment
of Expenses. The Company will pay all expenses incident to
the performance of its obligations under this Agreement, including
(i) the preparation, filing, including any fees required by
the Commission, and printing of the Registration Statement
(including financial statements and exhibits) as originally filed
and of each amendment and supplement thereto, in such number as the
Agent shall deem necessary, (ii) the printing and delivery to
the Agent of this Agreement and such other documents as may be
required in connection with the offering, purchase, sale, issuance
or delivery of the Placement Shares, (iii) the preparation,
issuance and delivery of the certificates, if any, for the
Placement Shares to the Agent, including any stock or other
transfer taxes and any capital duties, stamp duties or other duties
or taxes payable upon the sale, issuance or delivery of the
Placement Shares to the Agent, (iv) the fees and disbursements
of the counsel, accountants and other advisors to the Company,
(v) the reasonable out-of-pocket expenses of Agent, including
fees and disbursements of counsel to the Agent up to $50,000 (which
amount shall include all fees and disbursements of such counsel
described in clause (ix) below), (vi) the printing and
delivery to the Agent of copies of any Permitted Issuer Free
Writing Prospectus (defined below) and the Prospectus and any
amendments or supplements thereto in such number as the Agent shall
deem necessary, (vii) the preparation, printing and delivery
to the Agent of copies of the blue sky survey and any Canadian
“wrapper” and any supplements thereto, in such number
as the Agent shall deem necessary, (viii) the fees and
expenses of the transfer agent and registrar for the Common Stock,
(ix) the fees and expenses incident to any review by FINRA of
the terms of the sale of the Placement Shares, including fees and
expenses of counsel to the Agent, and (x) the fees and
expenses incurred in connection with the listing of the Placement
Shares on the Exchange.

 



9. Conditions to Agent’s
Obligations. The obligations of the Agent hereunder with
respect to a Placement will be subject to the continuing accuracy
and completeness of the representations and warranties made by the
Company herein, to the due performance by the Company of its
obligations hereunder, to the completion by the Agent of a due
diligence review satisfactory to it in its reasonable judgment, and
to the continuing satisfaction (or waiver by the Agent in its sole
discretion) of the following additional conditions:

 


(a) Registration Statement
Effective. The Registration Statement shall have become
effective and shall be available for the sale of all Placement
Shares contemplated to be issued by any Placement
Notice.

 


(b) No Material Notices. None
of the following events shall have occurred and be continuing:
(i) receipt by the Company of any request for additional
information from the Commission or any other federal or state
governmental authority during the period of effectiveness of the
Registration Statement, the response to which would require any
post-effective amendments or supplements to the Registration
Statement or the Prospectus; (ii) the issuance by the
Commission or any other federal or state governmental authority of
any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose;
(iii) receipt by the Company of any notification with respect
to the suspension of the qualification or exemption from
qualification of any of the Placement Shares for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose; or (iv) the occurrence of any event that makes
any material statement made in the Registration Statement or the
Prospectus or any material document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or
that requires the making of any changes in the Registration
Statement, the Prospectus or documents so that, in the case of the
Registration Statement, it will not contain any materially untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading and, that in the case of the Prospectus, it
will not contain any materially untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein, in the light of the
circumstances under which they were made, not
misleading.

 



 

23







 





 



(c) No Misstatement or Material
Omission. Agent shall not have advised the Company that the
Registration Statement or Prospectus, or any amendment or
supplement thereto, contains an untrue statement of fact that in
the Agent’s reasonable opinion is material, or omits to state
a fact that in the Agent’s reasonable opinion is material and
is required to be stated therein or is necessary to make the
statements therein not misleading.

 


(d) Material Changes. Except as
contemplated in the Prospectus, or disclosed in the Company’s
reports filed with the Commission, there shall not have been any
material adverse change, on a consolidated basis, in the authorized
capital stock of the Company or any Material Adverse Effect, or any
development that could reasonably be expected to cause a Material
Adverse Effect, or a downgrading in or withdrawal of the rating
assigned to any of the Company’s securities (other than asset
backed securities) by any rating organization or a public
announcement by any rating organization that it has under
surveillance or review its rating of any of the Company’s
securities (other than asset backed securities), the effect of
which, in the case of any such action by a rating organization
described above, in the reasonable judgment of the Agent (without
relieving the Company of any obligation or liability it may
otherwise have), is so material as to make it impracticable or
inadvisable to proceed with the offering of the Placement Shares on
the terms and in the manner contemplated in the
Prospectus.

 


(e) Representation Certificate. The
Agent shall have received the certificate required to be delivered
pursuant to Section 7(l) on or before the date on which
delivery of such certificate is required pursuant to
Section 7(l).

 


(f) Legal Opinion. The Agent shall
have received the opinions of Company Counsel required to be
delivered pursuant to Section 7(m) on or before the date on
which such delivery of such opinion is required pursuant to
Section 7(m).

 


(g) Comfort Letter. The Agent shall
have received the Comfort Letter required to be delivered pursuant
to Section 7(n) on or before the date on which such delivery
of such Comfort Letter is required pursuant to
Section 7(n).

 


(h) Secretary’s Certificate.
On the date of this Agreement, the Agent shall have received a
certificate, signed on behalf of the Company by its corporate
Secretary, in form and substance satisfactory to the Agent and its
counsel.

 


(i) No Suspension. Trading in
the Common Stock shall not have been suspended on the Exchange, and
the Common Stock shall not have been delisted from the
Exchange.

 



 

24







 





 



(j) Other Materials. On each date
on which the Company is required to deliver a certificate pursuant
to Section 7(l), the Company shall have furnished to the Agent
such appropriate further information, certificates and documents as
the Agent may reasonably request. All such opinions, certificates,
letters and other documents will be in compliance with the
provisions hereof. The Company will furnish the Agent with such
conformed copies of such opinions, certificates, letters and other
documents as the Agent shall reasonably request.

 


(k) Securities Act Filings Made.
All filings with the Commission required by Rule 424 under the
Securities Act to have been filed prior to the issuance of any
Placement Notice hereunder shall have been made within the
applicable time period prescribed for such filing by Rule
424.

 


(l) Approval for Listing. The
Placement Shares shall either have been approved for listing
quotation on the Exchange, subject only to notice of issuance, or
the Company shall have filed an application for listing quotation
of the Placement Shares on the Exchange at, or prior to, the
issuance of any Placement Notice.

 


(m) No Termination Event.
There shall not have occurred any event that would permit the Agent
to terminate this Agreement pursuant to
Section 12(a).

 



10. 
Indemnification and
Contribution.

 


(a) 
Company
Indemnification. The Company agrees to indemnify and hold
harmless the Agent, its partners, members, directors, officers,
employees and agents and each person, if any, who controls the
Agent within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act as follows:

 


(i) against any and all
loss, liability, claim, damage and expense whatsoever, as incurred,
joint or several, arising out of or based upon any untrue statement
or alleged untrue statement of a material fact contained in the
Registration Statement (or any amendment thereto), or the omission
or alleged omission therefrom of a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or arising out of any untrue statement or alleged
untrue statement of a material fact included in any related Issuer
Free Writing Prospectus or the Prospectus (or any amendment or
supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were
made, not misleading;

 


(ii) against
any and all loss, liability, claim, damage and expense whatsoever,
as incurred, joint or several, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 10(d) below) any
such settlement is effected with the written consent of the Agent,
which consent shall not unreasonably be delayed or withheld;
and

 



 

25







 





 



(iii) against
any and all expense whatsoever, as incurred (including the fees and
disbursements of counsel), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expense is not paid under
(i) or (ii) above, provided, however, that this indemnity
agreement shall not apply to any loss, liability, claim, damage or
expense to the extent arising out of any untrue statement or
omission or alleged untrue statement or omission made solely in
reliance upon and in conformity with written information furnished
to the Company by the Agent expressly for use in the Registration
Statement (or any amendment thereto), or in any related Issuer Free
Writing Prospectus or the Prospectus (or any amendment or
supplement thereto).

 


(b) Agent Indemnification. Agent
agrees to indemnify and hold harmless the Company and its directors
and each officer of the Company who signed the Registration
Statement, and each person, if any, who (i) controls the
Company within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act or (ii) is controlled
by or is under common control with the Company against any and all
loss, liability, claim, damage and expense described in the
indemnity contained in Section 10(a), as incurred, but only
with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Registration Statement (or any
amendments thereto) or the Prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with
information relating to the Agent and furnished to the Company in
writing by the Agent expressly for use therein.

 


(c) 
Procedure. Any party that
proposes to assert the right to be indemnified under this
Section 10 will, promptly after receipt of notice of
commencement of any action against such party in respect of which a
claim is to be made against an indemnifying party or parties under
this Section 10, notify each such indemnifying party of the
commencement of such action, enclosing a copy of all papers served,
but the omission so to notify such indemnifying party will not
relieve the indemnifying party from (i) any liability that it
might have to any indemnified party otherwise than under this
Section 10 and (ii) any liability that it may have to any
indemnified party under the foregoing provision of this
Section 10 unless, and only to the extent that, such omission
results in the forfeiture of substantive rights or defenses by the
indemnifying party. If any such action is brought against any
indemnified party and it notifies the indemnifying party of its
commencement, the indemnifying party will be entitled to
participate in and, to the extent that it elects by delivering
written notice to the indemnified party promptly after receiving
notice of the commencement of the action from the indemnified
party, jointly with any other indemnifying party similarly
notified, to assume the defense of the action, with counsel
reasonably satisfactory to the indemnified party, and after notice
from the indemnifying party to the indemnified party of its
election to assume the defense, the indemnifying party will not be
liable to the indemnified party for any legal or other expenses
except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in
connection with the defense. The indemnified party will have the
right to employ its own counsel in any such action, but the fees,
expenses and other charges of such counsel will be at the expense
of such indemnified party unless (1) the employment of counsel
by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably
concluded (based on written advice of counsel) that there may be
legal defenses available to it or other indemnified parties that
are different from or in addition to those available to the
indemnifying party, (3) a conflict or potential conflict
exists (based on written advice of counsel to the indemnified
party) between the indemnified party and the indemnifying party (in
which case the indemnifying party will not have the right to direct
the defense of such action on behalf of the indemnified party) or
(4) the indemnifying party has not in fact employed counsel to
assume the defense of such action within a reasonable time after
receiving notice of the commencement of the action, in each of
which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties
shall not, in connection with any proceeding or related proceedings
in the same jurisdiction, be liable for the reasonable fees,
disbursements and other charges of more than one separate firm
admitted to practice in such jurisdiction at any one time for all
such indemnified party or parties. All such fees, disbursements and
other charges will be reimbursed by the indemnifying party promptly
after the indemnifying party receives a written invoice relating to
fees, disbursements and other charges in reasonable detail. An
indemnifying party will not, in any event, be liable for any
settlement of any action or claim effected without its written
consent. No indemnifying party shall, without the prior
written consent of each indemnified party, settle or compromise or
consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated by
this Section 10 (whether or not any indemnified party is a
party thereto), unless such settlement, compromise or consent
(1) includes an unconditional release of each indemnified
party from all liability arising out of such litigation,
investigation, proceeding or claim and (2) does not include a
statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.

 



 

26







 





 



(d) 
Contribution. In order to
provide for just and equitable contribution in circumstances in
which the indemnification provided for in the foregoing paragraphs
of this Section 10 is applicable in accordance with its terms
but for any reason is held to be unavailable from the Company or
the Agent, the Company and the Agent will contribute to the total
losses, claims, liabilities, expenses and damages (including any
investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted, but after deducting any
contribution received by the Company from persons other than the
Agent, such as persons who control the Company within the meaning
of the Securities Act, officers of the Company who signed the
Registration Statement and directors of the Company, who also may
be liable for contribution) to which the Company and the Agent may
be subject in such proportion as shall be appropriate to reflect
the relative benefits received by the Company on the one hand and
the Agent on the other hand. The relative benefits received by the
Company on the one hand and the Agent on the other hand shall be
deemed to be in the same proportion as the total net proceeds from
the sale of the Placement Shares (before deducting expenses)
received by the Company bear to the total compensation received by
the Agent (before deducting expenses) from the sale of Placement
Shares on behalf of the Company. If, but only if, the allocation
provided by the foregoing sentence is not permitted by applicable
law, the allocation of contribution shall be made in such
proportion as is appropriate to reflect not only the relative
benefits referred to in the foregoing sentence but also the
relative fault of the Company, on the one hand, and the Agent, on
the other hand, with respect to the statements or omission that
resulted in such loss, claim, liability, expense or damage, or
action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault
shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to
information supplied by the Company or the Agent, the intent of the
parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The
Company and the Agent agree that it would not be just and equitable
if contributions pursuant to this Section 10(d) were to be
determined by pro rata allocation or by any other method of
allocation that does not take into account the equitable
considerations referred to herein. The amount paid or payable by an
indemnified party as a result of the loss, claim, liability,
expense, or damage, or action in respect thereof, referred to above
in this Section 10(d) shall be deemed to include, for the
purpose of this Section 10(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim to the extent
consistent with Section 10(c) hereof. Notwithstanding the
foregoing provisions of this Section 10(d), the Agent shall
not be required to contribute any amount in excess of the
commissions received by it under this Agreement and no person found
guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) will be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 10(d), any
person who controls a party to this Agreement within the meaning of
the Securities Act, and any officers, directors, partners,
employees or agents of the Agent, will have the same rights to
contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to
contribution as the Company, subject in each case to the provisions
hereof. Any party entitled to contribution, promptly after receipt
of notice of commencement of any action against such party in
respect of which a claim for contribution may be made under this
Section 10(d), will notify any such party or parties from whom
contribution may be sought, but the omission to so notify will not
relieve that party or parties from whom contribution may be sought
from any other obligation it or they may have under this
Section 10(d) except to the extent that the failure to so
notify such other party materially prejudiced the substantive
rights or defenses of the party from whom contribution is sought.
Except for a settlement entered into pursuant to the last sentence
of Section 10(c) hereof, no party will be liable for
contribution with respect to any action or claim settled without
its written consent if such consent is required pursuant to
Section 10(c) hereof.

 



 

27







 





 



11. 
Additional
Covenants.

 


(a) Representations and Covenants of the
Agent. The Agent represents and warrants that it is duly
registered as a broker-dealer under FINRA, the Exchange Act and the
applicable statutes and regulations of each state in which the
Placement Shares will be offered and sold, except such states in
which the Agent is exempt from registration or such registration is
not otherwise required. The Agent shall continue, for the term of
this Agreement, to be duly registered as a broker-dealer under
FINRA, the Exchange Act and the applicable statutes and regulations
of each state in which the Placement Shares will be offered and
sold, except such states in which the Agent is exempt from
registration or such registration is not otherwise required, during
the term of this Agreement. The Agent shall comply with all
applicable law and regulations in connection with the transactions
contemplated by this Agreement, including the issuance and sale
through the Agent of the Placement Shares.

 


(b) Representations and Agreements to
Survive Delivery. The indemnity and contribution agreements
contained in Section 10 of this Agreement and all
representations and warranties of the Company herein or in
certificates delivered pursuant hereto shall survive, as of their
respective dates, regardless of (i) any investigation made by
or on behalf of the Agent, any controlling persons, or the Company
(or any of their respective officers, directors or controlling
persons), (ii) delivery and acceptance of the Placement Shares
and payment therefor or (iii) any termination of this
Agreement.

 



12. 
Termination.

 



 

28







 





 



(a) The
Agent may terminate this Agreement, by notice to the Company, as
hereinafter specified at any time (1) if there has been, since
the time of execution of this Agreement or since the date as of
which information is given in the Prospectus, any Material Adverse
Effect, or any development that is reasonably likely to have a
Material Adverse Effect or, in the sole judgment of the Agent, is
material and adverse and makes it impractical or inadvisable to
market the Placement Shares or to enforce contracts for the sale of
the Placement Shares, (2) if there has occurred any material
adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or
escalation thereof or other calamity or crisis or any change or
development involving a prospective change in national or
international political, financial or economic conditions, in each
case the effect of which is such as to make it, in the judgment of
the Agent, impracticable or inadvisable to market the Placement
Shares or to enforce contracts for the sale of the Placement
Shares, (3) if trading in the Common Stock has been suspended
or limited by the Commission or the Exchange, or if trading
generally on the Exchange has been suspended or limited, or minimum
prices for trading have been fixed on the Exchange, (4) if any
suspension of trading of any securities of the Company on any
exchange or in the over-the-counter market shall have occurred and
be continuing, (5) if a major disruption of securities
settlements or clearance services in the United States shall have
occurred and be continuing, or (6) if a banking moratorium has
been declared by either U.S. Federal or New York authorities. Any
such termination shall be without liability of any party to any
other party except that the provisions of Section 8
(Expenses), Section 10 (Indemnification), Section 11
(Survival of Representations), Section 17 (Governing Law and
Time; Waiver of Jury Trial) and Section 18 (Consent to
Jurisdiction) hereof shall remain in full force and effect
notwithstanding such termination. If the Agent elects to terminate
this Agreement as provided in this Section 12(a), the Agent
shall provide the required notice as specified in
Section 13.

 


(b) The
Company shall have the right, by giving five (5) days’
written notice as hereinafter specified, to terminate this
Agreement in its sole discretion at any time after the date of this
Agreement. Any such termination shall be without liability of any
party to any other party except that the provisions of
Section 8, Section 10, Section 11, Section 17
and Section 18 hereof shall remain in full force and effect
notwithstanding such termination.

 


(c) The
Agent shall have the right, by giving five (5) days’ written
notice as hereinafter specified, to terminate this Agreement in its
sole discretion at any time after the date of this Agreement. Any
such termination shall be without liability of any party to any
other party except that the provisions of Section 8,
Section 10, Section 11, Section 17 and
Section 18 hereof shall remain in full force and effect
notwithstanding such termination.

 


(d) 
Unless earlier terminated pursuant to this
Section 12, this Agreement shall automatically terminate upon
the issuance and sale of all of the Placement Shares through the
Agent on the terms and subject to the conditions set forth herein;
provided that the provisions of Section 8, Section 10,
Section 11, Section 17 and Section 18 hereof shall
remain in full force and effect notwithstanding such
termination.

 


(e) This Agreement
shall remain in full force and effect unless terminated pursuant to
Sections 12(a), (b), (c), or (d) above or otherwise by mutual
agreement of the parties; provided, however, that any such
termination by mutual agreement shall in all cases be deemed to
provide that Section 8, Section 10, Section 11,
Section 17 and Section 18 shall remain in full force and
effect.

 



 

29







 





 



(f) Any termination of
this Agreement shall be effective on the date specified in such
notice of termination; provided, however, that such termination
shall not be effective until the close of business on the date of
receipt of such notice by the Agent or the Company, as the case may
be. If such termination shall occur prior to the Settlement Date
for any sale of Placement Shares, such Placement Shares shall
settle in accordance with the provisions of this
Agreement.

 


(g) Subject to the
additional limitations set forth in Section 8 of this
Agreement, in the event of termination of this Agreement prior to
the sale of any Placement Shares, the Agent shall be entitled only
to reimbursement of its out-of-pocket expenses actually
incurred.

 


13. 
Notices. All notices or other
communications required or permitted to be given by any party to
any other party pursuant to the terms of this Agreement shall be in
writing, unless otherwise specified, and if sent to the Agent,
shall be delivered to:

 


Roth
Capital Partners, LLC


888 San
Clemente


Newport
Beach, California 92660


Fax
No.: (949) 720-7227


Attention: Managing
Director

 


and


 


K&L
Gates LLP


1 Park
Plaza, Twelfth Floor


Irvine,
California 92614


Attention: Michael
A. Hedge


E-mail:
michael.hedge@klgates.com

 


and if
to the Company, shall be delivered to:


 


Torchlight Energy
Resources, Inc.


5700 W.
Plano Parkway, No. 3600


Plano,
Texas 75093


Attention: John A.
Brda


E-mail:
john@torchlightenergy.com

 


with a
copy to:


 


Axelrod
& Smith P.C.


5300
Memorial Drive, Suite 1000


Houston, Texas
77007


Attention: Robert
D. Axelrod


E-mail:
rdaxel@asklawhou.com


 



 

30







 






 




Each
party to this Agreement may change such address for notices by
sending to the parties to this Agreement written notice of a new
address for such purpose. Each such notice or other communication
shall be deemed given (i) when delivered personally or by
verifiable facsimile transmission (with an original to follow) on
or before 4:30 p.m., New York City time, on a Business Day or,
if such day is not a Business Day, on the next succeeding Business
Day, (ii) on the next Business Day after timely delivery to a
nationally-recognized overnight courier and (iii) on the
Business Day actually received if deposited in the U.S. mail
(certified or registered mail, return receipt requested, postage
prepaid).

 


An
electronic communication (“Electronic Notice”) shall
be deemed written notice for purposes of this Section 13 if
sent to the electronic mail address specified by the receiving
party under separate cover. Electronic Notice shall be deemed
received at the time the party sending Electronic Notice receives
verification of receipt by the receiving party. Any party receiving
Electronic Notice may request and shall be entitled to receive the
notice on paper, in a nonelectronic form (“Nonelectronic Notice”)
which shall be sent to the requesting party within ten
(10) days of receipt of the written request for Nonelectronic
Notice.

 


14. Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the
Company and the Agent and their respective successors and the
affiliates, controlling persons, officers and directors referred to
in Section 10 hereof. References to any of the parties
contained in this Agreement shall be deemed to include the
successors and permitted assigns of such party. Nothing in this
Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and
permitted assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement, except as expressly provided
in this Agreement. Neither party may assign its rights or
obligations under this Agreement without the prior written consent
of the other party; provided, however, that the Agent may assign
its rights and obligations hereunder to an affiliate thereof
without obtaining the Company’s consent.

 



15. Adjustments for Stock Splits.
The parties acknowledge and agree that all share-related numbers
contained in this Agreement shall be adjusted to take into account
any stock split, stock dividend or similar event effected with
respect to the Placement Shares.

 



16. Entire Agreement; Amendment;
Severability. This Agreement (including all schedules and
exhibits attached hereto and Placement Notices issued pursuant
hereto) constitutes the entire agreement and supersedes all other
prior and contemporaneous agreements and undertakings, both written
and oral, among the parties hereto with regard to the subject
matter hereof. Neither this Agreement nor any term hereof may be
amended except pursuant to a written instrument executed by the
Company and the Agent. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstance, is held invalid, illegal or unenforceable as written
by a court of competent jurisdiction, then such provision shall be
given full force and effect to the fullest possible extent that it
is valid, legal and enforceable, and the remainder of the terms and
provisions herein shall be construed as if such invalid, illegal or
unenforceable term or provision was not contained herein, but only
to the extent that giving effect to such provision and the
remainder of the terms and provisions hereof shall be in accordance
with the intent of the parties as reflected in this
Agreement.

 



 

31







 





 





17. 
GOVERNING
LAW AND TIME; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME. THE COMPANY HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE
LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.

 


18. 
CONSENT
TO JURISDICTION. EACH PARTY
HEREBY IRREVOCABLY SUBMITS TO THE NON-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 WITH ANY TRANSACTION CONTEMPLATED HEREBY, 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. EACH PARTY 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 (CERTIFIED OR REGISTERED MAIL, RETURN
RECEIPT REQUESTED) TO SUCH PARTY AT THE ADDRESS IN EFFECT FOR
NOTICES TO IT UNDER THIS AGREEMENT 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.

 


19. Use of Information. The Agent
may not use any information gained in connection with this
Agreement and the transactions contemplated by this Agreement,
including due diligence, to advise any party with respect to
transactions not expressly approved by the Company.

 


20. Counterparts. This Agreement
may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument. Delivery of an executed Agreement by one
party to the other may be made by facsimile
transmission.

 


21. Effect of Headings. The section
and Exhibit headings herein are for convenience only and shall
not affect the construction hereof.

 


22. Permitted Free Writing
Prospectuses.

 



 

32







 





 



The
Company represents, warrants and agrees that, unless it obtains the
prior consent of the Agent, and the Agent represents, warrants and
agrees that, unless it obtains the prior consent of the Company, it
has not made and will not make any offer relating to the Placement
Shares that would constitute an Issuer Free Writing Prospectus, or
that would otherwise constitute a “free writing
prospectus,” as defined in Rule 405, required to be
filed with the Commission. Any such free writing prospectus
consented to by the Agent or by the Company, as the case may be, is
hereinafter referred to as a “Permitted Free Writing
Prospectus.” The Company represents and warrants that it has
treated and agrees that it will treat each Permitted Free Writing
Prospectus as an “issuer free writing prospectus,” as
defined in Rule 433, and has complied and will comply with the
requirements of Rule 433 applicable to any Permitted Free
Writing Prospectus, including timely filing with the Commission
where required, legending and record keeping.

 


23. Absence of Fiduciary
Relationship.

 


The
Company acknowledges and agrees that:

 


(a) The Agent is acting
solely as agent in connection with the public offering of the
Placement Shares and in connection with each transaction
contemplated by this Agreement and the process leading to such
transactions, and no fiduciary or advisory relationship between the
Company or any of its respective affiliates, stockholders (or other
equity holders), creditors or employees or any other party, on the
one hand, and the Agent, on the other hand, has been or will be
created in respect of any of the transactions contemplated by this
Agreement, irrespective of whether or not the Agent has advised or
is advising the Company on other matters, and the Agent has no
obligation to the Company with respect to the transactions
contemplated by this Agreement except the obligations expressly set
forth in this Agreement;

 


(b) it is capable of
evaluating and understanding, and understands and accepts, the
terms, risks and conditions of the transactions contemplated by
this Agreement;

 


(c) the Agent has not
provided any legal, accounting, regulatory or tax advice with
respect to the transactions contemplated by this Agreement and it
has consulted its own legal, accounting, regulatory and tax
advisors to the extent it has deemed appropriate;

 


(d) it is aware that
the Agent and its affiliates are engaged in a broad range of
transactions which may involve interests that differ from those of
the Company and the Agent has no obligation to disclose such
interests and transactions to the Company by virtue of any
fiduciary, advisory or agency relationship or otherwise;
and

 


(e) it waives, to the
fullest extent permitted by law, any claims it may have against the
Agent for breach of fiduciary duty or alleged breach of fiduciary
duty in connection with the sale of Placement Shares under this
Agreement and agrees that the Agent shall not have any liability
(whether direct or indirect, in contract, tort or otherwise) to it
in respect of such a fiduciary duty claim or to any person
asserting a fiduciary duty claim on its behalf or in right of it or
the Company, employees or creditors of Company, other than in
respect of the Agent’s obligations under this Agreement and
to keep information provided by the Company to the Agent and the
Agent’s counsel confidential to the extent not otherwise
publicly-available.

 



24. 
Definitions.

 



As used
in this Agreement, the following terms have the respective meanings
set forth below:

 



 

33







 





 



“Applicable Time” means
(i) each Representation Date, (ii) the time of each sale
of any Placement Shares pursuant to this Agreement, and
(iii) each Settlement Date.

 


“Business Day” shall mean
any day on which the Exchange and commercial banks in the City of
New York are open for business.

 


“Issuer Free Writing
Prospectus” means any “issuer free writing
prospectus,” as defined in Rule 433, relating to the
Placement Shares that (1) is required to be filed with the
Commission by the Company, (2) is a “road show”
that is a “written communication” within the meaning of
Rule 433(d)(8)(i) whether or not required to be filed with the
Commission, or (3) is exempt from filing pursuant to
Rule 433(d)(5)(i) because it contains a description of the
Placement Shares or of the offering that does not reflect the final
terms, in each case in the form filed or required to be filed with
the Commission or, if not required to be filed, in the form
retained in the Company’s records pursuant to Rule 433(g)
under the Securities Act.

 


“Rule 172,”
“Rule
405,” “Rule 415,”
“Rule
424,” “Rule 424(b),”
“Rule 430B,” and
“Rule 433” refer to
such rules under the Securities Act.

 


“Trading Day” means any
day on which shares of Common Stock are purchased and sold on the
Exchange.

 


All
references in this Agreement to financial statements and schedules
and other information that is “contained,”
“included” or “stated” in the Registration
Statement or the Prospectus (and all other references of like
import) shall be deemed to mean and include all such financial
statements and schedules and other information that is incorporated
by reference in the Registration Statement or the Prospectus, as
the case may be.

 


All
references in this Agreement to the Registration Statement, the
Prospectus or any amendment or supplement to any of the foregoing
shall be deemed to include the copy filed with the Commission
pursuant to EDGAR; all references in this Agreement to any Issuer
Free Writing Prospectus (other than any Issuer Free Writing
Prospectuses that, pursuant to Rule 433, are not required to
be filed with the Commission) shall be deemed to include the copy
thereof filed with the Commission pursuant to EDGAR; and all
references in this Agreement to “supplements” to the
Prospectus shall include, without limitation, any supplements,
“wrappers” or similar materials prepared in connection
with any offering, sale or private placement of any Placement
Shares by the Agent outside of the United States.




 





34








 





 


If the
foregoing correctly sets forth the understanding between the
Company and the Agent, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a
binding agreement between the Company and the Agent.

 


 


	
 

	
 

	

Very
truly yours,  


 


	
 

	
 

	

TORCHLIGHT
ENERGY RESOURCES, INC.  


 


 


	
 

	
 

	


By:

	


/s/ John A. Brda


	
 

	
 

	
	

Name:
John A. Brda  


	
 

	
 

	
	

Title:
Chief
Executive Officer, President and Secretary


	




 


 


ACCEPTED
as of the date first-above written:  


 

	
 

	
 


	

ROTH
CAPITAL PARTNERS, LLC  


 


 

	
 

	
 


	


By:

	


/s/ Alexander G. Montano

	
 

	
 


	
	

Name:
Alexander G. Montano  

	
 

	
 


	
	

Title:
Managing Director  

	
 

	
 







 

 



 

 

 


 




[Signature
page to Sales Agreement]


 















 





 

SCHEDULE
1 

 


 

 



________________________

 



FORM OF PLACEMENT NOTICE



__________________________

 


 

 


	


From:

	


TORCHLIGHT ENERGY RESOURCES, INC.


	
 

	
 


	


To:

	


ROTH CAPITAL PARTNERS, LLC


	
 

	
 


	


Attention:

	


RothECM@roth.com


	
 

	
 


	
 

	


Alexander G. Montano


	
 

	


amontano@roth.com


	
 

	
 


	
 

	


Otilia Chen


	
 

	


tchen@roth.com


	
 

	
 


	
 

	


Dustin Cabrera


	
 

	


dcabrera@roth.com


	
 

	
 


	
 

	


Hue X. Irvine


	
 

	


hirvine@roth.com


	
 

	
 


	


Subject:

	


Placement Notice


	
 

	
 


	


Date:

	


[●], 20[●]






 

Gentlemen:
 


Pursuant to the
terms and subject to the conditions contained in the Sales
Agreement between Torchlight Energy Resources, Inc., a Nevada
corporation (the “Company”), and Roth
Capital Partners, LLC (the “Agent”), dated July 20,
2020, the Company hereby requests that the Agent sell up to
[●] shares of the Company’s common stock, $0.001 par
value per share, at a minimum market price of $[●] per share,
during the time period beginning at [●]:00 a.m. Eastern
time on [●], 20[●], and ending [●]:00 p.m.
Eastern time on [●], 20[●].

 


 

















 





 

SCHEDULE
2 

 


 

 



__________________________

 



COMPENSATION



__________________________

 


The
Company shall pay to the Agent in cash, upon each sale of Placement
Shares pursuant to this Agreement, an amount equal to 3% of the
gross proceeds from each sale of Placement Shares.

 


 

















 





 

SCHEDULE
3 


 



__________________________

 



NOTICE PARTIES



__________________________


 

 



The Company


 


John A.
Brda, Chief Executive Officer, President and Secretary


john@torchlightenergy.com


 


Roger
N. Wurtele, Chief Financial Officer


roger@torchlightenergy.com

 


 



The Agent


 


RothECM@roth.com


 


Alexander
G. Montano


amontano@roth.com


 


Otilia
Chen


tchen@roth.com


 


Dustin
Cabrera


dcabrera@roth.com


 


Hue X.
Irvine


hirvine@roth.com


 

















 







EXHIBIT 7(l)


 



Form of Representation Date Certificate


 



[●], 20[●]


 


This
Representation Date Certificate (this “Certificate”) is executed
and delivered in connection with Section 7(l) of the Sales
Agreement (the “Agreement”), dated July
20, 2020, and entered into between Torchlight Energy Resources,
Inc., a Nevada corporation (the “Company”), and Roth
Capital Partners, LLC. All capitalized terms used but not defined
herein shall have the meanings given to such terms in the
Agreement.


 


The
undersigned, a duly appointed and authorized officer of the
Company, having made all necessary inquiries to establish the
accuracy of the statements below and having been authorized by the
Company to execute this certificate, hereby certifies as
follows:

 


1. As of the date of
this Certificate: (i) the Registration Statement does not contain
any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order to make
the statements therein not misleading; (ii) neither the
Registration Statement nor the Prospectus contain any untrue
statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading; and (iii) no event has occurred as a
result of which it is necessary to amend or supplement the
Prospectus in order to make the statements therein not untrue or
misleading.

 



2. Each of the
representations and warranties of the Company contained in the
Agreement were, when originally made, and are, as of the date of
this Certificate, true and correct in all material
respects.

 



3. Each of the
covenants required to be performed by the Company in the Agreement
on or prior to the date of the Agreement, this Representation Date,
and each such other date as set forth in the Agreement, has been
duly, timely and fully performed in all material respects and each
condition required to be complied with by the Company on or prior
to the date of the Agreement, this Representation Date, and each
such other date as set forth in the Agreement or in the Waivers has
been duly, timely and fully complied with in all material
respects.

 



4. Subsequent to the
date of the most recent financial statements in the Prospectus,
there has been no Material Adverse Effect.

 



5. No stop order
suspending the effectiveness of the Registration Statement or of
any part thereof has been issued, and no proceedings for that
purpose have been instituted or are pending or threatened by any
securities or other governmental authority (including, without
limitation, the Commission).

 



 










 





  




The
undersigned has executed this Representation Date Certificate as of
the date first written above.

 





	

 

	
TORCHLIGHT ENERGY
RESOURCES, INC.

	

 


	

 

	

 

	

 

	

 


	

	
By:  

	



	

 


	

 

	

 

	
Name 

	

 


	

 

	

 

	

Title 

	

 









 


 


 


 


 




[Signature
page to Representation Date Certificate]