Document:

exhibit_10-1.htm

Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT

The Parties, as defined below, enter into this Purchase and Sale Agreement, dated as of June 6, 2014 (“Signing Date”) and effective as of May 1, 2014 (“Effective Date”) upon the terms and conditions stated herein.

 

DEFINITIONS

 

“Agreement” means this Purchase and Sale Agreement.

 

“Seller” Zenith Petroleum Corporation, a Colorado corporation with offices at 7790 East Arapahoe Rd., Ste. 190, Centennial, CO 80112.

 

“Purchaser” means Torchlight Energy, Inc., a Nevada corporation, with offices at 5700 W. Plano Pkwy, Ste. 3600, Plano, TX 75093.

 

“Parties” means Seller and Purchaser.

 

 “Oklahoma Assets” means the oil and gas properties located in Oklahoma, which are further described on Exhibit A.

 

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

 

AGREEMENT

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

 

	
A.

	
Acquisition of Oklahoma Assets.  At the Closing (as defined in Section E, hereof) Purchaser will acquire from Seller certain Working Interest positions in wells and net mineral acres free and clear of all liens and encumbrances, the details of which assets to be acquired are further outlined as Exhibit A (the “Oklahoma Assets”).

 

	
B.

	
Consideration—Purchase Price.  At the Closing, as consideration for the purchase of the Oklahoma Assets, the Purchaser will cause to be issued to Seller 1,350,000 shares of common stock (the “Stock”) of Torchlight Energy Resources, Inc, the parent of the Purchaser.

 

	
C.

	
Stock Consideration and Stock Valuation.  Torchlight Energy Resources, Inc. will issue the 1,350,000 shares for the acquisition of the Oklahoma Assets.  Seller acknowledges that the shares of Stock will not have been registered under the Securities Act of 1933, as amended (the “Act”), or any state securities acts, and accordingly, are restricted securities.

 

  

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D.

	
The Closing

 

	 	
1.

	
Closing.  The closing of the transactions contemplated by this Agreement shall take place on or before June 6, 2014 (the “Closing Date”), at a place mutually agreeable to the Parties, or at such other time as agreed upon among the Parties (the “Closing”).

 

	 	
2.

	
Delivery of Documents at Closing.  At the Closing: (a) Seller shall deliver to Purchaser all instruments of assignment and bills of sale necessary to transfer to Purchaser good and marketable title to the Oklahoma Assets free and clear of all liens, charges or encumbrances against delivery by Purchaser to Seller of the Stock.

 

	
E.

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

 

	
F.

	
Representations and Warranties.

 

	 	
1.

	
Seller’s Representations and Warranties.

 

	 	
i.

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

 

	 	
ii.

	
Seller warrants and represents to Purchaser that (a) it owns all of the Oklahoma Assets free and clear of any liens, claims, equities, charges, options, rights of first refusal, or encumbrances; (b)  it has not assigned any interest in the Oklahoma Assets to any third party, nor is any such assignment pending; (c)  it has the unrestricted right and power to transfer, convey and deliver full ownership of the Oklahoma Assets without the consent or agreement of any other person and without any designation, declaration or filing with any governmental authority; and (d) upon the transfer of the Oklahoma Assets to Purchaser as contemplated herein, Purchaser will receive good and valid title thereto, free and clear of any liens, claims, equities, charges, options, rights of first refusal, encumbrances or other restrictions.

 

	 	
iii.

	
Seller warrants and represents to Purchaser that it has not transferred, sold, assigned conveyed, encumbered, pledged or hypothecated any rights, title or interest in or to the Oklahoma Assets.

 

 

 

 

 

  

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iv.

	
Seller further warrants and represents to Purchaser that the lease included in the Oklahoma Assets is valid, in effect, and has not lapsed or reverted to the lessor(s).

 

	 	
v.

	
Seller warrants and represents that the execution, delivery, and performance of this Agreement by Seller does not (a) conflict with, violate, or constitute a breach of or a default under any other outstanding agreements or articles of organization or regulations of Seller; (b) result in the creation or imposition of any lien, claim, or encumbrance of any kind upon the Oklahoma Assets or (c) require any authorization, consent, approval, exemption, or other action by or filing with any third party or Governmental Authority (as defined below) under any provision of:  (i) any applicable Legal Requirement (as defined below), or (ii) any credit or loan agreement, promissory note, or any other agreement or instrument to which Seller is a party or by which the Oklahoma Assets may be bound or affected.  For purposes of this Agreement, "Governmental Authority" means any foreign governmental authority, the United States of America, any state of the United States, and any political subdivision of any of the foregoing, and any agency, department, commission, board, bureau, court, or similar entity, having jurisdiction over the parties hereto or their respective assets or properties.  For purposes of this Agreement, "Legal Requirement" means any law, statute, injunction, decree, order or judgment (or interpretation of any of the foregoing) of, and the terms of any license or permit issued by, any Governmental Authority.

 

	 	
vi.

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

 

	 	
vii.

	
Seller warrants and represents that there is no claim, suit, arbitration, investigation, action, litigation or other proceeding, whether judicial, administrative or otherwise, now pending or, to Seller’s knowledge, contemplated or threatened against Seller before any court, arbitration, administrative or regulatory body or any governmental agency which may result in any judgment, order, award, decree, liability or other determination which will or could reasonably be expected to have any material effect upon Seller or the transfer by Seller to Purchaser of the Oklahoma Assets, under this Agreement, and there is no basis known to Seller for any such action. No litigation is pending, or, to Seller’s knowledge, threatened against Seller, or their assets or properties which seeks to restrain or enjoin the execution and delivery of this Agreement or any of the documents referred to herein or the consummation of any of the transactions contemplated thereby or hereby. Seller is not subject to any judicial injunction or mandate or any quasi-judicial or administrative order or restriction directed to or against it or which would affect Seller or the Oklahoma Assets.

 

 

 

 

  

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viii.

	

Seller warrants and represents that Seller does not (a) have any leases of property to any third party relating to the Oklahoma Assets, whether as lessor or lessee; (b) have any contractual or other obligations relating to the Oklahoma Assets, whether written or oral; and (c) have given any power of attorney to any person or organization for any purpose relating to the Oklahoma Assets. Seller shall provide to Purchaser prior to the Closing Date each and every contract, lease or other document relating to the Oklahoma Assets to which it is subject or is a party or a beneficiary.

	 	 	 
	 	

ix.

	

The Seller warrants and represents that it (i) understands that the issuance of the Stock will not have been registered under the Securities Act of 1933, as amended (the “Act”), or any state securities acts, and accordingly, are restricted securities; (ii) is acquiring the Stock solely for the Seller’s own beneficial account, for investment purposes, and not with view to, or for resale in connection with, any distribution of the Stock; (iii) understands that any future sales of any shares or interest of the Stock, under current law, will require either (a) the registration of the Stock under the Act and applicable state securities laws; (b) compliance with Rule 144 of the Act; or (c) the availability of an exemption from the registration requirements of the Act and applicable state securities laws. The Sellers hereby consent to the placement of the legend, or a substantially similar legend, set forth below, on each certificate representing shares of the Stock until they have been sold, transferred, or otherwise disposed of, pursuant to the requirements herein. The legend shall read substantially as follows:

 

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

 

 

 

 

 

 

 

  

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x.

	
 
The Seller acknowledges that it has access to and has reviewed all current information about Torchlight Energy Resources, Inc. filed with the Securities and Exchange Commission (the “SEC”) (which filings can be accessed by going to www.sec.gov/edgar/searchedgar/companysearch.html, typing “Torchlight Energy Resources” in the “Company name” field, and clicking the “Search” button), including (A) the Form 10-Ks for the years ended December 31, 2012 and December 31, 2013; (B) the Form 10-Q’s for the quarter ended March 31, 2014; and (C) the Form 8-K’s filed on January 8, 2014, January 17, 2014, January 29, 2014, February 3, 2014 and April 17, 2014 (collectively, the “Filed Documents”).

	 	 	 
	 	
 
xi.

	

 
Seller warrants and represents that it is an Accredited Investor as that term is defined in Rule 501(a) of Regulation D of the Act, and has access to and has reviewed all current information about the Purchaser filed with the Securities and Exchange Commission (the “SEC”).

 

	 	
2.

	
Purchaser’s Representations and Warranties.

 

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

 

	
G.

	
Indemnification.

 

	 	
(i) 

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

 

 

 

 

  

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(ii)

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

 

	
H.

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

 

 

 

 

 

 

 

 

 

 

 

  

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Seller:

 

Zenith Petroleum Corporation

7790 East Arapahoe Rd., Ste. 190

Centennial, CO 80212

Attn: Jack Johnston

303-779-1900

Purchaser:

Torchlight Energy, Inc.

5700 W. Plano Pkwy, Ste. 3600

Plano, TX 75093

Attn: John Brda

214-432-8002

 

	
I.

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

 

	
J.

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

 

	
K.

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

 

	
L.

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

 

	
M.

	
Fees & Costs.  It is further agreed and understood that except as set forth in this Agreement, each Party has no claim against the other for any costs or fees it may have incurred, and that each Party shall pay their own taxable costs, and legal fees.

 

 

 

  

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N.

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

 

	
O.

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

 

	
P.

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

 

	
Q.

	
No Assignments.  No obligation or right arising under this Agreement may be assigned or delegated by any Party without the express written consent of the other Parties.  Provided, however, that Purchaser may assign its obligations under this Agreement without Seller’s consent, if that assignment it to further the purposes of this Agreement.

 

	
R.

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

 

	
S.

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

 

	
T.

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

 

	
U.

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

 

	
V.

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

 

 

 

 

 

  

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  AGREED AND EXECUTED as of the Signing Date and Effective Date:

 

 

 

	SELLER:	 	PURCHASER:	 
	 	 	 	 	 	 
	ZENITH PETROLEUM CORPORATION	 	TORCHLIGHT ENERGY, INC.	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	By:	
/s/ Jack Johnston 

	 	By:	
/s/ John Brda 

	 
	 	
Jack Johnston

	 	 	
John Brda

	 
	 	
 

	 	 	
President

	 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

9

  

 

Schedule A to Zenith Agreement

Assets being acquired in Oklahoma Projects operated by Husky Ventures:

$1,650,000 cash

All interests in the CW Well

All interests in the Stevens Well

All interests in the Coronado Well

All interests in the Jet Well

All interests in the Jones Well

All interests in the Liebhart Well

All interests in the Gamebird Well

All interests in the Sieber Well

All interests in the Vaverka Well

All interests in the Kodiak Well

All interests in the AnnaLee Well

All interests in the Hobbs Ranch Well

All interests in the Sasquatch Well

All interests in the Yeti Well

All interests in the Jam Well

All interests in the Odin Well

All interests in the Loki Well

All Rights to the lease acreage in Chisholm Trail AMI 2.7%

All Rights to the lease acreage in the Rosedale AMI 5%

All Rights to the lease acreage in the Viking AMI 5%

Initial  _____________

Initial _____________exhibit_4-3.htm

Exhibit 4.3

 

 

[FORM OF SERIES A WARRANT]

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, OR AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND APPLICABLE LAWS IS AVAILABLE.

SERIES A WARRANT TO PURCHASE

COMMON STOCK OF

TORCHLIGHT ENERGY RESOURCES, INC.

 

	Date of Issuance:  _____ __, 2011 	 Warrant No.  __________

 

This certifies that, for value received, TORCHLIGHT ENERGY RESOURCES, INC., a Nevada corporation (the “Company”), grants _____________, a _____________________ [corporation/limited liability company/limited partnership/individual] or its registered assigns (the “Registered Holder”), the right to subscribe for and purchase from the Company, at the Exercise Price (as defined herein), from and after 9:00 a.m. Central Standard Time on _________, 2011 (the “Exercise Date”) and to and including 5:00 p.m., Central Standard Time, on June 30, 2014 (the “Expiration Date”), _____________ (_____) shares, as such number of shares may be adjusted from time to time as described herein (the “Warrant Shares”), of the Company’s common stock, par value $.001 per share (the “Common Stock”), subject to the provisions and upon the terms and conditions herein set forth.  The “Exercise Price” per share of Common Stock will be $5.00 per share.

This Warrant is issued in connection with the transactions described in that certain Amended and Restated Private Offering Memorandum dated as of May 25, 2011 (the “Memorandum”) and in that certain Subscription Agreement between the Company and the Registered Holder dated as of _____ __, 2011 (the “Subscription Agreement”).  The Registered Holder of this Warrant is subject to certain restrictions set forth in the Memorandum and the Subscription Agreement and will be entitled to certain rights and privileges set forth in the Memorandum and the Subscription Agreement.

 

Section 1.              Registration.  The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Records”), in the name of the Registered Holder.  The Company may deem and treat the Registered Holder as the absolute owner of this Warrant for the purpose of any exercise hereof or any distribution to the Registered Holder.

Section 2.              Registration of Transfers and Exchanges.

 

(a)           Subject to Section 9 hereof, the Company shall register the transfer of this Warrant, in whole or in part, upon records to be maintained by the Company for that purpose, upon surrender of this Warrant, with the Form of Assignment attached hereto completed and duly endorsed by the Registered Holder, to the Company at the office specified in or pursuant to Section 3(b).  Upon any such registration of transfer, a new Warrant, in substantially the form of this Warrant, evidencing the Common Stock purchase rights so transferred shall be issued to the transferee and a new Warrant, in similar form, evidencing the remaining Common Stock purchase rights not so transferred, if any, shall be issued to the Registered Holder.

 

  

Series A Warrant – Page 1

  

(b)           This Warrant is exchangeable, upon the surrender hereof by the Registered Holder at the office of the Company specified in or pursuant to Section 3(b) hereof, for new Warrants, in substantially the form of this Warrant evidencing, in the aggregate, the right to purchase the number of Warrant Shares which may then be purchased hereunder, each of such new Warrants to be dated the date of such exchange and to represent the right to purchase such number of Warrant Shares as shall be designated by the Registered Holder at the time of such surrender.

Section 3.              Duration and Exercise of this Warrant.

(a)           This Warrant shall be exercisable by the Registered Holder as to the Warrant Shares at any time during the period commencing on the Exercise Date and ending on the Expiration Date. At 5:00 p.m., Central Standard Time, on the Expiration Date, this Warrant, to the extent not previously exercised, shall become void and of no further force or effect.

 

(b)           Subject to Sections 4, and 7 hereof, upon exercise or surrender of this Warrant, with the Form of Election to Purchase attached hereto completed and duly endorsed by the Registered Holder, to the Company at 2007 Enterprise Avenue, League City, Texas 77573, Attention: Thomas Lapinski, or at such other address as the Company may specify in writing to the Registered Holder, and upon payment of the Exercise Price multiplied by the number of Warrant Shares then issuable upon exercise of this Warrant in lawful money of the United States of America, all as specified by the Registered Holder in the Form of Election to Purchase, the Company shall promptly issue and cause to be delivered to or upon the written order of the Registered Holder, and in such name or names as the Registered Holder may designate, a certificate for the Warrant Shares issued upon such exercise.  Any person so designated in the Form of Election to Purchase, duly endorsed by the Registered Holder, as the person to be named on the certificates for the Warrant Shares, shall be deemed to have become holder of record of such Warrant Shares, evidenced by such certificates, as of the Date of Exercise (as hereinafter defined) of such Warrant.

 

(c)           The Registered Holder may pay the applicable Exercise Price pursuant to Section 3(b), at the option of the Registered Holder, either (i) in cash or by cashier’s or certified bank check payable to the Company, or (ii) by wire transfer of immediately available funds to the account which shall be indicated in writing by the Company to the Registered Holder, in either case, in an amount equal to the product of the Exercise Price multiplied by the number of Warrant Shares being purchased upon such exercise (the “Aggregate Exercise Price”).

 

(d)           The “Date of Exercise” of any Warrant means the date on which the Company shall have received (i) this Warrant, with the Form of Election to Purchase attached hereto appropriately completed and duly endorsed, and (ii) payment of the Aggregate Exercise Price as provided herein.

 

  

Series A Warrant – Page 2

  

(e)           This Warrant will be exercisable either in its entirety or, from time to time, for part, only of the number of Warrant Shares which are issuable hereunder.  If this Warrant shall have been exercised only in part, the Company shall, at the time of delivery of the certificates for the Warrant Shares issued pursuant to such exercise, deliver to the Registered Holder a new Warrant evidencing the rights to purchase the remaining Warrant Shares, which Warrant shall be substantially in the form of this Warrant.

 

Section 4.              Payment of Expenses.  The Company will pay all expenses (other than any federal or state income tax or similar obligations of the Registered Holder) attributable to the preparation, execution, issuance and delivery of this Warrant, any new Warrant and the Warrant Shares.

 

Section 5.              Mutilated or Missing Warrant Certificate.  If this Warrant is mutilated, lost, stolen or destroyed, upon request by the Registered Holder, the Company will issue, in exchange for and upon cancellation of the mutilated Warrant, or in substitution for the lost, stolen or destroyed Warrant, a substitute Warrant, in substantially the form of this Warrant, of like tenor, but, in the case of loss, theft or destruction, only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction of this Warrant and, if requested by the Company, indemnity also reasonably satisfactory to it.

 

Section 6.              Reservation, Listing and Issuance of Warrant Shares.

 

(a)           The Company will at all times have authorized, and reserve and keep available, free from preemptive rights, for the purpose of enabling it to satisfy any obligation to issue Warrant Shares upon the exercise of the rights represented by this Warrant, the number of Warrant Shares deliverable upon exercise of this Warrant.  The Company will, at its expense, use it best efforts to cause such shares to be included in or listed on (subject to issuance or notice of issuance of Warrant Shares) all markets or stock exchanges in or on which the Common Stock is included or listed not later than the date on which the Common Stock is first included or listed on any such market or exchange and will thereafter maintain such inclusion or listing of all shares of Common Stock from time to time issuable upon exercise of this Warrant.

 

(b)           Before taking any action which could cause an adjustment pursuant to Section 7 hereof reducing the Exercise Price below the par value of the Warrant Shares, the Company will take any corporate action which may be necessary in order that the Company may validly and legally issue at the Exercise Price, as so adjusted, Warrant Shares that are fully paid and non-assessable.

 

(c)           The Company covenants that all Warrant Shares will, upon issuance in accordance with the terms of this Warrant, be (i) duly authorized, fully paid and nonassessable, and (ii) free from all liens, charges and security interests.

 

Section 7.              Adjustment of Number of Warrant Shares.

 

(a)           The number of Warrant Shares to be purchased upon exercise hereof is subject to change or adjustment from time to time as hereinafter provided:

 

  

Series A Warrant – Page 3

  

(i)             Stock Dividends; Stock Splits; Reverse Stock Splits; Reclassifications.  In case the Company shall (a) pay a dividend with respect to its Common Stock in shares of capital stock, (b) subdivide its outstanding shares of Common Stock, (c) combine its outstanding shares of Common Stock into a smaller number of shares of any class of Common Stock or (d) issue any shares of its capital stock in a reclassification of the Common Stock (including any such reclassification in connection with a consolidation or merger in which the Company is the continuing corporation), other than elimination of par value, a change in par value, or a change from par value to no par value (any one of which actions is herein referred to as an “Adjustment Event”), the number of Warrant Shares  purchasable upon exercise of the Warrant immediately prior to the record date for such Adjustment Event shall be adjusted so that the Registered Holder shall thereafter be entitled to receive the number of shares of Common Stock or other securities of the Company (such other securities thereafter enjoying the rights of shares of Common Stock under this Warrant) that such Registered Holder would have owned or have been entitled to receive after the happening of such Adjustment Event, had such Warrant been exercised immediately prior to the happening of such Adjustment Event or any record date with respect thereto.  An adjustment made pursuant to this Section 7(a)(i) shall become effective immediately after the effective date of such Adjustment Event retroactive to the record date, if any, for such Adjustment Event.

(ii)            Adjustment of Exercise Price.  Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant is adjusted pursuant to Section 7(a)(i), the Exercise Price for each Warrant Share payable upon exercise of each Warrant shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares of Common Stock purchasable upon the exercise of each Warrant immediately prior to such adjustment, and the denominator of which shall be the number of shares of Common Stock so purchasable immediately thereafter.

 

(iii)           Adjustments for Consolidation, Merger, Sale of Assets, Reorganization, etc.  In case the Company (a) consolidates with or merges into any other corporation and is not the continuing or surviving corporation of such consolidation of merger, or (b) permits any other corporation to consolidate with or merge into the Company and the Company is the continuing or surviving corporation but, in connection with such consolidation or merger, the Common Stock is changed into or exchanged for stock or other securities of any other corporation or cash or any other assets, or (c) transfers all or substantially all of its properties and assets to any other corporation, or (d) effects a capital reorganization or reclassification of the capital stock of the Company in such a way that holders of Common Stock shall be entitled to receive stock, securities, cash and/or assets with respect to or in exchange for Common Stock, then, and in each such case, proper provision shall be made so that, upon the basis and upon the terms and in the manner provided in this subsection 7(a)(iii), the Registered Holder, upon the exercise of this Warrant at any time after the consummation of such consolidation, merger, transfer, reorganization or reclassification, shall be entitled to receive (at the aggregate Exercise Price in effect for all shares of Common Stock issuable upon such exercise immediately prior to such consummation as adjusted to the time of such transaction), in lieu of shares of Common Stock issuable upon such exercise prior to such consummation, the stock and other securities, cash and/or assets to which such holder would have been entitled upon such consummation if the Registered Holder had so exercised this Warrant immediately prior thereto (subject to adjustments subsequent to such corporate action as nearly equivalent as possible to the adjustments provided for in this Section).

(iv)           De Minimis Adjustments.  No adjustment in the Exercise Price and number of Warrant Shares purchasable hereunder shall be required unless such adjustment would require an increase or decrease of at least $0.05 in the Exercise Price; provided, however, that any adjustments which by reason of this Section 7(a)(iv) are not required to be made shall be carried forward and taken into account in any subsequent adjustment.  All calculations shall be made to the nearest full share.

 

  

Series A Warrant – Page 4

  

(b)           Notice of Adjustment.  Whenever the number of Warrant Shares purchasable upon the exercise of each Warrant or the Exercise Price is adjusted, as herein provided, the Company shall promptly notify the Registered Holder in writing (such writing referred to as an “Adjustment Notice”) of such adjustment or adjustments and shall deliver to such Registered Holder a statement setting forth the number of shares of Common Stock purchasable upon the exercise of each Warrant and the Exercise Price after such adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made.

(c)           Other Notices.  In case at any time:

(i)           the Company shall declare any cash dividend on its Common Stock;

(ii)           the Company shall pay any dividend payable in stock upon its Common Stock or make any distribution (other than regular cash dividends) to the holders of its Common Stock;

(iii)           the Company shall offer for subscription pro rata to all of the holders of its Common Stock any additional shares of stock of any class or other rights;

 

(iv)the Company shall authorize the distribution to all holders of its Common Stock of evidences of its indebtedness or assets (other than cash dividends or cash distributions payable out of earnings or earned surplus or dividends payable in Common Stock);

(v)           there shall be any capital reorganization, or reclassification of the capital stock of the Company, or consolidation or merger of the Company with another corporation (other than a subsidiary of the Company in which the Company is the surviving or continuing corporation and no change occurs in the Company’s Common Stock), or sale of all or substantially all of its assets to another corporation; or

(vi)           there shall be a voluntary or involuntary dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, or winding up of the Company;

then, in any one or more of said cases the Company shall give written notice, addressed to the Registered Holder at the address of such Registered Holder as shown on the books of the Company, of (1) the date on which the books of the Company shall close or a record shall be taken for such dividend, distribution or subscription rights, or (2) the date (or, if not then known, a reasonable approximation thereof by the Company) on which such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, winding up or other action, as the case may be, shall take place.  Such notice shall also specify (or, if not then known, reasonably approximate) the date as of which the holders of Common Stock of record shall participate in such dividend, distribution or subscription rights, or shall be entitled to exchange their Common Stock for securities or other property deliverable upon such reorganization, reclassification, consolidation, merger, sale, dissolution, liquidation, bankruptcy, assignment for the benefit of creditors, winding up, or other action, as the case may be.  Such written notice shall be given (except as to any bankruptcy proceeding) at least five (5) days prior to the action in question and not less than five (5) days prior to the record date or the date on which the Company’s transfer books are closed in respect thereto.  Such notice shall also state that the action in question or the record date is subject to the effectiveness of a registration statement under the 1933 Act, or to a favorable vote of stockholders, if either is required.

 

  

Series A Warrant – Page 5

  

(d)           Statement on Warrants.  The form of this Warrant need not be changed because of any change in the Exercise Price or in the number or kind of shares purchasable upon the exercise of a Warrant.  However, the Company may at any time in its sole discretion make any change in the form of the Warrant that it may deem appropriate and that does not affect the substance thereof and any Warrant thereafter issued, whether in exchange or substitution for any outstanding Warrant or otherwise, may be in the form so changed.

(e)           Fractional Interest.  The Company will not be required to issue fractional Warrant Shares on the exercise of the Warrants.  The number of full Warrant Shares which shall be issuable upon such exercise shall be computed on the basis of the aggregate number of whole shares of Common Stock purchasable on the exercise of the Warrants so presented.  If any fraction of a share of Common Stock would, except for the provisions of this Section 7(e) be issuable on the exercise of the Warrants (or specified proportion thereof), the Company shall pay an amount in cash calculated by it to be equal to the then fair value of one share of Common Stock, as determined by the Board of Directors of the Company in good faith, multiplied by such fraction computed to the nearest whole cent.

Section 8.              No Rights or Liabilities as a Stockholder.  The Registered Holder shall not be entitled to vote or be deemed the holder of Common Stock or any other securities of the Company which may at any time be issuable on the exercise hereof, nor shall anything contained herein be construed to confer upon the holder of this Warrant, as such, the rights of a stockholder of the Company or the right to vote for the election of directors or upon any matter submitted to stockholders at any meeting thereof, or give or withhold consent to any corporate action or to receive notice of meetings or other actions affecting stockholders (except as provided herein), or to receive dividends or subscription rights or otherwise, until the Date of Exercise shall have occurred.  No provision of this Warrant, in the absence of affirmative action by the Registered Holder hereof to purchase shares of Common Stock, and no mere enumeration herein of the rights and privileges of the Registered Holder, shall give rise to any liability of such holder for the Exercise Price or as a stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company.

Section 9.              Transfer Restrictions; Registration of the Warrant and Warrant Shares.

(a)           Neither the Warrant nor the Warrant Shares have been registered under the 1933 Act.  The Registered Holder, by acceptance hereof, represents that it is acquiring this Warrant to be issued to it for its own account and not with a view to the distribution thereof, and agrees not to sell, transfer, pledge or hypothecate this Warrant, any purchase rights evidenced hereby or any Warrant Shares unless a registration statement is effective for this Warrant or the Warrant Shares under the 1933 Act, or in the opinion of such Registered Holder’s counsel reasonably satisfactory to the Company, a copy of which opinion shall be delivered to the Company, such registration is not required as some other exemption from the registration requirement of the 1933 Act and applicable laws is available.

(b)           Subject to the provisions of the following paragraph of this Section 9, each Certificate for Warrant Shares shall be stamped or otherwise imprinted with a legend in substantially the following form:

 

  

Series A Warrant – Page 6

  

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “1933 ACT”), OR APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR SUCH SECURITIES UNDER THE 1933 ACT, AN OPINION OF COUNSEL, SATISFACTORY TO THE ISSUER HEREOF, TO THE EFFECT THAT REGISTRATION IS NOT REQUIRED UNDER THE 1933 ACT AS SOME OTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE 1933 ACT AND APPLICABLE LAWS IS AVAILABLE.

(c)           The restrictions and requirements set forth in the foregoing paragraph shall apply with respect to Warrant Shares unless and until such Warrant Shares are sold or otherwise transferred pursuant to an effective registration statement under the 1933 Act or are otherwise no longer subject to the restrictions of the 1933 Act, at which time the Company agrees to promptly cause such restrictive legends to be removed and stop transfer restrictions applicable to such Warrant Shares to be rescinded.

Section 10.            The Company’s Option to Redeem.

(a)           If a registration statement is effective for the Warrant Shares under the 1933 Act, and if the closing price of the Common Stock on the Trading Market (as defined in Section 10(c)) is $7.50 or more for 22 consecutive Trading Days (as defined in Section 10(c)), then this Warrant will be subject to redemption at the option of the Company.  If the Warrant is subject to redemption, as set forth herein, the Company may redeem the Warrant at any time at a price calculated by multiplying $0.01 by the number of Warrant Shares into which the Warrant is exercisable (the “Redemption Amount”).

(b)           The Company shall deliver to the Registered Holder a written Notice of Redemption (the “Notice of Redemption”) specifying the date for the redemption (the “Redemption Payment Date”), which date will not be less than 10 nor more than 30 days after the date of the Notice of  Redemption (the “Redemption Period”).  A Notice of Redemption will not be effective with respect to any portion of this Warrant for which the Registered Holder has previously delivered a Form of Election to Purchase and paid to the Company the entire Aggregate Exercise Price of such exercise.  Upon receipt of the Notice of Redemption, the Registered Holder will have until 5:00PM (CST) on the date before the Redemption Payment Date to exercise the Warrant in whole or in part, pursuant to Section 3 of this Warrant.  For a Registered Holder to effect such an exercise, the Company must have received this Warrant, with the Form of Election to Purchase attached hereto appropriately completed and duly endorsed, and payment of the Aggregate Exercise Price (as provided in Section 3(c) herein) no later than 5:00PM (CST) the date before the Redemption Payment Date.  The Registered Holder’s right to exercise the Warrant or any portion thereof called for redemption will terminate on at 5:00PM (CST) on the date of the Redemption Payment Date, unless the Company subsequently fails to pay the applicable Redemption Amount.  Upon the Redemption Payment Date, the Redemption Amount will be recalculated based on any Warrant Shares the Registered Holder may have exercised prior to the Redemption Payment Date pursuant to this Section 10(b).  On the Redemption Payment Date, the Redemption Amount, as recalculated (if at all), will be paid in good funds to the Registered Holder.

 

  

Series A Warrant – Page 7

  

(c)           “Trading Day” means a day on which the principal Trading Market is open for business.  “Trading Market” means any market or exchange on which the Common Stock is listed or quoted for trading on the date in question.

Section 11.            Notices.  All notices and other communications relating to this Warrant shall be in writing and shall be deemed to have been duly given if delivered personally or sent by United States certified or registered first-class mail, postage prepaid, return receipt requested, or overnight air courier guaranteeing next day delivery to the parties hereto at the following addresses or at such other address as any party hereto shall hereafter specify by notice to the other party hereto:

 

(a)           If to the Registered Holder of this Warrant or the holder of the Warrant Shares, addressed to the address of such Registered Holder or holder as set forth on books of the Company or otherwise furnished by the Registered Holder or holder to the Company.

 

(b)           If to the Company, addressed to:

Torchlight Energy Resources, Inc.

2007 Enterprise Avenue

League City, Texas 77573

Attn: Thomas Lapinski, CEO

A notice or communication will be effective (i) if delivered in person or by overnight courier, on the business day it is delivered, and (ii) if sent by registered or certified mail, the date of actual receipt by the party to whom such notice is required to be given.

 

Section 12.            Binding Effect.  This Warrant shall be binding upon and inure to the sole and exclusive benefit of the Company, its successors and assigns, and the holder or holders from time to time of this Warrant and the Warrant Shares.

 

Section 13.            Survival of Rights and Duties.  This Warrant shall terminate and be of no further force and effect on the earlier of (i) 5:00 p.m., Central Standard Time, on the Expiration Date and (ii) the date on which this Warrant and all purchase rights evidenced hereby have been exercised, except that the provisions of Sections 6(c) and 10 hereof shall continue in full force and effect after such termination date.

 

Section 14.            Governing Law.  This Warrant shall be governed and controlled as to the validity, enforcement, interpretations, construction and effect and in all other aspects by the substantive laws of the State of Texas.  In any action between or among any of the parties, whether arising out of this Warrant or otherwise, each of the parties irrevocably consents to the exclusive jurisdiction and venue of the federal and state courts located in Harris County, Texas.

 

Section 15.            Section Headings.  The Section headings in this Warrant are for purposes of convenience only and shall not constitute a part hereof.

 

  

Series A Warrant – Page 8

  

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

                   

	 	 	 TORCHLIGHT ENERGY RESOURCES, INC.
	 	 	 	 
	 	 	 	 
	 	 By:	 	 
	 	 	 Thomas Lapinski,	 
	 	 	 President and Chief Executive Officer 	 
	 	 	 	 
	 	 Date:	 	 

 

 

  

Series A Warrant – Page 9

  

FORM OF ELECTION TO PURCHASE

(To Be Executed Upon Exercise of this Warrant)

To Torchlight Energy Resources, Inc.:

The undersigned, the record holder of this Warrant (Warrant No. _____), hereby irrevocably elects to exercise the right, represented by this Warrant, to purchase ___________ of the Warrant Shares and herewith and hereby tenders payment for such Warrant Shares to the order of Torchlight Energy Resources, Inc. of $_________________, representing the full purchase price for such shares at the price per share provided for in such Warrant and the delivery of any applicable taxes payable by the undersigned pursuant to such Warrant.

The undersigned requests that certificates for such shares be issued in the name of:

 

	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 (Please print name and address)  	 	 Social Security or Tax Identification No.	 
	 	 	 	 

 

In the event that not all of the purchase rights represented by the Warrant are exercised, a new Warrant, substantially identical to the attached Warrant, representing the rights formerly represented by the attached Warrant which have not been exercised, shall be issued in the name of and delivered to:

 

 

	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 (Please print name and address)   	 	 Social Security or Tax Identification No.	 

 

	 Date:	 	 	 Name of Holder (Print):	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 By:	 	 	 
	 	 	 	 	 	 	 	 	 
	 	 	 	(Name):	 	 	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 (Title):	 	 	 

 

 

 

Form of Election to Purchase

  

  

  

FORM OF ASSIGNMENT

FOR VALUE RECEIVED, ________________ hereby sells, assigns and transfers to each assignee set forth below all of the rights of the undersigned under the attached Warrant (Warrant No. ___) with respect to the number of shares of Common Stock covered thereby set forth opposite the name of such assignee unto:

 

	Name of Assignee 	Address	

Number of Shares of

Common Stock

 

If the total of said purchase rights represented by the Warrant shall not be assigned, the undersigned requests that a new Warrant Certificate evidencing the purchase rights not so assigned be issued in the name of and delivered to the undersigned.

Dated: __________________                                                                                                Name of Holder (Print):  ________________________

                                                       ________________________________

                                                       (Signature of Holder)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Form of Assignment

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